Management Accounting Report: Systems and Techniques Analysis

This report delves into the realm of management accounting, employing Aston Martin as a case study to illustrate the practical application of various accounting systems and techniques. The report begins with an introduction to management accounting, emphasizing its role in strategic decision-making, resource optimization, and performance management. It then explores various accounting systems, including cost accounting, price optimization, inventory management, and job costing, highlighting their benefits and applications within Aston Martin. Furthermore, the report analyzes different types of management accounting reports, such as inventory management, budget, performance, and accounts receivable reports. The report then examines marginal and absorption costing techniques, providing detailed examples and calculations to demonstrate their use in determining profitability. Finally, the report explores the application of budgeting and its role in financial planning. Overall, the report provides a comprehensive overview of management accounting principles and practices, offering valuable insights into financial analysis, reporting, and decision-making within a business context.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1............................................................................................................................................1
P2............................................................................................................................................3
M1...........................................................................................................................................4
D1...........................................................................................................................................5
TASK 2............................................................................................................................................5
P3............................................................................................................................................5
M2...........................................................................................................................................9
D2...........................................................................................................................................9
TASK 3............................................................................................................................................9
P4............................................................................................................................................9
M3.........................................................................................................................................11
TASK 4..........................................................................................................................................11
P5..........................................................................................................................................11
M4.........................................................................................................................................14
D3.........................................................................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Managerial accounting refers to the application of professional knowledge, techniques
and concept in collecting the accounting data in a systematic way. On the basis of these data
management of the company develop plans and approaches then according to that controlling the
operations of the business, take effective decision, optimising the use of resources, revelation to
management and safeguarding assets (Siverbo, 2014). It is a profession that consist of partnering
in management decision procedure, observe the planning and manage the performance of
management system. It is essential for business to concentrate on all the business operations in
order to arrange activities in systematic way. To better understand of this assignment selected
organisation Aston Martin, which is a British independent manufacturer of luxury sports car and
grand tourers. The company was founded in 1913 by Lionel Martin and Robert Bamford. It is
mainly dealing into Auto mobile and luxury products. In this report consist of role of
management accounting and different systems with requirements. Along with discuss about
different methods used in management accounting as well as set a range of techniques. In
addition, apply planning tools in management accounting with merit and demerit. At the end
identify financial problems and sort out through different techniques.
TASK 1
P1
Management accounting is linked with various provisions which is following by the
different business entities with aim of forming strategic judgements. It is a part of accounting
which is applied by the manager to gather, evaluation and determine the financial data
effectively to maintain the profitability. The role of the management accounting to actuation the
firm's strategy as well as management activities.
Management accounting system is a set of strategy and approaches that is applied by
business to recognise all the opportunities or arise risk to make decisions towards best resources
and utilise funds within an organization. Through these system Aston martin can arrange all the
records and transactions of the business. Every company wants to effectively run manufacturing
activities and respond to all the risk that arise during to procedure. Such as, Aston Martin use
several types of accounting system to appraise the skilfulness of business organization (Granlund
and Lukka, 2017).
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Cost accounting system: It is mainly applied through management in respect to evaluate
costs which is connected with the operational activities and increase the productivity. The
essential requirement of this to recognise the not relevant cost of manufacturing procedure and
reduce unnecessary cost from the procedure due to produce different items. Such as, Aston
Martin can apply cost accounting system to determine all the expenses that belongs from the
production activity. It is required for firm to arrange all the expenses and deduct eradicable cost
that impact on the income calculation procedure. The management use this system to identify all
the cost like variable and fixed cost.
Price optimization system: This system is applied through the different business entity
who produce and sell out different types of products. So for this require to set effective price
framework to attract customer regarding to their firm. This system help to set right price for each
product and concentrate on the set of prices of items and services to sell out the products. In the
context of Aston Martin apply this system to set right price structure of different luxury cars to
fulfil the requirement of all the customers and enhance the profitability (Kastberg and Siverbo,
2016).
Inventory management system: It is a system that is utilised by company to keep overall
records of stock at different level of manufacturing. To produce goods require raw material,
finished goods as well as unfinished goods. This system mostly used by the manufacturing
company to know requirement of materials at each level and arrange inventories as per the
requirement. It supports to business in stock predication, automatic recording, materials tracking
inventory alerts. The essential requirement of this system in Aston Martin to assemble the car
require various parts which is required in sufficient manner and track by the this system to make
effective decision for further procedure.
 LIFO: The meaning of this method is last in first out means organisation can sell out
those products which are coming in last.
 FIFO: It means sell out those products firstly which are manufacturing earlier in the
business and mostly manufacturing organisation use this method for selling products.
 AVCO: It means calculate average cost and combine the price and units which is
manufactured by the business.
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Aston Martin can be utilised FIFO method the supports in manufacturing activities of
different cars. It is essential for all the business entity to collect all the relevant information of
each products that keep secure from damages.
Job costing system: This system defined as a set of methods and logical procedures that
collect, arrange and process data in regard of labour cost that helps in prepare of reports to take
effective decision. As per the cost arrange all the resources con sign particular contract where
mention all the terms & condition in order to meet with customer requirement. The essential
requirement of this system to make predication for individual unit cost or report in respect to
supply luxury cars. It is essential to maintain the record regarding to all specific jobs or contract.
Aston Martin use special rules that are utilised for various kind of job and supports in predication
(Hirsch, Seubert and Sohn, 2015).
P2
Management accounting report is a procedure of producing assorted direction
explanation reports that consist of numerous data and information regarding the performance of
an organisation. These reports are produced by the manager in respect to analysis the efficiency
and according to that make decision. The main reason to produce these reports to record all the
detailed information of each department and know inner information. The manager of Aston
Martin prepare different types of reports such as:
Inventory management report: This report produce by the manufacturing organisation to
collect detail information of each level of production. In this report mention in which stage
required more inventories to produce products. The main purpose to create this report to enhance
the profitability and including all the relevant information of stock. The manager of Aston
Martin keep proper record through this report and help to reduce all the wastages at every stage
of production. It maintain all the information like raw material, finished goods etc.
Budget report: This type of report is mostly produced by each companies in order to
predict future activities and associated risk. This report defines financial success of a firm which
is utilised by the management to compare the situation of business to enhance the profit margin.
In this report include all the expenses or income that based on the estimation and according to
that Aston Martin follow all the activities and spend more. Additionally, it supports a manager to
offer best worker incentive, cost deduction and negotiate the budgets that supports to maintain
the profitability (Chandar, Collier and Miranti, 2012).
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Performance report: It is a kind of the report which is produced by the manager to
identify the performance of overall organisation and each staff member. This report supports to
business and encourage for the effective work. As a result they getting reward regrading to work.
To offer reward require to analysis the performance of company and their employees. The
manager of Aston martin can evaluate all the business operations and make key strategic
decision in context of future of a business. Through this report people are rewarded for the
commitment and complete task on time. As a performer laid off that enhance staff member's
morale and work accordingly.
Account receivable report: To conduct the business activities require to conduct deal on
credit so for this require to produce accounts receivable report. Through this report record all the
essential data of creditors and their time and creditors will pay the amount on time. Through
these fluctuations spare balance that belong for certain period of time will enable a manager to
recognise all the defaulters and take action against them. Such as Aston Martin is a
manufacturing organisation that manufacturer different luxury cars and sale out directly to
suppliers on credit or on cash. There are set limit of credit period like 30, 60 or 90 days. Thus, it
is essential for management to produce this report and collect all the payments on time (Horton
and de Araujo Wanderley, 2018).
M1
System Benefits and application
Inventory management system It is mainly applied by the business to track all the activities of
manufacturing to estimate that in which stage require more
stock. The main functionality is Aston martin can arrange
systematically all the records of stock and place order
effectively. It is beneficial because this system make possible
for the organisation to purchase raw material and other
manufacturing resources.
Cost accounting system The main advantage of this system to calculate cost of
different raw material which is utilised in the business. These
are connected with the production activities. Additionally, it is
applied in Aston martin to analysis the evidence of direct &
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indirect cost of operations.
Price optimization system It supports to Aston Martin to set the price of items which is
produced within organization. In addition, this system
advantageous to determine the prices as per the competition,
customers and other essential market and business facts.
Job costing system It is beneficial to perform all the activities to deduct and
enhance labour units circulation for various activities in the
manufacturing procedure and services supply to people as per
the work. It is applied by Aston martin to determine the cost
of various aspects.
D1
Different types of system as well as reports work together in process of business to
enhance the profitability of business in continuous manner. The accounting system are utilised to
recognise and measure the efficiency as well as reports to keep all the transactions in appropriate
way. Such as Aston Martin company apply the inventory management system to know
requirement of material at different level. On the basis of this system produce inventory
management system to track available stock and place accordingly. Cost accounting system as
well as job costing system helps to company to maintain all records in regard of all the
expenditure and particular job which is integrated with reports and smoothly run organisational
procedure (Fiondella, Maffei and Spanò, 2016).
TASK 2
P3
Marginal Costing technique: It is a costing system utilise through entities for determine
the cost of all the additional units which are produced in last accounting years. With the help of it
the additional cost of making pizzas could be determined by Aston martin.
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Note: DL in the income statement stands for direct labour and DM stands for direct
material.
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Absorption costing technique: It is a type of costing which is applied by the organisation
to calculate profit where production units are recovered from the sales of same units.
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M2
To calculate the net profit of the organisation apply different techniques in effective
manner. These techniques are marginal and absorption costing technique. These are helping to
make financial report in proper manner and help to analysing all the business activities in proper
manner and know the actual position of the business.
D2
Financial reports are important part of any business that supports the financial point of
the business. On the basis of these report the organisation can take right decision to attain profit
and losses by running a business. It supports to arrange profitability through various costing
method (Teittinen and Järvenpää, 2013).
TASK 3
P4
Budget: It is a document that produced through an organisation for predict and calculate
the situation in future in regard of income and expenditure for particular time. Through this
document business to attain net profit through declaration the cost of business. Budget is a
quantitative statement where consist of fixed as well as variable cost that change as per the
situation. Aston martin can produce budget on the basis of last year activities and apply
modification in present activities.
Budgetary Control: It is a continuous procedure where business can follow the
guidelines of budget and according to that control the business activities known as budgetary
control. Companies are producing several types of budget to analysis the actual performance of
Aston Martin.
Variance Analysis: It is quantitative examination method which is applied to know
differences between actual and planned activities. It is applied by the business to maintain
control for certain period of time. These changes are based on the market condition, results of the
business. It is applied in Aston Martin in order to know all the differences. Advantage: It is effective tool which s applied by the manager to identify all the
differences in between standard and planned activities. Variance analysis utilised by
management to recognise all the differences.
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 Disadvantage: The demerit of this tool that it take more time to for the determination and
that correct all the actions in proper manner.
Flexible budget: This budget is based on the organisation situation and according to that
apply all the relevant changes in the business operations (Prencipe and Dekker, 2014). Advantage: The main advantage of this budget that there are applied modification as per
the situation of the business and prepare budget to forecast all the profits.
 Disadvantage: Due to have not expertise people do not apply modification as per the
changes in the management and take more time to reproduce of the budget for the
organisation.
Capital budgeting: It refers as a procedure which is utilising by the business to recognise
all the related options to make invest and choose best one for investment activities. There are
discussed various kind of techniques that is applied to use for the business procedure such as: NPV: This method is mainly based on the present value as well as net cash flow as per
the investment project. The main reason to apply this method to effectively analysis of
investment project in a common manner in the mind of any experienced business person. ARR: The particular method is mainly utilised by the business to calculate the cost on
average basis and achieved them through investment activities which is applied by an
organisation. Pay back period: It is type of the capital budgeting where analysis two project investment
and calculate he pay back period according to that company make the decision for
investment in proper manner.
Advantage: Through this method an organisation easily accomplish all the long term
goals in proper manner and search out all the relevant options which is advantageous for the
business. As a result people take interest in the business activities and increasing them through
investment alternatives.
Disadvantage: To apply this method required to require higher cost in effective manner
and outcomes may be uncertain and huge losses based on the particular techniques (Serena
Chiucchi, 2013).
M3
To analysis all the business activities for future time period and related risk require to
apply planning tools in order to generate more profits. These are supporting to business to set all
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