Management Accounting Report

This report delves into management accounting, exploring various systems, methods for report generation, and cost analysis techniques like absorption and marginal costing. It examines the integrated working of management accounting systems and reports, analyzing the advantages and disadvantages of different planning tools within budgetary control. The report uses the example of Unicorn Grocery to illustrate the application of these concepts, demonstrating how management accounting can respond to financial problems such as declining profit and productivity levels. Key performance indicators (KPIs) and budgetary targeting are highlighted as tools for addressing these challenges. The report concludes by emphasizing the importance of appropriate methods for ensuring business sustainability and success.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1 ..........................................................................................................................................3
P1 Management accounting and different type of management accounting system..................3
M1 Benefits of management accounting system and their application ......................................4
P2 Different methods use for management accounting report....................................................5
D1 Integrated working of management accounting system and management accounting
reports .........................................................................................................................................7
TASK 2............................................................................................................................................7
P3 Cost analysis by different methods .......................................................................................7
M2 Range of management accounting techniques for appropriate financial report.................10
D2 Financial report and its interpretation ................................................................................11
TASK 3..........................................................................................................................................11
P4 Advantages and disadvantages of different planning tools in budgetary control................11
TASK 4..........................................................................................................................................13
P5 Use of management accounting system to respond to financial problems .........................13
M3 & M4 Managerial accounting respond to financial problems ...........................................14
D3 &D4 Planning tools helpful in sorting out financial problems ..........................................14
CONCLUSION .............................................................................................................................14
REFERENCES .............................................................................................................................15

INTRODUCTION
MA is a process which aid and support all departments managers to take effective
decision which are related with their daily operations. It enables the firm to keep their daily
routine data and according to those, their weekly, monthly and daily reports get prepared. This
method is suitable for them because an entity can identify the deviations which occur at the time
of manufacturing activity. If any thing went wrong then managers are capable in taking effective
decision. It is completely different from financial accounting in which the reports are prepared
for the outsiders which are called as the stakeholders of the company where as on the other hand
management accounting is used for taking decision which are for internal audiences of business
(Hammad, Jusoh and Ghozali, 2013). The present report is based on Unicorn grocery who is
working in a grocery items. Cited organisation is dealing in consumer products and managerial
accounting aid them in effective and efficient decisions. In this assignment, various things will
be going to be discussed in which methods used for making management accounting reports are
considered. Also the different forms of cost are explained. Advantages and disadvantages of
budget is an essential component which makes the report more effective. Also some other factors
are going to be elaborated in this assignment.
TASK 1
P1 Management accounting and different type of accounting system
Managerial accounting is a procedure through which an organisation can maintain their
records of operation. This helps them in making financial reports and aids the managers to take
decision which are for short term. Unlike the financial accounting, it does not provide the whole
year reports which help the organisation to analyse these reports. These reports are prepared for
all internal audiences which are employees, CEO of the company etc (Balakrishnan, Labro and
Soderstrom, 2014).
Management accounting aims to provide help to managers so that they can take decision
which helps in growth and success. Hence, managers can manage all activities in a proper
manner and have to formulate effective planning for sustainability. So it can be said that
management accounting provides a platform through which managers can take short term
decision.

Another advantage of using this approach is that it helps in making and changing
strategies which are helpful in long run success of a firm. This helps in gathering more and more
information about the business so that target can be set and achieved in the minimum time frame.
Also in case of finding out any deviation and difference by the superiors at the time of activity
then they can change that according to the need and demand of time.
This method is best for Unicorn grocery due to dealing in grocery items. They really need
this type of technique through which they can analyse their daily stock of vegetables etc. Once
they apply this system on their business, then they can manage their cash availability and reduce
unnecessary storage of vegetables and fruits (Baldvinsdottir, Mitchell and Nørreklit, 2010). This
helps them in another manner in which they can control the cost of warehousing and spoilage of
things. The wastage of products get minimises and their business can provide fresh items to their
target customers. This helps in creating a brand image and their business can attain profit in an
ethical manner. So this technique is useful for them with the purpose of earning profit.
Management accounting system has different number of aspects which helps the
organisation to use for their business activities. These system approaches aid an entity to take
effective decision on weekly or monthly reports. The systems of management accounting are as
follow:
1. Cost accounting: Cost accounting approach helps an organisation to use effective system
from which they can control their cost of product. In this concern they have to utilise
such method from which their production quality get improved at the minimum cost.
2. Inventory management: According to this technique it is clearly stated that a firm have to
manage their stock so that they can provide material when ever needed in market.
3. Job order costing: This method is used when the products are different from each other.
It deals in when an organisational production items get vary. Like unicorn grocery they
deal in grocery items as well as fruits and vegetables also (Bodie, 2013).
4. Price optimizing: It is an analysis by the company to identify that how the customers are
going to respond on different prices of the products and services through different
channels.
M1 Benefits of management accounting system and their application
All the above system is helpful according to Unicorn. They deal in different range of
products and from such methods they can examine cost which is going to be incurred. Along

with this, it also aids them in taking effective decision. By conducting costing system, they can
measure the cost which they incur at the time of procuring goods.
This method is helpful in determining the price of different products which they offer to
their customers.
By consulting the inventory management system, this helps them most because they can
manage their stock which is demanded in the market. All the methods are completely applicable
and managers can utilise such system in an appropriate manner (Breuer, Frumusanu and Manciu,
2013).
By using management accounting system, it enable an organisation to deal with may
problems. Unicorn grocery have to apply this technique in their business for managing their
inventory. Thus, they are dealing with regular basis operations and exchange of goods and
services. Moreover, they also have to analyse the job order costing which is associated with
every product. It is high in nature for an entity just because of dealing with different goods and
services.
P2 Different methods use for management accounting report
Accounting reports are a crucial part which shows clear picture of performance of an
organisation. A comprehensive accounting report is prepared in every quarter to give a holistic
view of the business finance. This information is helpful in changing strategies according to the
need of market and competitors.
Managers become more and more capable in taking decision which sort out all of their
problems in shorter time course. These reports are prepared with the purpose of achieving the
targets and goals which are set by the firm. These reports are prepared on the weekly, monthly
and quarterly base so that in such time period if any type of difference occurs then managers can
easily work on that.
Accounting reports helps in keeping the business fit and healthy. As like human beings
regular check up is compulsory for them to maintain their body healthy same procedure is
followed in business. For human beings, doctors help them in keeping them fit where as
managers are the doctors for any business firm. They have to look over on all acts which take
place in an entity.
While there are different kinds of business reports which are valuable for them to
maintain their firm health in long term (Burritt and et. al., 2011). These report aids the

organisation to provide quality products and maintain a brand image in front of new users also.
Their profit margin will get increase and all activities will be carried out in a systematic manner.
Managerial accounting reports are helpful for many leaders and managers as per this they can
examine performance of business entities and take effective decision through which growth and
sustainability become possible.
The managerial accounting reports are: i) Budget report ii) Account receivable aging
report iii) Job cost report iv) Inventory or manufacturing report. All these reports are helpful in
analyse the performance of business so that they can reformulate their strategies. The basic
discussion of these points is as follow:
1. Budget report: It is a most important and the most fundamental report in managerial
accounting. Budget enables the organisation to control cost of an enterprise whether it is
unified or has several departments. It is prepared in the prior year so that all expenses get
evaluated. (Bushee, Carter and Gerakos, 2013).
2. Account receivable aging reports: This type of reports is crucial for the business purpose
because it signifies about credit offer to the customer. The main purpose of preparing this
report is to identify the reasons behind the process of collection. An organisation has to
tighten their credit policies in favour of such customers who have failed to meet with
their debts on time. Hence, a firm have to look over on their old debts also.
3. Job cost report: “Job cost reports provide a side-by-side view of the total cost accrued in
a single project compared to the expected revenue yielded by that project”. So it is the
duty of a leader or manager to evaluate that which project require more fund and identify
that how much cost is going to be spent on that apart from the expected estimation.
Hence, managers have to evaluate such projects which provide them high profit so that
they can execute that.
4. Inventory and manufacturing report: Companies which deal in physical products can
use this report for making and comparing two things in an effective manner. This report
includes certain number of things like inventory waste, hourly labour cost and per unit
overhead cost. An organisation can compare between two or more departments to
identify which one is providing the best outcome at the minimum cost (Garrison and et.
al., 2010).

Every business firm have to use this technique so that they can achieve their goals on
time and at a minimum cost. It enables in providing a sense of state of business finance and grabs
all the opportunities which arise in the marketplace. Unicorn grocery can utilise this approach for
making their supply process effective.
They have to prepare budget in which cited firm have to ascertain all of their expenses
which are going to occur in an accounting year in short run. Also they have to identify that their
debtors pay all amount on time or not. The basic aim behind this activity is just to recover all
such amount which does not get covered. This leads in improving their operations more
smoothly because the amount of fund for routine operation increases. So all reporting system are
helpful in some of its nature so that business can prosperously grow and expand their activities
and its profitability gets increased day by day (Grafton, Lillis and Mahama, 2011).
D1 Integrated working of management accounting system and management accounting reports
Management accounting system is an analysis of all activities which are taking place in
an organisation. It enables the manager to analyse statistical form of the data of an organisation
which they performed during a week or in a month. On the basis of these statistical data a report
get formed. This helps them in improving their productivity and controlling deviations in a
proper framework. For example by using the inventory and management accounting system, an
organisation become able to produce only such quantity of goods which are demanded as well as
on the basis of reports, entity can manufacture only such quantity of goods which required or not
present in their warehouses. Thus, this process help in integrated the management accounting
system with all of their reporting process.
TASK 2
P3 Cost analysis by different methods
Cost accounting is a procedure through which the cost of products measured. Along with
this, the amount which is incurred with the production of items is also including in the actual
price of the good. Correct amount have to be mentioned in the financial statement which helps in
identifying the correct price of the product. There are various types of cost which have to been
taken into account and enables in understanding this approach conveniently.
1. Direct: Such cost which is directly related with factory and do not get vary.

2. Indirect: Such type of cost does not directly affect the production unit . It includes salary,
rent etc.
3. Fixed: This type of cost do not get changed and remain fixed with any course of time. It
remains constant with any course of time (Herzig and et. al., 2012).
4. Variable: Change in cost is referred to as the variable cost. This process is only possible
in the long run of business.
5. Operating: Operating cost is such type of cost which is related with the operational
activity of business.
There are different types of cost which an organisation has to use for setting price of their
product. All these questions answer by taking this approach into consideration. The two major
things which helps in better understanding about this concept is: i) Marginal costing ii)
Absorption costing.
1. Absorption costing: Absorption cost is anything which is directly related with cost. It
incur straightforward for producing an item for the target customers of the business. (Li and et.
al., 2012). This is the reason it is known as the full costing method because it absorbs the full
cost of product. This is one of the most important term which provide a platform to get the actual
price of product and add adequate amount of value in that. So an organisation can attain
appropriate profit in an ethical manner. The income statement of Unicorn grocery by using
absorption method is as follow:
Selling Price £35
Unit costs
Direct materials £6
Direct Labour £5
Variable Production overhead £2
Variable sales overhead £13
Budgeted production for the period is 600 units
Fixed cost for a month:
Production overhead: In this budgeted cost is £1,800 and Actual cost is £2,000

Administration Cost: In this budgeted cost is £800 and Actual cost is £700
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
Fixed overhead: £2000
Total £100(over absorbed)
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod. O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
0
11200
(1600)
600
700
21000
(9600)
11400

Fixed selling expenditure
Over absorption
Net Profit
600
(100) (1800)
9600
Marginal costing: Marginal cost of an item signifies the change which occurs from the past to
present. Marginal cost refers to as the unit which is produced last by the firm.
Marginal costing = Change in consumption/ Change in quantity of the product.
Marginal costing is helpful for the managers in taking effective decision. While regarding
this approach, the changes easily get analyse which occur during in production activity. If
managers found any kind of deviation while analyse all factors then they can stop such activity
immediate. This lead in promote sustainability of an organisation. So this is considered as one
of the most effective system. This procedure aids the management team to focus on variability
which takes place due to a specific judgement. The income statement by the marginal costing is
as follow:
Working 1: Calculate variable production cost £
Direct material 6
Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
Net profit using marginal costing £ £
Sales 21000

Less Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
600
2000
700
600
(7800)
13200
3900
9300
M2 Range of management accounting techniques for appropriate financial report
Concept or technique of managerial accounting refers to all methods which are helpful
for a firm in its long run survival. The system approaches which are helpful for this procedure
are as follow:planning and budgeting, short and long term decision, operational measurement of
performance. For this concern, these topics have to appropriately understand: Planning and budgeting: This process helps in planning all expenses which are going to
be incurred in a week or in a month. The budget has to be prepared according to such
planning practise (Lukka and Modell, 2010). Short and long term projects: The second technique in this regard is project decision
making. Managers use managerial accounting reports through which they can identify
that which project is suitable for them or which is not. Operational measurement of performance: The main motive behind using this technique
is to make an appropriate comparison between actual results which achieve by a firm on
the basis of their planning and budgeting.
Unicorn grocery can use this technique through which their financial reports become more and
more attractive. Firstly, they have to plan that what type of activities are going to be performed
by them and what amount is going to be spent on each and every activity by consulting effective
budgetary approach.

On the basis of various accounts and reports, it get analyse that, by identifying the net
profit through marginal costing, company already have a profit of 9300. This signifies that they
are dealing in high quality products with little variations. This get done because of properly
utilise the planning concept and implement it into business operations. Along with this, they have
prepare short and long term objectives in an adequate manner for attainment.
D2 Financial report and its interpretation
As per the above financial report, it is examine that company's profit by the absorption
costing approach is 9600 which is more than marginal costing. Also £100 is over absorbed by the
organization (Macintosh and Quattrone, 2010). Their financial position is strong and they do not
need to change more things.
Net profit using marginal costing £ £
Sales
Less Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
600
2000
700
600
21000
(7800)
13200
3900
9300
This is a income statement of the company in which net profit through marginal costing get
calculated. According to this, company is grocery store is earning a profit of 9300 which is
appropriate in nature. Thus it get identify that their condition is better than other small
enterprises.