Analysis of Management Accounting Techniques for GSQ Ltd

This report provides a detailed analysis of management accounting techniques, specifically focusing on their application within GSQ Ltd. The report begins with an introduction to management accounting, highlighting its role in decision-making processes and the importance of timely financial information. It then explores various management accounting techniques, including marginal costing and absorption costing, providing examples and calculations to illustrate their practical application. The report compares and contrasts these methods, ultimately recommending the absorption costing method for GSQ Ltd due to its ability to allocate fixed overhead costs and provide a clear picture of profitability. The conclusion summarizes the benefits of management accounting for organizations, emphasizing its usefulness for GSQ Ltd and the importance of integrating different accounting systems to reduce risk and improve efficiency. The report also includes a list of references used in the analysis.

Management
Accounting

TABLE OF CONTENTS
 INTRODUCTION
 MANAGEMENT ACCOUNTING TECHNIQUES
 CONCLUSION
 REFERENCES

INTRODUCTION
 Management accounting refers to identifying, measuring, analysing and interpreting the
information which will help in decision making process of the organisation.
 It involves timely preparing financial information and providing it to managers so that
managerial decisions can be taken.
 In this report, GSQ Ltd is taken as an organization.
 It covers introduction to management accounting system, different types of techniques
and planning tools used in management accounting

MANAGEMENT ACCOUNTING
TECHNIQUES
There are different types of tools and techniques in the management
accounting. Some of them are stated below.
 Marginal costing method: It is a technique used in fixing the selling
price, the best use of available resources, to make or buy decision,
acceptance or rejection of the order. It is based on fixed cost, variable
cost and contribution.

Cont..
Particulars £ £
Sales Revenue (50000*30) 1500000
Marginal cost of sales
Direct material 400000
Direct labour 150000
Variable production overheads 100000
Variable selling, distribution and
administrative expenses 200000 850000
Contribution 650000
Fixed costs
Fixed manufacturing overhead 160000
Fixed selling and administration costs 60000 220000
Net profit 430000

Cont..
 Absorption costing method: It is a method for capturing cost related to manufacturing.
It includes both direct and indirect cost.
Particulars £ £
Net sales 1500000
Less: Cost of sales
Opening inventories
Variable production cost 650000
Fixed overhead Absorption 160000
Less: Closing inventories
Cost of Sales 810000
Gross profit 690000
Less: Variable selling expenses 200000
Fixed admin. And distribution cost 60000 260000
Profit or loss 430000

Cont..
 From the above, it can be said that GSQ Ltd should use absorption costing method as it
allocated fixed overhead cost to each units of a product produced whether it is sold or
not. It also shows the clear profitability of the organization.

CONCLUSION
 It can be summarized from above that management accounting is useful for every organization.
 The importance and benefits of management accounting has helped GSQ Ltd in understanding it and
implementing it in its organization.
 The different types of management accounting system that can be used by GSQ Ltd in order to achieve
its objectives more efficiently.
 It also analyses the usefulness of integrating management accounting system in an organization and also
different types of management accounting system that are very essential for the businesses to reduce risk.
 It also includes analysing the management accounting techniques, that is, absorption costing and
marginal costing method and its relevance to GSQ Ltd

REFERENCES
 Aleem, M., Khan, A. H. and Hamad, W., 2016. A comparative study of the different
costing techniques and their application in the pharmaceutical companies. The Audit
Financiar journal. 12(143). pp.1253-1253.
 Bottomley, B. and Bosman, R., 2018. Job costing: An analysis of the construction
industry.
 DeNisi, A. . and Murphy, K. R., 2017. Performance appraisal and performance
management: 100 years of progress?. Journal of Applied Psychology. 102(3). p.421.