Management Accounting Report: Techniques and Analysis for Oshodi Plc

This report delves into management accounting practices, focusing on Oshodi Plc, a manufacturing company in the fruit juice sector. It defines management accounting, explores its requirements, and details the benefits of management accounting systems, including price optimization, cost accounting, and inventory management. The report then examines the integration of management accounting reports within organizational processes and outlines various reporting methods such as budget reports, account receivable reports, performance reports, and inventory reports. Furthermore, it analyzes cost analysis techniques, specifically marginal and absorption costing, to prepare income statements. The report also discusses planning tools used for budgetary control, their advantages, and disadvantages, and how these tools can address financial issues. Finally, it compares how organizations adapt management accounting systems to respond to financial problems, concluding with an analysis of management accounting's contribution to solving these problems.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Defined about the management accounting and the requirements of management
accounting system.......................................................................................................................1
M1 Defined the benefits of management accounting systems and their application..................2
D1 Integration of management accounting system and report within organisational process....3
P2 Define different methods used for management accounting reporting..................................3
TASK 2............................................................................................................................................5
P3 Usage of the techniques of cost analysis to prepare income statement by using marginal
and absorption costing.................................................................................................................5
M2 Applying range of management accounting techniques.......................................................7
D2 Produce financial reports and interpretation of above data...................................................7
TASK 3............................................................................................................................................7
P4 Defined advantages and disadvantages of different kind of planning tools which are used
for budgetary control...................................................................................................................7
M3 Analyse the use of different planning tools and their application.......................................9
D3 Application of planning tools to respond financial issue along with attainment of
sustainable success ...................................................................................................................10
TASK 4..........................................................................................................................................10
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems.....................................................................................................................10
M4 Analyse the contribution of management accounting in respond to financial problems....13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management Accounting is explained as a practice of identifying, measuring, analysing
and communicating all of the financial information to top management for the purpose of
achieving companies mission & vision(What is Management Accounting, 2019). It involves
presentation of any financial information for internal purposes so that key business can be taken
easily. With the help of management accounting, financial information can be collected through
which overall performance can be improved in short period of time. This project report is based
by considering Oshodi Plc which is one of the bigger manufacturing industry in the sector of
JOJO fruit juice. The main benefit of JOJO juice is that it can be consumed by every group age
people. Number of concept will be covered in it which will start from the explantation of
management accounting with several method of management accounting report. Different types
of planning tool will also be discussed with their major advantages and disadvantages. Also, file
will contain detail knowledge that how management accounting helps to resolve any sort of
financial problem which arises in the organisation.
TASK 1
P1 Defined about the management accounting and the requirements of management accounting
system
Management accounting is explained as a method or even concept that helps association
because it collects all of the information related to financial activity through which decisions can
be taken easily(Parker, 2012). Different types of financial analysis such as product costing,
forecasting, budgeting can done with the help of management accounting. In context of Oshodi
Plc, management accounting will play crucial role for them as it will give them idea that what
types of decision are required to be taken by organisation for achieving goals. As Oshodi Plc
performs at greater level, it will be important for them to select different management accounting
so that company can perform better. List of some management accounting system are:
 Price Optimising System: It is a accounting system which can play huge role for
organisation like Oshodi Plc because company gets opportunity to select suitable price
for selling their product within the market. It has a huge impact on market because
organisation can easily identify that how slight changes in product price changes the

whole demand and supply structure. In order to increase the sale of JOJO fruits, it will be
important for Oshodi Plc to select best price which can be affordable by customers.
 Cost Accounting System: Whenever organisation produces number of product they uses
cost accounting system because it helps to estimate the accurate amount of cost every
product(Otley, 2016). It is suitable because company gets the chance to calculate whether
they are earning profit or not. Oshodi Plc can be benefited from cost accounting system
because it will help them to prepare annual financial statement as it helps to keep records
related to stock, WIP and finished goods. In short, it will give that what is the estimate
cost to prepare any of the JOJO juice profit. Even cost accounting systems are of two
types and they are:
◦ Job costing system: This accounting system is favourable for those business
organisation which manufactures number of product because every single cost can be
calculated easily in it.
◦ Process costing: It is the accounting system which helps to find the cost of
production at each stage. This is costing method is necessary for those company
which takes number of stages for manufacturing any of the product.
 Inventory management system: This is the accounting system which is used by Oshodi
Plc in order to find accurate demand any supply of market. This can be beneficial for
them because it will give them the idea that what should be the quantity of raw material
that is need to be kept within the organisation through which demand and supply will not
be affected in any situation. There are different types of inventory management system
which can be used by Oshodi Plc such as LIFO, FIFO & AVCO. In order to reduce
wastage of raw material, Oshodi Plc should use FIFO method where first in product will
be manufactured at first for selling within the market(Fullerton and et. al., 2014).
M1 Defined the benefits of management accounting systems and their application.
Price optimisation system
 For the purpose of enhancing overall sale of a company, price optimisation system can be
used by Oshodi Plc. It will give idea to organisation that at what price consumers want to purchase any of the
JOJO juice product.

Cost accounting system
 In order to enhance profitability ratio, cost accounting system can easily play supporting
role. For the purpose of finding the efficiency of process, organisation can easily use this
accounting method.
Inventory management system
 For the purpose of maintaining accurate report related to stock, organisation can easily
adopt this accounting system(Soin and Collier, 2013).
 It is beneficial for Oshodi Plc because it will reduce their unnecessary expenses which
occurs while manufacturing JOJO juice.
 By managing the inventory in an appropriate manner an organisation can minimise their
cost, maximise the sales and profit.
D1 Integration of management accounting system and report within organisational process.
It is assumed that management accounting to totally connected with management
accounting report because organisation can easily find the accurate information which directly
helps in preparing financial statements. For understanding in detail, lets take the example that
organisation uses inventory management system. This system will help to obtain each and every
information related to inventories which will be presented within management reporting. In same
way, organisation also take help of other accounting reporting while operating business
operations.
P2 Define different methods used for management accounting reporting.
Management accounting report is the crucial part of any business organisation because
it helps to provide accurate information about business organisation that how it is performing and
where improvement is still required. It is beneficial because it gives idea that how profit can be
increased and what can be the major ways to overcome from problem which is being faced by
business organisation(Maas, Schaltegger and Crutzen, 2016). In context of Oshodi Plc,
management accounting reporting can play significant role because it will give them idea that
how cost can be reduced in order to maximise profit percentage. There are different types of
management accounting system which has been explained below:

Budget reports: The most important report for any of the business organisation because
it helps to control unnecessary expenses which occurs within the company. Oshodi Plc can
prepare budget just to decide that in which section what amount of money should be invested.
Whole of this report is prepared by comparing previous year report where every information are
already mentioned(Hiebl, 2014).
Account receivable ageing report: It is the report which is necessary for Oshodi Plc to
prepare because there are number of customers connected with company who purchase product
in credit system. It will help to set standard time period to collect cash from debtors. It helps to
maintain inflows and outflows of cash in standard accounting system.
Performance reports: Whenever company need to find out the accurate performance of
employees as well as of organisation they need to take the help of performance report. In context
of Oshodi Plc, they are needed to prepare performance report to find exact position of employees
that whether they are able to perform their task in specific manner or not. This will also give idea
whether JOJO juice is being preferred by employees or not. If any of the things lack in it then
they can easily formulate new plans and policies
Inventory and Manufacturing report: It is the accounting report which has a great
importance for business organisation who is engaged in manufacturing activities. In context of
Oshodi Plc, they will be benefited from this particular report because they are engaged in
manufacturing activities. They can easily find accurate amount of cost to produce single JOJO
juice through which they can set their profit margin. Even they will have better knowledge that
how much raw material is required to them so that production department don't get affected in
any of the situation(Herbert and Seal, 2012).
In order to run business successfully, Oshodi Plc will need the help of all above
mentioned accounting report because this will help them to take better decisions according to the
situation which arises in front of them while manufacturing JOJO juice.
TASK 2
P3 Usage of the techniques of cost analysis to prepare income statement by using marginal and
absorption costing
Cost Accounting Techniques are being considered by organisation like Oshodi Plc
because it helps in analysing the cost of every single expenses so that percentage of profit can be

increased. Oshodi Plc has got two option available with them and they are marginal & absorption
costing(Cooper, Ezzamel and Qu, 2017). Marginal Costing: It is also understood as variable costing because variable cost do
changes in it. This technique of costing is prepared only in those organisation which
perform business activities at smaller level.
Calculation of marginal costs and profitability of Oshodi Plc. is depicted below:
Marginal cost
Direct material cost 18
Direct Wages 4
Variable production overhead 3
Total variable production cost 25
Income statement using Marginal costing
November December
Units Amount Amount Units Amount Amount
Sales @ 50 10000 500000 12000 600000
Less: Cost of sales
Opening stock @ 25 2000 50000
Variable cost of production @ 25 12000 300000 10000 250000
Less: Closing stock @ 25 2000 50000
250000 300000
Variable selling overhead 50000 60000
Total variable cost of sales 300000 360000
Contribution 200000 240000
Fixed overheads:
Production 99000 99000
Selling 14000 14000
Administration 26000 139000 26000 139000
Net profit 61000 101000
Absorption Costing: It is the method of costing where cost will be included of both fixed
and constant. Absorption costing are mainly used by organisation which perform business
activities at bigger platform. In this types of costing method, cost changes as the change in per
unit of output occurs.
Calculation of net profit using absorption costing along with ascertainment of over
(under) absorption cost:

Income statement using Absorption costing
November December
Units Amount Amount Units Amount
Amoun
t
Sales @ 50
1000
0 500000
1200
0 600000
Less: Cost of sales
Opening stock @ 34 2000 68000
Variable cost of production @ 34
1200
0 408000
1000
0 340000
Less: Closing stock @ 34 2000 68000
340000 408000
Gross profit 160000 192000
Adjustment for over / under
absorption of overheads 9000 9000
169000 183000
Fixed overheads:
Variable selling overhead 50000 60000
Fixed selling overhead 14000 14000
Fixed Administration overhead 26000 90000 26000 100000
Net profit 79000 83000
Working Notes:
Fixed production overhead absorption rate 99000/11000 9
Full production cost for one unit to be used in stock valuation
is: 29
Variable cost 25
Fixed production overhead 4
Calculation of over/ under absorption of fixed production overheads

Production
Overhead
absorbed
per unit
Total
overhead
absorbed
Overhead
incurred
Over (Under)
absorption
Units Amount Amount Amount Amount
November 12000 9 108000 99000 9000
December 10000 9 90000 99000 -9000
Conclusion: It is understood from the above table that changes in opening and closing
stock, fluctuate the amount of net profit. Different method calculate different result but as per the
business structure of Oshodi it is important for them to follow absorption costing method
because it will consider both fixed and variable cost.
M2 Applying range of management accounting techniques
It is the method of accounting which is helps to calculate revenue and expenses within
the organisation and this information is prepared in financial documents. It is easily calculated
with the help of marginal & absorption costing(Bouten and Hoozée, 2013). It is said that
absorption & marginal costing helps in calculating the profitability of company through which it
can be easily determined that whether company is performing well or not.
D2 Produce financial reports and interpretation of above data
From the above prepared statement, it is understandable that net profit in November is
61000 where as in the month of December it reaches up to 101000. This figure was calculated
with the help of marginal costing. In case of absorption costing, it was found that profit in the
month of November is 79000 and 83000 in the month of December. It can be clearly seen that
profit in the month of December is high because sales revenue is greater in it as compared to the
month of November. It is better for organisation like Oshodi Plc that they must use absorption
costing because direct and indirect expenses are calculated easily in it.
TASK 3
P4 Defined advantages and disadvantages of different kind of planning tools which are used for
budgetary control
A budget is an important document for the business as it consist all the estimated and
income about the future plans or strategies. Other than that, budgetary control considered as a

process which helps the business to find out the difference between the estimated and actual
outcome so that the variances can be found and can establish proper control and monitor on that.
There are several planning tools which can be used by the Oshodi Plc of budgetary control are
explained beneath:
Zero based budget: In this budget the base of all the activities starts from zero as this
budget is not depend on the previous budgets(Tucker and Parker, 2014). While preparing this
budget each and every expenses needs to be justified before entering all the figures in the actual
budget. This budget will be beneficial for Oshodi Plc when they wants to prepare for their
particular activities which are newly present.
Advantages Disadvantages
 It will be profitable for the company
as in inspire them to keep their eyes
on each and every activity which
helps to reduce unnecessary cost.
 This budget carry higher efficiency as
this budget is working on the actual
number rather than the estimated
figures.
 This budget is not beneficial for the
long term plans or investment.
 While preparing this budget company
have to more focus on the research
due as in this budget all the figures
recorded on the zero base due to which
managers have to give their more time
and money in this budget.
Master budget: This budget comprises various small budgets within and developed a
common budget so that all the activities can be recorded in one document which will help the
company to easily assess overall performance of the company. Oshodi Plc can use this budget to
bring sufficiency and uniformity in their business operations. The various budget are covered
under this budget like sales, cash and purchase(Bell, Hoque and Arroyo, 2012).
Advantages Disadvantages
 This budget save the extra cost and
time of the company as in this budget
manager can find out all the
information at one place.
 This budget create confusion due to
which company is not able to update
anything in it.
 This budget does not able to specify
any of the activity as if company want

 In this budget, all the activities are
recorded appropriately which enables
the company to detect extra cost from
unnecessary operations and implement
them to in a productive activity.
to know about that how much sales
department is spending and earning
then it is not possible.
Flexible budget- It is the most beneficial budget for the company as it allows them to
make changes according to their requirements. This budget is more suitable for Oshodi Plc as
compare to static budget as it enables the manager to record all the necessary changes according
to their business requirements(Nitzl, 2016). Also, this budget showcase the changes in the
expenses and income as per the changes in the output. Although this budget have great advantage
for the company but it also has some disadvantages which are described below:
Advantages Disadvantages
 It allows the business of Oshodi Plc to
changes its recorded figures as per the
business needs.
 This budget is very beneficial to cope
up from the adverse situation like by
using this they will be able to control
their cost.
 This budget also represent the
unfavourable situations of the budget
which lead the negative impact on the
investors and consumers of the
business.
 It is not suitable for a longer period of
time as it prepare only for specific span
of time like half-yearly or quarterly.
M3 Analyse the use of different planning tools and their application.
According to the above discussed it can be stated that all the planning tools like Zero budget,
master budget and flexible budget are very useful for the business organisation. These are
enables the Oshodi Plc to maintain the proper flow of cash so that the strong financial position of
the business can be determines and can grow in the marketplace. Here is given below the cash
budget of Oshodi Plc(Tappura and et. al., 2015).

Receipts £
Cash sales 450
Credit sale receipts from debtors 220
Other income earned 200
Total receipts (a) 870
Payments
Purchases 205
Wages 105
Fixed costs 200
Capital expenditure - Machinery 650
Advertising 50
Total Payments (b) 1210
Surplus/Deficit (a) – (b) -340
D3 Application of planning tools to respond financial issue along with attainment of sustainable
success
All the above mentioned planning tools plays a crucial role in solving out all the financial
crisis. As master budgets helps the Oshodi Plc to regulate all the activities effectively by
considering the sufficiency of each and every activity. This budget allows the company to
maintain an appropriate flow of cash by investing funds in a more productive activity. Other,
flexible budget enables the business of Oshodi Plc to make essential changes according to their
business and market situations so that the overall profitability and sustainability of the business
can be increased(Cokins, 2013).
TASK 4
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems
Management accounting system have their own important within the business as it
enables to prepare and provide necessary financial and statistical data to the manager so that they
will be able to formulate effective decisions to solve out all the issues. As Oshodi Plc is