Management Accounting: Costing Methods and Project Organizing

This report provides a comprehensive overview of management accounting, detailing its characteristics, reporting methods, and applications in strategic decision-making. It contrasts management and financial accounting, elaborating on job costing, price optimization, inventory management, and cost accounting systems. The report also discusses management accounting reporting methods such as inventory management, budget, performance, and accounts receivable aging reports. Furthermore, it analyzes marginal and absorption costing, including calculations and reconciliation, alongside cost volume profit analysis, flexible budgeting, and cost variance. Finally, it touches upon the benefits and drawbacks of different project organizing types and the implementation of accountancy systems in response to fiscal crises, using Essentra Packaging as a case example.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
P1. Describe managerial accounting and the critical characteristics of the various forms of
managerial accounting............................................................................................................1
P2. Elaborate methods of management accounting reporting................................................3
P3. Marginal and absorption expenses are used to calculate the costs of preparing the income
statement.................................................................................................................................4
PART 2............................................................................................................................................9
P4. The benefits and drawbacks of different types of project organizing..............................9
P5. Accountancy systems implementation amongst enterprises in response to fiscal crisis11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

INTRODUCTION
It is the process of supplying macroeconomic information and logic to managers so that they
can decide things (Alawattage and Wickramasinghe, 2018). To create efficient and exact
selections, and also engage with enterprise, development, and banking transactions, management
accounting utilizes statistical data in order to make those selections. Accounting and finance-
related records are generated by utilising capacities and enhanced technology. Elaboration of
budgets, tracking of operations and formulating strategies for it are also aided by the tool.
Berkeley Consultants has been founded in 1990 to assist individuals in understanding the
concept of strategy formulation. In the form of independent management team, firms supply a
variety of offerings to their customers. One of its customers is Essentra Packaging, a
manufacturing firm which has specializing in tearing tapes. This section entails budgeting
process, as well as the various types and ways of reporting. Different pricing are calculated, and
the advantages and disadvantages of different organization models was given. Additionally, a
link between managerial accounting and financial troubles has indeed been established.
PART 1
P1. Describe managerial accounting and the critical characteristics of the various forms of
managerial accounting
In management accounting, reports and predictions are prepared to give managers with
reliable, complete financial and statistical information needed to create short-term decisions
about the day-to-day activities of a business. An analysis of the corporation's behaviour can
assist Essentra Packaging formulate vision and strategy. If firms can generate ideas, for
marketing, scheduling, forecasting as well as other activities based on this data, they will be able
to evaluate their production more effectively accounting information is provided. Essentra
packages can take advantage of a wide range of investments in administration accounting to
fulfil its goals.
Companies utilise operational accounting technologies to analyse and measure their
production. So, Essentra Packing can set guidelines for each section in attempt to obtain
excellent results. In this way, management would be able to generate knowledgeable decisions
based on reliable facts and information. Since it operates including both financial and non-
financial variables, Essentra Packaging should use it (Al-Sayed and Dugdale, 2016).

Management accounting solutions might be tailored to a company's requirements and to
the surroundings. It could use a cost accounting system to keep track of its stocks, as an instance.
Utilization of a sales managerial tool can be used as a foundation for establishing prices of
merchandise. The same is true of companies that provide services to its customers in the market.
Industrialization brought management accounting methods to the UK. All of these
techniques can be utilised to overcome fiscal problems. As a result of financial management, an
institution's actions can be controlled and managed.
Difference between management and financial accounting
Management accounting Financial accounting
Essentra Packaging utilizes it to carry out its
own internal activities, such as sorting and
packaging. This data is utilised to create
decisions, but it is maintained confidential.
As component of the disclosures procedure, all
facts, data, and volumes are readily accessible
to the general community.
In this situation, there is no clear framework or
protocol. In certain cases, all needed
information may be included in the figures for
a particular community (Amnuai, 2019).
Accounting reporting methods such as GAAP,
IFRS and many others are generally recognised
by everyone in this context.
Based on the requirement, the Essentra
packages may incorporate budgetary and also
non-financial data in its analysis.
Companies are asked to provide them with
financial data, and they do so willingly.
These documents do not necessitate specific
inspection frameworks.
As a result, the assertions are examined before
they are filed or distributed to the public.
Types of management accounting system-
Job costing system: This means that the business is able to calculate the true amount of
all expenditures spent throughout the course of carrying out the function(s). It is possible for
organisations to make investment decisions based on knowledge that has been accumulated over
a period of time. Using this system, Essentra Packaging can collect information on job duties and
the associated costs associated with each one. In order to anticipate profits, the company requires
determine the overall costs associated with the operation.

Price optimisation system: In a vibrant economy, it is vital for firms to set price
structures for their products or consumables, since this will assist them enhance financial
performance. The company should have a thorough understanding of economic characteristics as
well as customer expectations. This will aid management in making customer impressions,
preferences, and commercial preferences. It could boost the competitiveness of product lines and
also have a beneficial impact on overall Essentra packages sales (Andarwati, Nirwanto and
Darsono, 2018).
Inventory management system: Production and assembling have indeed been significant
operations within the organisation. These procedures regulate the supplier, inventory and
commanding qualities. Essentra Packaging would be able to accurately verify its inventory,
thereby lowering costs and create profit yields as a consequence. By assuring that commodities
are being used in the best economical and productive manner feasible, organisations could boost
their productivity.
Cost accounting system: For selling income, regulating expenses, and cost reporting,
businesses utilise this approach to calculate the expenses associated with specific commodities.
A crucial element, because it is difficult for profitable businesses to estimate the exact pricing of
their inventories with any degree of accuracy. There are a number of areas wherein Essentra
Packaging must be involved, but that's only possible if service expenses are well projected. So,
the firm will be enabled to track inventory quantities and various stages of production. Using it
for price identification, distribution and categorization as well as monitoring would allow firms
to compare prices between themselves.
P2. Elaborate methods of management accounting reporting
A management's accounting statement is used to guide higher-level management in
creating strategic decision. Using these figures, Essentra Packaging may evaluate the
performance of its employees. Listed below are a few facts-
Inventory management report: As a result, it is one of the most significant actions
related with the creation of reports. There are a number of considerations that Essentra
Packaging should take into account, like setup expenses, stock closures, and so on. They also
offer details on security and the ways that can be utilized to acquire it. There must be a balance
struck amongst the services supplied to customers and inventory management (Arnold and Artz,
2019).

Budget Report: Essentra Packaging should supply production information in the near
future, since this would assist businesses in conducting their operations in a more organised
manner. Fundamentally, it informs people of the advantages that are available to them in attempt
to improve worker morale and allow them to perform respective jobs more efficiently. It would
also assist the company in assuring that overall effectiveness is improved in terms of how
operations are carried out.
Performance report: Reviews are carried out to determine the performance of an
institution. It contains detailed data on the benefits provided to employees. Essentra Packaging
might use this tool to motivate its employees by enabling them to examine the firm's corporate
performance and create techniques for boosting corporate growth. It will likewise assist
management in determining whether modifications are required to boost employee efficiency.
Accounts receivable ageing report: It will generate important data in the type of
invoices for concessions provided to users. As a consequence, Essentra Packaging decides on the
amount to be paid and the credits note to be issued. It is a tool which assists businesses in
achieving favourable fiscal productivity, collecting, and past-due payback performance (Bloom,
Sadun and Van Reenen, 2016).
P3. Marginal and absorption expenses are used to calculate the costs of preparing the income
statement
Calculation of costs-
 Absorption costing-
Total cost of production
Particulars Amount
Direct materials 60
Direct labour 40
Variable production cost 20
Fixed production cost 20
Full production cost 140
Income statement
Particulars May June
Sales 25000 18750

Less: Cost of sales
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Fixed production cost 2000 1600
Opening stock 0 0
Closing stock 0 700
Under/Over absorption 0 400
Gross profit 11000 7850
Less: Expenses
Variable sales commission 500 375
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3475
 Marginal costing-
Total cost of production
Particulars Amount
Direct materials 60
Direct labour 40
Variable production cost 20
Full production cost 120
Income statement
Particulars May June
Sales 25000 18750
Less: Variable cost
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Opening stock 0 0

Closing stock 0 600
Variable sales commission 500 375
Contribution 12500 9375
Less: Fixed cost
Fixed production 2000 2000
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3375
Reconciliation statement
Particulars May June
Net profit under absorption costing 6500 3475
Add/Less: Closing stock 0 (100)
Net profit under marginal costing 6500 3375
Calculation of material variances
Particulars Budgeted Actual Variances
Materials cost per unit £24 £18.67 £5.33
Inventory ledger record LIFO Method
Date Description Sale/Purchases Balance
Units Cost Total Units Total
Jun-01 Opening Inventory 10 £35 £350 10 £350
Jun-09 Purchases 15 £38 £570 25 £920
Jun-15 Issued -12 £38 -£456 13 £464
Jun-20 Purchases 10 £32 £320 23 £784
Jun-23 Issued -10 £32 -£320 13 £464
Jun-27 Issued -3 £38 -£114 10 £350
Jun-30 Issued -2 £35 -£70 8 £280
Average cost methods
Date Purchases Units Cost Total

Jun-01 Opening Inventory 10 £35 £350
Jun-09 Purchases 15 £38 £570
Jun-20 Purchases 10 £32 £320
Total 35 £1,240
Average cost of Inventory = Total/Units = 1240/35 = 35.43
Pricing denotes the overall expenses spent when carrying out operations and activities
within the institution's infrastructure. It is divided into variable, fixed, indirect, and instantaneous
categories. Essentra Packaging imposes a variety of charges in the course of its operations.
Assess the expenses of fundamental supplies, people, and suppliers, among many other things.
This word refers to the entire set of protocols associated with calculating the total cost. It would
enable administrators to calculate the cost of specific actions (Brierley, 2017).
Cost volume profit analysis: It is a technique of analysis that aims to determine the
discrepancy among income and expenditure earned by performing specified operations. Its goal
is to estimate an organization's financial situation in light of distribution across multiple factors.
Flexible budgeting: This is defined as budgeting procedures in which factors related to
overall expenses can be adjusted depending on volumes produced and value created. These
tactics can be used by Essentra Packaging to evaluate the overall effect of earnings over a certain
time frame.
Cost variance: As a result, it is viewed as a technique of comparing past expenditures
with the current expenditures. Essentra Packaging should determine the discrepancy between
expected and observed manufacturing expenses.
Absorption & marginal costing:
Absorption costing: Technique for calculating operating expenses that includes expenses
involved in the operation of producing vital functions or consumables whilst complying to
GAAP for operating expenses. Essentra packaging charges customers for both fixed and
recurrent prices for goods or operations delivered by the company. This cost is utilised for
finance and operational processes that work efficiently and help to the profitability of a
company. Price rises will also be caused by changing and fixed expenditures, operational costs,
and compensation. Such information would be helpful to the firm's management in devising
appropriate techniques for coping with situations that may occur throughout the process of an
operating performance. These costs have been internalised and technical tools which can be

regarded by the organization's management are explained in this report (Christ and Burritt,
2017).
Marginal costing: The supplementary cost is the result of a rise or reduction in overall
production expenses for generating more quantities of merchandise. This shows the fee that is
levied on each component of a value. These expenditures include both structural and advertising
expenses, in addition to the operational and regulatory charges that go along with them. Essentra
product's performance could be improved by incorporating excess expenses, and managers must
take this into account. Accountants would've been able to track the improvement in income
resources as a consequence of this. To determine cumulative expenses, use the appropriate
approximation-
Cost allocation: Assigning operational expenses depending on accomplished activities is
the process of assigning profit margins. A firm like Essentra distributes money depending on
multiple manufacturing activities.
Fixed cost: As a consequence of changes in the number of operations and things
supplied, fixed expenses are those that would not alter. Essentra Packing's total spending or costs
in carrying out its business operations.
Variable cost: Corporate expenses which fluctuate in response to production
development are known as variable expenses (sometimes called variable costs). A corporation's
capability for manufacture determines whether it's able to produce more or less, because it
increases with industrial creativity and lowers with such a fall in installed capability. Expenses
involved with supply and variable overhead will be included in the calculation for Essentra
(Christensen and et, 2015).
Normal costing: This comprises the price of products in the form of product expenses,
employee wages, and a variety of other expenses that happen in a business while it (Essentra
packaging) is delivering its services.
Standard costing: It refers to preset charges which are anticipated within the context of
projected opportunities for supplying certain services. This is in contradiction to the company's
actual accomplishments. Essentra packaging, for example, utilizes price to determine the true
costs connected with all of this.

Activity based costing: It refers to an accounting system that businesses can employ to
assess the cost of managerial functions and the cost of their product. Pricing schemes are
developed based on the procedures and activities involved.
Inventory cost: Included in this category are the expenses connected with the company's
acquisition, shipment, storage, and a number of other operations that it must execute. Storage
expenses for management of recurring costs that have transpired and are occurring might be
detected by Essentra packaging (Collings, Wood and Szamosi, 2018).
Valuation methods:
LIFO: It is an abbreviation for last in first out. If Essentra Packaging wants to retain
record of additional materials given by the company, it might use this method of capturing
modifiable inventory. It is the most current products that are produced that have the highest cost
of sales (COGS). As an example, the Essentra packaging manufacturing worker used industrial
products that came after the original order was placed.
FIFO: It relates to the pricing of things moved out as well as the resources associated
with inventory. Past costs would've been counted as an initial expenditure in this case. This cost
would've been eliminated from the fiscal statements and substituted with a one-time expenditure
which might display as the first item on the annual statements. So, Essentra Ltd. employs
commodities which were purchased in the start so that their quality doesn't really degrade with
time.
Overhead: Indicative of manpower and material expenditures. A precise salary is
specified for each of these positions.
PART 2
P4. The benefits and drawbacks of different types of project organizing
A plan is a financial approach for a specific time span. This comprises evidence volumes,
pricing and expenditure, liabilities, cash flow, and various other aspects. This is also utilised to
forecast financial composition and also the company's status for the next term. In order to
accomplish success the senior leadership employs a long-term goal-oriented approach. To
evaluate whether or not massive sections are using financial resources successfully and
efficiently, Essentra packages managers establish several operational regions. In order to avoid
unnecessary expenditure, it emphasizes on fiscal discipline. In addition to attain progress and

success, this procedure requires setting financial and environmental objectives for a specified
time span (Daniel, Persson and Sandorf, 2018).
Administration of Essentra packages defines firm objectives and compiles relevant
information to create budgets. The quality of the information obtained is subsequently assessed
using such tools. Needs to prepare spending and offers these to high-level executive committees
for approval, based on study findings. An institution's managers would implement it once it has
been formally approved. As an executive group, we go through a series of steps to develop
estimates.
Zero based budgeting: This is a plan that has been built from basis. This assists company
management in explaining all expenses spent whilst conducting business. This one is developed
by management in Essentra packaging to evaluate the requirements and costs of all company
initiatives. As a response, the accompanying advantages and disadvantages are discussed-
Advantages:
 In particular, administrators can anticipate prospective investment and revenues with the
assistance of technologies. To limit the possibility of destruction, it assists to recognize activities that are not
lucrative and so not worth pursuing.
Disadvantages:
 In the budgetary control, it is a difficult tool to employ since it overlooks the complete
previous year's activity.
 Preparation of this planning procedure requires extra energy, which cannot be committed
by a company as a whole (Hsu and Lin, 2016).
Operating budget: There are a number of factors that go into the annual planning of a
certain activity. This entails calculating the overall quantity of investment necessary for strategy
efficiency, which includes refunded duties or operations performed for somebody else. This
strategy can be produced by Essentra Packing's administration to capture non-financial spending.
Another example is amortisation that is a non-cash expense that is recognised in the proper
planning. The majority of its advantages and disadvantages are as shown below-
Advantages:
 This assists business managers in assessing the expenditures that are integrally related to
running operations and determining the best plan for controlling it all.