Management Accounting Systems: Reporting, Cost Analysis & Planning

This report explores the importance of management accounting and its various systems in fulfilling business requirements. It details the benefits and advantages of management accounting, highlighting useful techniques for cost analysis and the role of budgets in business planning. The report also guides companies in selecting appropriate management accounting systems for addressing financial issues, focusing on methods useful for reporting and aiding managers in effective decision-making. Specific areas covered include job costing, price optimization, cost accounting, and inventory management, with an evaluation of different management accounting systems and their benefits. The report also includes a cost analysis using marginal and absorption costing methods, illustrated with income statements for November and December.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION .........................................................................................................................3
TASK.............................................................................................................................................4
P1. Define management accounting and provide essential reasons for demanding various
types of management accounting systems............................................................................4
P2. Evaluate various methods used in management accounting reporting...........................5
P3: Evaluate costs with the help of useful techniques which will help to analyse costs and
prepare income statement with the help of Marginal and absorption costs..........................8
P4: State merits and demerits of various types of planning tools which are helpful in
budgetary control................................................................................................................10
P5. Comparision between companies and how they are adopting management accounting
systems while responding to financial problems................................................................12
CONCLUSION ...........................................................................................................................14
REFERENCES.............................................................................................................................15

INTRODUCTION
The report prepared below explains the importance of management accounting and
requirements which could be fulfilled with the help of management accounting systems. It also
explains what are the benefits and advantages of management accounting system. The report
also helps to find useful techniques that contribute in analysing costs and how budgets are
helpful for business over a period of time. It also helps to guide companies as which
management accounting system would be helpful for finance related issues. Management
accounting report helps to find out which alternative will be more suitable for carrying out
operations. This report gives an idea about methods which will be useful in management
accounting reporting and will help managers, executives in finding out useful solutions for the
problems occurring on a frequent basis (Agustia, 2020).

TASK
P1. Define management accounting and provide essential reasons for demanding various types
of management accounting systems.
Management accounting can be explained as a technique which helps in preparation of
reports and statements which are useful in the long run of business life cycle. It helps to manage
operations on small as well as large scale which facilitate efficient decision making. It helps to
set goals, identify needs of the business and work accordingly. It also helps to focus on making
future based plans which will improve efficiency and effectiveness of business. It also helps to
maximize profit margin and minimize costs incurred during the process (Alsaid, 2021). It helps
to guide managers, supervisors in decision making process keeping future aspect in mind. It
also helps company to have an idea about financial and non financial factors which affect
growth and expansion of organisation. Management accounting not only helps in planning but
also focuses on improving coordination and communication in Nasty gal vintage company. It
also helps to motivate staff persons present in the organisation which will help in increasing
customer satisfaction and serving them right according to their needs, tastes and preferences.
Types of Management accounting system:
1. Job costing : There are many types of management accounting which are helpful for
better and proper functioning of business. Job costing is considered as a useful method
which helps to assess cost of each project and job performed, completed so far. It can
further be explained as a tool which involves direct and indirect costs which can be
divided in three sub areas such as Overhead, materials and labour. It is helpful to find if
the job tasks performed are generating profit or not and would prove to contribute in
positive aspects in coming days or not for the Nasty gal vintage company. It is also
helpful in calculating expenses related to specific jobs which focus on customer
preferences as well. It is given priority when the work is given to specific sections,
projects and areas. It also helps to examine costs for each section by providing a
separate accounting for certain work. It makes sure that all costs are covered with the
help of job costing and required profit, revenues are generated (Drury, 2018).

2. Price optimisation : Such pricing models help business to have an idea and proper
guidance about fluctuations recorded in demand. It also helps to understand how profit
margin can be improved and what price range would be suitable for which customers.
Price optimisation is helpful to assess data related to customer and market for reaching a
point which would prove to be the most effective reach for organisation. It helps
managers to collect historical data and have a thorough analysis of the same. It helps to
set objectives in Nasty gal vintage company accordingly and keep an eye on all
operations and functions timely. The information used in price optimization includes
inventory based costs, sales recorded for the year by the firm, operating costs (Iredele,
Tankiso and Adelowotan, 2020).
3. Cost accounting : Cost accounting can be defined as a form of accounting which focuses
on calculation of total cost incurred due to production of goods and services in Nasty gal
vintage company. It not only assess total costs but fixed and variable costs as well. Cost
accounting can be explained as part which takes only quantitative measures in account
whereas when associated with management it helps to understand qualitative measures
too.
4. Inventory management : Inventory management helps to understand the process of
ordering the inventory, keep safety and security of those inventories, putting those
inventories to best possible uses and at last sale of inventories as well. It helps company
to order right quantity at right time. Inventory management keeps a check on purchase
of stock till sale of goods. It also ensures that there is enough stock available for
customer's in the hour of need and inventories are order well in time by Nasty gal
vintage company.
P2. Evaluate various methods used in management accounting reporting.
Management accounting reports helps to highlight financial position of the Nasty gal
vintage company over a period of time. The factors which must be included in a report related
to management aspects are efficiency and effectiveness if company and employees working in
it. It also highlights scale on which performance of employees is measured indicating the level
they have reached in achieving their goals (Johnstone, 2018). Management reports can be
analysis report, status report, business report etc. It is used as a base which provides important

data and information to stakeholders and shareholders for facilitating decision making process.
Some important reports are discussed below:
1. Account receivable report: This report is helpful in preparing records which
reflect unpaid customer bills which have been outstanding from a longer period
of time (Modell, 2020). Such reports are helpful for managers of Nasty gal
vintage to find out why they are lagging behind and what is the reason behind
their slow speed. It also gives an idea about which customer's are increasing risks
in a company. There are analytical reports which help to collect, sort, organise
and summarise important data which contribute in better functioning of business.
2. Budget based report: Budgeting reports helps business to have an overview and
idea about actual budget spent and standard budgets set for a period of time. It
also helps to understand the reasons behind variations observed. Budget based
report is considered more useful than any other report prepared in company. It
helps to understand expense level and what possible actions can bring those
levels in control. Budget report includes covering costs related to production
costs, monthly and annually project totals. It therefore helps Nasty gal vintage to
understand what could be the reasons responsible for poor budgeting and lack of
resources in business (Massicotte and Henri, 2021).
3. Inventory management report: Inventory management report is helpful to find
out the amount of stock available with the company. It helps to keep a track
record of raw material in an organisation as what is to be kept for reordering
purpose and which is to be taken out at first priority. Inventory report guides to
run the operations related to businesses smoothly without any hurdle. It can help
Nasty gal vintage in reducing and cutting down costs which will in return reduce
the risks as well.
Evaluation of benefits of different management accounting systems:
The benefits which are used are provided by Management accounting system to business are:
Types of Management
accounting system
Benefits Assessment of benefits in
relation with company
Cost accounting  This helps in
assessment of costs
 This will help to find
out reasons and areas

involved in carrying
out certain activities. It
helps to reduce costs
which will help to
perform in a better way
and minimize risks
associated. It also
helps to save funds and
use them for better
areas than before. It
also helps to find out
reasons behind the
repetitive incurred
costs.
related to costs which
hinder growth of
business in working
environment. It helps
to affect Nas gal
vintage company in
positive aspects. It also
helps to compare actual
performances with
standard set for
performances and
understand the reasons
behind such deviations.
Price optimisation system This is helpful to reduce costs
which are not useful and in
return will help to increase the
profit margin as well.
Reducing costs and
minimizing risk related to
expenses will also help to
increase valuation of the firm
in environment.
This method is useful in
company's perspective the
reason being it helps in
planning and formulating
strategies, policies helpful in
long run of the business. It will
also help Nasty gal vintage to
attract new and potential
customer's & provide better
pricing for products which are
demanded on a regular basis.
Inventory management system Advantages which are
associated with inventory
management system are that it
helps to predict the level of
stock and inventories which
Nasty gal vintage can use such
tools to find out reordering
quantity of stock, what is
present stock available with
the company. It helps to

are to be kept by Nasty gal
vintage company for future
aspects. It helps to provide
customers products and
services well in time so that
customer's would not have to
wait for a long period of time.
It also helps to cut down
unwanted costs related to
inventory
control costs related to
management of inventories in
a business which are left
unused. Controlling costs
related to raw material,
inventories help to increase
profitability as well.
TASK 2
P3: Evaluate costs with the help of useful techniques which will help to analyse costs and
prepare income statement with the help of Marginal and absorption costs.
Cost: It can be explained as a form of accounting which helps the company to perform
better, manage and improve profitability and reduce unwanted expenses & costs. Cost
management accounting helps in preparing and examining data which help managers,
supervisors in decision making which will facilitate growth and expansion of company in the
long run. It is responsible for hurdles and obstacles coming in the pathway success of Nasty gal
vintage company. It can be improved by keeping any eye on costs incurred and the reasons
behind it (Ndemewah, Menges and Hiebl, 2019).
Full costing: It is also known as absorption costing which is accountable for calculation of all
costs linked with the manufacturing and production of a particular product or service in an
organisation. It is helpful in setting up of competitive prices for the products and services ready
for sale in market. In such costs it is pre-assumed that product costs will include variable as well
as fixed costs too. It is considered as more useful than any other costing because it gives a better
track record of profits earned by the Nasty gal vintage company.
Cost Cards
November
Sales = 70* 10000 = £ 700000
Direct Materials = £100000

Direct Labour = £ 150000
Fixed Overheads = £ 250000
December
Sales = 70* 8000 = £ 560000
Direct Materials = £100000
Direct Labour = £ 150000
Fixed Overheads = £ 250000
Inventory = £ 2000 units
Income Statement using Marginal Costing
Details £s November
£s
£s December
£s
Turnover 700000 560000
Less: COGS 500000 400000
Direct Material cost 100000 100000
Direct Labour cost 150000 150000
Fixed manufacturing
overhead
250000 250000
Less: Closing Stock 100000
Gross Profit 200000 160000
Profit statements using Absorption Costing
Details £s November
£s
£s December
£s
Turnover 700000 560000
Less: COGS 500000 400000
Direct Material cost 100000 100000
Direct Labour cost 150000 150000
Fixed manufacturing
overhead
250000 250000

Less: Closing Stock 100000
Gross Profit 200000 160000
Less: Under
absorption
0 50000
Profit 110000
Marginal costing: Marginal costing can also be defined as variable costs which find out
expenses incurred for producing one additional unit in a business or company. It is used to find
out whether Nasty gal vintage is utilizing its resources optimally or not. It is useful to calculate
profit margin of a company and prices at which products must be offered in the market and
services would be rendered.
TASK 3
P4: State merits and demerits of various types of planning tools which are helpful in budgetary
control.
Budgetary control: It can be explained as a practice which helps to manage income generated
and expenses incurred in company during its life cycle. It also helps to plan its revenue earned
accordingly which would help to multiply company's asset and funds with time. It provides an
idea if there is any fluctuation noticed between planned budgets and actual budgets in a
company. It also helps Nasty gal vintage to find reasons behind the varying result over a period
of time and how they be controlled (Ngo, 2021).
Some planning tools which are helpful in budgetary control are mentioned below:
1. Financial budget : A financial budget helps Nasty gal vintage to have an idea in
advance about the plans they have to implement for better working of an
organisation. It is helpful in managing funds earned with the help of short term
and long term activities of business. It is helpful to have a rough idea about what
amount will be earned during a period, what is borrowed and upto what scale is
being spent.
Advantages Disadvantages
1. It helps to prepare a proper plan keeping 1. It is a risky operation which if fails can lead

future situations in mind which would help to
carry out operations related to purchase and
investment .
to increase in expenditure and loss of funds.
2. Operating budget : It can be explained as a budget which consists of expenditure
and income generated from business operations on a regular basis in Nasty gal
vintage company. It includes costs related to sale of goods and revenue
generated from such operations.
Advantages Disadvantages
It helps to enhance and improve
communication skills between employees and
staff persons of company. It also helps to
allocate resources properly i.e. right amount at
right place at right time. It helps to increase
efficiency of company and employees as well.
It incurs losses related to allocation of
resources which might be hard to recover in
future and might prove out to be of no use.
Recording transaction on a daily basis might
prove to be hectic and time consuming as well.
3. Master budget : It can be explained as a type of budget which lays down an idea
about the funds, revenue they are planning to earn and what amount they are
planning to spend over a certain period of time (Zadorozhnyi, Muravskyi and
Shevchuk, 2018). . It can also help Nasty gal vintage company to provide
suggestions about how preparation of budgets would help business to reach its
set goals and objectives. It is helpful in assessment of performance of company
taking in account various responsibilities assigned to employees of company. It
is a strategy which helps to document expected future sales, purchases and
production levels as well (Oyewo, Ajibolade and Obazee, 2019).
Advantages Disadvantages
It works as a tool which motivates employees
for performing better than before. It helps In
assessment of past performances with present
and find the reasons which lead to variation in
Master budget might not prove to be as
reliable as other budgets because employees
might not record actual sales and expenses
incurred on right scale which will hinder

both standard as well as budgeted
performance. It helps to improve job
satisfaction and proves to be a good
contribution for the growth and expansion of
company.
calculation of actual performance of the
company. It is also a rigid budget thus
updating changes might not be easy.
P5. Comparision between companies and how they are adopting management accounting
systems while responding to financial problems.
Financial problems refers to the problems that are faced by an organisation when they are
operating in a competitive environment (Pilipczuk, 2020). These may include, shortage of
required cash flows to operate any buisness. Following are some of the isues which are related
to the business being discussed in the report, which is , Nasty Gal.
 Lack of Finance: The funds of any business are very crucial in the operations of a
business, it helps the business to expand and grow its business (ter Bogt and Scapens,
2019). Nasty gal vinatge has insufficient funds in its operations which creates issues for
the business to operate.
 Improper cash flow management: The funds of any business are required to be managed
properly. This is one of the significant problem in the management of Nasty Gal.
 Excessive Debts: The business works on funds provided to them on debt. Nasty Gal
vinatge has made it an obligation to not keep short and long term obligations in the
business and draw it to a bankruptcy.
The management accounting approaches which are applied by the Nasty Gal Vintage are:
 Benchmarking: This refers to the activity of the business to compare the products and
services of the organisation with the businesses who are leading in an industry (Quinn
and Hiebl, 2018). These helps the business to determine where they are lacking in the
market. Nasty Gal uses these practices to operate more effectively and efficiently.
 Key Performance Indicators: These are the key factors which gives insights to the
business whether the operations of the business are efficient and similar to the principle
which have been set by the business to compare their actual operations with the
projected performance indicators (Weetman, 2019).
Following is the comparision of Nasty Gal Vinatge with Marks and Spencer plc related to how
they apply management accounting system;