Management Accounting Report: Techniques and Planning Tools for Airdri

This report delves into the realm of management accounting, also known as cost accounting, and its practical application within the manufacturing context, specifically using Airdri, a designer hand dryer manufacturer, as a case study. The report commences with an introduction to management accounting, emphasizing its role in collecting, analyzing, and reporting financial information for internal decision-making. It then explores different management accounting systems, including cost accounting, inventory systems, job costing, and price optimization, highlighting their significance in controlling costs and enhancing operational efficiency. The report further examines various management accounting reporting methods, such as budgets, accounts receivable reports, and performance reports, to provide insight into their contributions to effective financial management. Furthermore, the report applies a range of management accounting techniques like cost-volume-profit analysis, marginal costing, absorption costing, and various costing methods (fixed, variable, normal, and ABC costing). The report also explains the use of planning tools, including budgets, and strategic planning tools such as PEST analysis. The report concludes by discussing the adaptation of management accounting systems in response to financial issues, demonstrating how businesses can leverage financial data for strategic decision-making and improved performance.

Management Accounting

Student declaration
I certify that the assignment submission is entirely my own work and I fully inderstand the
consequences of Plagiarism. I understand that making a false declaration is a form of
malpractice.
Student signature Date:

Contents
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
Demonstration .an understanding of management accounting system........................................1
Different methods of management accounting reporting............................................................3
TASK 2............................................................................................................................................4
Apply a range of management accounting techniques................................................................4
TASK 3............................................................................................................................................5
Explain the use of planning tool in management accounting......................................................5
TASK 4............................................................................................................................................6
Comparison of companies with the use of different system to respond financial problems.......6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Managerial accounting commonly also known as cost accounting is defined as the
process of collecting, reporting, analysing important useful financial information within an
organisation by responsible manager (Kolk and Perego, 2015). It help the entire management
system and support to make meaningful decision in order to remove any kind of contingences
and improve the overall performance within a specific period of time. In this report, Airdri has
been selected that deal in manufacturing of designer hand dryer so that concept of management
accounting can be understood in significant manner.
The report discussed the different system and important reports of management
accounting, types of costing techniques to calculate net profit for an accounting year. Apart this
report describes types of planning tool and adaptation of management accounting system in
reposed to various financial issues.
TASK1
Demonstration .an understanding of management accounting system.
In present business situation, the practice of gathering, examining, recording and writing
valuable financial transaction and happing into closing account and financial statement by the
manager within an organisation is defined as the management accounting. It is consider being a
disciplined method of recording and preserving advantageous evidence about companies’ entire
performance in a year to make effective decision for future growth (Mahesha and Akash, 2013).
There are different systems that are used by manager of an organisation to make a proper
analysis and measurement of resources so that actual status can be obtained within a type frame
and meaningful decisions are made for growth and development.
The concept of management accounting first appeared as an essential movement during the
initial industrial rebellion, in the foremost businesses and also for business firms of the day. With
the flow of time the system keeps on modifying and double-entry bookkeeping taken more than 300
years from the time MA first appeared as a identifiable ground. The different principles of
Management accounting are:
 Influence
 Relevance
 Value
1

 Trust
Difference between financial and management accounting is discussed below:
Management accounting Financial accounting
 It mainly includes specialised data
product to make meaningful decision.
 Recorded data are only beneficial for
the internal staff member as they take
useful decision to grow profit.
It includes types of financial statement such
as balance sheet, cash flow etc. to analyse
actual status of company (McLean,
McGovern and Davie, 2015).
 Reports and statement are used by
external stakeholder to make assessing
about company health.
To ease the process of decision making manager in Airdri use to implement the concept
of different system of management accounting that are discussed underneath:
Cost accounting: This system provides complete evidence about the total cost utilise by
the management within different activity so that they can make effective future plans and
policies. Airdri mainly use this costing method to makes proper analysis of cost after the
production and fix best selling price so that cost can be covered.
Inventory system: This system help respective manager to tracks the actual stock available in
warehouses and also support to bring effectiveness in supply chain of manufacturing company.
In Airdri, production manager use to keep a detail record of stock ready for use in factory and
actual finished hand dryer ready for sales (Miller and Power, 2013).
Job costing: With the support of this system management are provided with a systematic
a method to calculate actual cost involved in production of single product. The manager of Airdri
use to calculate the actual expenses such as material, labour and other miscellaneous expenses in
producing hand dryer.
Price optimisation: This system aid firms to fix the best price of their product which is
suitable for both customers and company. It contains numerous techniques that assist to analysis
customer's respond to the prices of product. In Airdri manager set the best price for hand dryer so
that sales can be increased and company could attain good profit.
Al these systems must be integrated within organisational process of Airdri, as these
system contributes feature measurable to control cost, total amount obsessed by debtors and
2

actual or current financial condition and position of business in a specific time period (Neubauer
and et.al, 2012).
Different methods of management accounting reporting
In business firm, it is very crucial to records and each and every kind of transaction into
proper reports or books depending upon their nature so that crucial evidence can be analyzed to
make future plans for growth. It has been stated that financial information related to company
must be real, accurate, appropriate and free from any kind of error so that actual strength and
status of company can be observed by user to make decision related to investments. The internal
manager and auditor must make sure that statement should show the current status of company
during an accounting year. There are different kinds of report that are being used in Airdri to
prepare authentic information that are discussed below:
Budgets report: This report is mainly prepared for interior uses by manager. In which they set
some targeted presentation principles on which overall performance of company is compared
(Padovani, Orelli and Young, 2014). Such as manager in Airdri use this report to set a budgeted
values of sales for hand dryer within a specific time frame and applies different sales strategy or
discount polices to achieve these target. The overall sales for the period are calculated and in
case if target are not met than polices arte changed to modify results.
Account receivable report: Companies those provide goods on credit basis use to prepare
this kind of report. This is because account receivable report use to keep a systematic record of
each customer like amount due, date for payment, type of product etc. that reduces the situation
of conflicts. Thus in Airdri manager in order to increase sales use to sell product on credit basis
therefore they are required to maintain account receivable report so that outstanding amount can
be collected on fix time.
Performance report: This report support in evaluation of overall performance of company
and employees as well. In Airdri, manager use to keep detail information about each employee
and keep record of their performance during a time frame. The set targets on which performance
are compared. This report helps to increase the entire performance of employees and improve
profitability.
3

TASK 2
Apply a range of management accounting techniques.
In business term cost, is defined as the value of money that is being used by companies in order
to produce a specific unit of product. In general, an amount or monetary value that is paid by the
buyer to seller in order to acquire a particular product (Strauß and Zecher, 2013). There are
different kinds of cost that are implemented by Airdri in their production process such as fixed,
variable, direct and indirect, product and period cost, controllable and uncontrollable cost.
Various cost analysis used by manager in order to get the overall cost spend are cost benefit
analysis, lifecycle cost analysis etc. There are different kind of management accounting
techniques implemented by manager in Airdri that are discussed below:
Microeconomic techniques:
Cost volume profit: It is a common method of cost accounting that is also commonly known
as break even analysis that help to figure out a point for Airdri where company can sell hand
dryer without any fear of losses. It helps in making short term decision such as increase in sales
for short period.
Marginal costing: This method is useful in determining the extra cost incurred on producing
extra unit of output. In Airdri, manager uses this technique to determine the extra expenses
incurred in producing additional unit of hand dryer rather than desired quantity.
Absorption costing: It is usually recognized as total costing method that provides greatest
outcome at a detailed era of time. It is a practise of approximating income which includes each
adjustable and immovable prices are allocated to cost focuses where they are accounted for
occurred in manufacture of goods that must be improved by selling different goods and services.
Product technique:
Fixed cost: In economic term, the overhead or expenses within an organisation are those are not
dependent on the actual level of production of goods and services (Takeda and Boyns, 2014). For
example: in Airdri different fixed cost are interest, rent etc. that are not related to production of
hand dryer.
Variable cost: These are types of cost that keeps on changing as per the quantity of goods
and services changes within a specific time period. These are sum of all marginal cost over all
unit produced.
4

Normal costing: It is methods that help manager of Airdri to derive the actual cost such as
actual cost of material, labour and standard expenses that are used by company in allocation of
resources.
ABC costing: It is a costing technique that recognizes exercises in Airdri and appoints the
expense of every movement to all items and administrations as indicated by the genuine
utilization by each. This model assign out progressively indirect expenses into direct expenses
contrasted with ordinary costing
All those cost that are related with procurement, management and storage of raw and
finished goods are termed as inventory cost. In Airdri there are different kind of inventory cost
such as ordering cost, caring cost and stock out cost.
TASK 3
Explain the use of planning tool in management accounting.
In present time, it is very important for companies to have proper plans to deal future
unexpected situation. There are various planning tool that are used by manager of Airdri to make
better condition for functioning such as budgets, pricing, common costing system and strategic
planning.
Budgets: A well-defined systematic estimate of overall revenues and expenses for a thorough era
of time frame are known as budgets (Watts and McNair-Connolly, 2012). It aid to carry
efficiency, proficiency and development in the working environment that also support employees
to perform well. Budgets are effective planning tool that is used to set a benchmark to manager
and encourages them to achieve the predefined objectives for the production element in Airdri.
There are various types of budgets that arte prepared by manager of respective company such as
capital and operating budgets.
Alternative methods of budgeting:
Flexible Budgets: This budgets support to keeps of adjusting and bends with the deviations
in volume of numerous business actions within Airdri. With the support of flexible budget result
are more sophisticated and more beneficial to company as compared to static budgets.
Zero based budgets: This budget is important tool for making future plan as it benefits
Airdri to defend all expenditures and accepted it for each different product. The thoughts
essentially start with a Zero that supports business function to be properly analysed and reliable.
5

In order to have proper strategic planning manager of Airdri applies the concept of PEST so
that problems of future or current can be controlled and managed.
Political: All these factors that are included by the political condition of a place are
considered being political factors such as tax policies, excise duty. Manager of Airdri makes
proper plan to deal with these forces in order to maximise sales.
Economical: Factors such as inflation, deflation that can hamper the profitability of
company are known as economic forces. Manager of Airdri are required to analyse these factors
so that sales can be improved and profit can be extracted in more amount.
Social: The factors such as culture, beliefs, trends in market, customer preferences are
known as social factors. It is the duty of manager to produce the goods according to the need of
customer and needs of market so that actual profit can be increased.
Technological: All those technological factors that help Airdri to produce advance hand
dryer are consider being technological forces.
TASK 4
Comparison of companies with the use of different system to respond financial problems.
There are numerous money related issues that are mostly looked by an association, for
example, over exploitation of assets, inappropriate administration of stock, over costs that
gaining and so forth according to the business scope, size of business scale, budgetary balance
etc.
Benchmarking: Company uses this approach to set standard and perform a particular
activity. In case if target are not achieved than manager are able to determine the error and
reason of problems. In Airdri manager are able to analyse the on-going problem of
mismanagement of inventory.
KPI: Large organisation different lagging and leading indicators to perform a certain task
that helps to improve the quality of business operation. In Agment, solution manager are able to
determine the problem of more spending than earning. Due to this the company is not able to
operate it function in proper manner and profit margin keeps of diminishing.
Financial governance: It is a descriptive methods, that is refers to a systematic manner for
manager of companies to collect, manage, monitors and control overall financial information for
a specific period of time. It mainly contains how businesses track financial dealings; accomplish
6

performance and govern data, compliance, operations and disclosures (Zoni, Dossi and Morelli,
2012). Thus in Airdri manager used the concept of finance governance in order to keep a detail
information about raw material issues to production leader and also maintain a report of finished
hand dryer that support them to overcome the financial issues of mismanagement of inventory.
Similarly in Agment solution, management use to maintain appropriate report about complete
expenses and tries to recover them from make right amount of sales.
Characteristic of effective management accountant within Airdri:
 Must have personality that can be accepted by each member of company so that
Accountant can influence any one within company.
 An understanding of the role of functional managers and top executives of an
organization.
 Must have balanced outlook at each stages of management executive.
Thus form the above mention features of an accountant it is observed any financial issue can
be resolved within company as they knows the overall happing of business.
CONCLUSION
From the above Management accounting report, it is concluded that with the systematic use
of different system manager at each level are able to prepare effective report that support in
decision making process. It is also concluded that with the support of variety of accounting
system large number of financial problems can be solved as it help to record and measure the
overall performance. Costing method such as Marginal costing is measured to be appreciated
technique that support to ascertain net profit for an accounting year.
7

REFERENCES
Books and Journals
Kolk, A. and Perego, P., 2015. Social and environmental accounting. Wiley Encyclopedia of
Management, pp.1-6.
Mahesha, V. and Akash, S. B., 2013. Management Accounting Benefits: ERP Environment.
SCMS Journal of Indian Management. 10(3).
McLean, T., McGovern, T. and Davie, S., 2015. Management accounting, engineering and the
management of company growth: Clarke Chapman, 1864–1914. The British Accounting
Review. 47(2). pp.177-190.
Miller, P. and Power, M., 2013. Accounting, organizing, and economizing: Connecting
accounting research and organization theory. The Academy of Management Annals.
7(1). pp.557-605.
Neubauer, H. and et.al, 2012. Management Accounting Systems and Institutionalization in
Medium-Sized and Large Family Businesses-Empirical Evidence from Germany and
Austria. European Journal of Management. 12(2). pp.41-60.
Padovani, E., Orelli, R. L. and Young, D. W., 2014. Implementing change in a hospital
management accounting system. Public management review. 16(8). pp.1184-1204.
Strauß, E. and Zecher, C., 2013. Management control systems: a review. Journal of Management
Control. 23(4). pp.233-268.
Takeda, H. and Boyns, T., 2014. Management, accounting and philosophy: The development of
management accounting at Kyocera, 1959-2013. Accounting, Auditing & Accountability
Journal. 27(2). pp.317-356.
Watts, T. and McNair-Connolly, C. J., 2012. New performance measurement and management
control systems. Journal of Applied Accounting Research. 13(3). pp.226-241.
Zoni, L., Dossi, A. and Morelli, M., 2012. Management accounting system (MAS) change: field
evidence. Asia-Pacific Journal of Accounting & Economics. 19(1). pp.119-138.
8