Management Accounting Report: UKC Furniture Financial Analysis

This report offers a comprehensive analysis of management accounting practices, focusing on their application within the context of UKC Furniture. It begins with an introduction to management accounting, its essential requirements, and the different types of systems, including cost accounting and inventory management. The report then explores various management accounting reporting methods, such as cost and stock reporting, followed by the preparation of income statements using managerial accounting techniques like cost analysis, product costing, and marginal analysis. Furthermore, the report examines different planning tools used for budgetary control, including zero-base budgeting, rolling budgeting, and activity-based budgeting, evaluating their benefits and drawbacks. Finally, it assesses how organizations adapt management accounting systems to respond to financial problems, utilizing ratios, key performance indicators, and benchmarks. The report concludes with a summary of the key findings and provides references to support its analysis.

Management Accounting

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explanation of management accounting and essential requirements of different types of
management accounting systems.................................................................................................1
TASK 2............................................................................................................................................2
P2 Explanations of different methods used for management accounting reporting..................2
TASK 3............................................................................................................................................2
P3 Preparation of income statement by suing managerial accounting technique........................2
TASK 4..........................................................................................................................................10
P4Evolution of benefits and drawbacks of different types of planning tools used for budgetary
control........................................................................................................................................10
P5Evaluation of how organisations are adapting management accounting systems to respond
to financial problems.................................................................................................................15
CONCLUSION..............................................................................................................................17
REFRENCES.................................................................................................................................17

INTRODUCTION
Management accounting is a process of identifying, collecting, summarizing and presenting
accounting data in an effective way through which business organization implement effect
policies. It will help in decision making process. In order to understand the concept of
managerial accounting, UKC FURNITUR has been taken. In this report importance of
various managerial accounting system has been defined and used of various managerial
accounting techniques for calculation of cost had been analysis. This report also considers
how manger use managerial accounting tools for solving financial problem has been define
briefly.
TASK 1
P1 Explanation of management accounting and essential requirements of different types of
management accounting systems
Management Accounting: Management accounting consists of internal systems that an
organization uses to generate measure and evaluate quantitative and financial information for the
management of the organization. Managers of the UCK furniture use this data to analyze the
operational processes of the entity and make necessary decisions to assist its day to day
activities. In other words, management accounting helps the UCK furniture’s management to
perform all its functions including planning, staffing, implementing and monitoring.
There are various types of management accounting system which are as follows:
 Cost accounting system: This method is used by the companies engaged in
manufacturing processes. UCK furniture can use this method to estimate the price of the
products for profitability analysis and cost control. Cost accounting system also assist an
organization in calculating the value of closing material, work in progress for proper
financial accounting (Nielsen, Mitchell, and Nørreklit,2015, March).
 Inventory management systems: This method is used to keep the track of inventories
of an organization on various levels i.e. raw material level, sales, deliveries. This method
helps to prevent the overstocking and under stocking of inventories.
 Job costing system: This method involves the process of accumulation of information of
cost related to specific jobs which are to be undertaken in organization. This method will
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help the managers to identify the jobs which are of less value or which are not important
and incurring major part of cost.
 Price optimizing system: This system depicts the relationship between supply-demand
and how it varies at different level of prices. This method helps in maximizing profits
and customer retention.
TASK 2
P2 Explanations of different methods used for management accounting reporting.
Business organizations use following types of accounting reports:
Cost reporting: This type of report is prepared for identifying cost summery incurred during in
particular time period. It will help in formulating cost management strategies to reduce cost of
business activites
Stock report: This report is prepared for verifying stock level of the company. It will help in
managing stock level of the company
Accounts receivable report: This report is formulated for the purpose of identifying activites of
debtors, with the use of this report manger built policies so that they can easily collect money
from customers and formulate attractive offer policies to increase cash sales.
Budget report: This report is prepared for summery of income and expense of future time
period it will help in implementation of effective polices (Dekker, 2016).
TASK 3
P3 Preparation of income statement by suing managerial accounting technique
Management accounting technique: These are the tools and methods used for calculating
value of cost incurred during the business operational activities process. Followings are the
techniques used by the mangers for identify cost through which they can implement
policies:
Cost amylases technique: This technique is used for identified special cost incurred
during manufacturing process. Job costing and process costing and standard costing are
part of this technique.
Product costing: This tool is implement by managers to identified cost of each product of
the company. It is also use for controlling additional cost incurred during production
procedure
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Cost of inventory: This technique is used for calculating the cost incurred during maintain
developing and stocking the inventory within the organization. For this purpose manger
use various method EOQ, LIFO. FIFO, average stock etc. It also use for identifying
maximum, minimum and average stock need for organization for this purpose they use
VED, ABC analyses technique it will help in managing and controlling over all stock of
business organization.
Marginal analysis: This is essential technique of management accounting. It is most
useful tool, it will help in identifying the effect of additional units on profit and cost
incurred on manufacturing product. In this technique mangers analysis the relationship of
profit with other factors.
Absorption costing: It is also an essential part of managerial accounting tools. This will
help in calculating cost and profit for a particular time period. It will use all the factors of
production (Jamil, Zuriana, Mohamed, Muhammad, and Ali, 2015).
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4
Particular Descriptions Amount
(Pound) Particular Amount
(Pound)
a) Units produced 11000 9500
b) Cost of Direct Material
(4kilo-
gramx3Pound
/kilo-
gramx11000)
132000
(4kilo-
gramx3Pound/kilo-
gramx9500)
114000
c) Cost of Direct Labor
(4 hoursx
2pound/hours
x11000)
88000
(4 hoursx
2pound/hours
x9500)
76000
d) Cost of Variable Overhead (5pound/desk
x11000) 55000 (5pound/deskx950
0) 47500
e) Prime Cost 275000 237500
f) Production overhead 20000 20000
g) Cost of goods
produced 295000 257500
h) Variable revenues cost (1Pound/des
kx11000) 11000 (1Pound/deskx95
00) 9500
i) fixed selling cost 2000 2000
j) Cost of Goods sold 308000 269000
k) Profit= l-j 77000 63500
l) Sales
(35
POUND/des
kx11000)
385000
(35
POUND/deskx95
00)
332500
Cost Card by using absorption costing method
January February

5
Particular Amount Amount
(POUND) Particular
Amount
(POUND
)
a) units produced 11000 9500
b) Revenues price per
desk 35 35
c) Variable cost per
desk:
Direct material
(4kilo-
gramx3Pound
/desk)
12
(4kilo-
gramx3Pound/des
k)
12
Direct Labour
(4 hoursx
2Pound/hour
s
8 (4 hoursx
2Pound/hours 8
Variable overhead 5 5
Variable revenues
overhead 1 1
d) Contribution 9 9
Total contribution 99000 85500
e) Fixed costs
Production overhead NOTE1 22000 19000
Revenues overhead 2000 2000
Profit (d-e) 75000 64500
January February
NOTE1
Production overhead are regarded as average production for every month that is 10000 units.
Thus, for January, the overhead amount= (20000/10000)x11000
Thus, for February, the overhead amount= (20000/10000)x9500
Cost Card by Applying Marginal costing

For the period ending
February
Sales
Net sale for January 385000
Net sale for February 332500
Total sale (A) 717500
Cost of goods sold
Cost for the month of January 308000
Cost for the month of February 269000
Total Cost of goods sold (B) 577000
Net income(C= A-B) 140500
Workings- Cost of
Finished goods
January February
Particular Descriptions Amount
(GBP)
Descriptions Amount
(GBP)
Units produced 11000 9500
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a) Direct Material (4kilo-gramx3pound/
kilo-gramx11000)
132000 (4kilo-gramx3pound/
kilo-gramx9500)
114000
b) Value of Direct
Labour
(4 hours x 2pound/hours
x11000)
88000 (4 hours x
2pound/hours x9500)
76000
c) Value of
Variable
Overhead
(5GBP/deskx11000) 55000 (5GBP/deskx9500) 47500
d) Prime Cost 275000 237500
e) Value of
Production
overhead
20000 20000
f) Cost of goods
produced
295000 257500
g) Value of
Variable
revenues cost
(1pound/deskx11000) 11000 (1pound/deskx9500) 9500
h) fixed selling cost 2000 2000
i) Cost of Goods
sold
308000 269000
Month Hours
Spent Expenses
January 630 7960
February 505 7410
Mar 705 8285
April 555 7535
May 780 9110
June 795 9820
Highest number of hours = June =
795
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Lowest number of hours = February
= 505
Variable cost= (9820-7410)/(795-
505)
Variable cost= 8.310345 GBP per
unit
fixed cost= 9820 - (795x8.31)
fixed cost= 3213.55 GBP
expenses for july= 3213.55 +
(650x8.31)
expenses for july= 8615.05 GBP
expenses for august= 3213.55 +
(750x8.31)
expenses for august= 9446.05 GBP
Opening Inventories 0
Purchase 100
Units 10 1000
200
Units 11 2200
130
Units 13.84615 1800
LIFO
130 13.84615 143.85
200 11 2200
70 10 700
Cost of 3043.85
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Goods
Sold
Value of
closing
stock (30
x 10)
300
FIFO
100 10 110
200 11 2200
100 13.84615 1384.615
Cost of
Goods
Sold
3694.615
Value of
closing
stock (30
x
13.84615)
415.3845
AVCO 100 10 1000
200 11 2200
130 13.84615 1800
Average
Cost
(13.84615
+ 11
+10)/3
11.61538
Cost of goods sold 4646.154
(400x11.61538)
Closing Stock 348.4615
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