Management Accounting: Decision Making Concepts and Techniques Report

This report delves into management accounting principles and their practical applications, focusing on Connect Catering Services in the UK. It covers essential requirements of different management accounting systems, including cost and inventory management. The report explains various reporting methods such as budgeting, aging reports, and cost accounting. It then explores cost analysis techniques, preparing income statements using marginal and absorption costing. Furthermore, it discusses planning tools for budgetary control, comparing the advantages and disadvantages of each. Finally, the report analyzes how organizations adapt management accounting systems to address financial challenges, providing a comprehensive overview of the subject matter.

Management Accounting

Table of Contents
Introduction .....................................................................................................................................3
Task1................................................................................................................................................3
P1 Management accounting it's essential requirements of different types of management
accounting systems.....................................................................................................................3
P2 Explain different methods used for management accounting reporting................................5
Task2................................................................................................................................................7
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs. .........................................................................7
......................................................................10
Task3..............................................................................................................................................11
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control......................................................................................................................11
Task 4.............................................................................................................................................13
P5 Compare how organizations are adapting management accounting systems to respond to
financial problems. ........................................................................................................................13
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................15

Introduction
Management accounting can be simply be defined as an accounting tools that is fruitful
to ensure that the organisation are using the best possible use of their limited and valuable
resource. It is applied for solving a number of tasks that includes measuring, analysing and
mainly presenting their financial information to the managers to make quicker and well-
informed decisions (Jansen, 2018). Talking in context of small and medium- sized companies,
management accounting solves a number of issues that includes limited credit facilities, lack of
demand of their product or service offerings and weaker or inappropriate recording system.
Connect Catering Services, is one of the well-known caterers for fresh foods and
are family oriented in U.K. They have been successful in operating their business for the last
thirty years through their excellent quality products and services. This projects aids their
management and includes important of management accounting it's practical application by
different techniques. Adding to this, it also covers different planning tools that will support them
in solving the financial issues.
Task1
P1 Management accounting it's essential requirements of different types of management
accounting systems.
Management accounting is relevant tools and selects the most useful financial information
that are annually recorded in important financial statements that include profit and loss
account,Balance sheet and cash flow statements (Maas and et. al., 2016). It's main aim is to
improve the decision making process of the company with the ultimate aim to make their process
sustainable in order to reach their desired objectives.
Management accounting has been successful to make immense contribution and have
resulted in effective decision making. Some of it's main principle has aided diverse organization
around the world to enhance the manager's decision making capabilities and in turn contributed
significantly in increase their productivity. This principles can be elaborated in detailed for it's
better understanding.

 Influence: This is one of the critical principle. It states the influence of communication
and it's power to strengthen decision making capabilities . It states the accurate and fair
information that is useful in analysing in order to evaluate and select the best alternative
that is most appropriate to solve the specific issue that have arisen in the company. This
is done, as it integrates diverse thought process as impact of actions in one department
effects all the other department and accordingly establishes proper co-ordination and
enhances productivity of the entire organisation (Boučková, 2015). This further aids to
become authoritative due to the result of getting access to the most required information
that is useful to them.
 Relevance: Information is important for one and all. It is just that every individual and
different organization want to access the most useful information that is relevant for them
along with the individual making the decisions from all the available resources. It is
important for the decision maker to carefully understand requirement of all of their
shareholder as they are operating their business with the ultimate aim to maximize their
welfare. Adding to this point, it is important to ensure that they is a proper balance of all
the information including external and internal and financial and non financial.
 Value: It is important to predict it's value. Management accounting is capable to link it's
processes to company's model and it is important to know the demand of it's macro
economic environment. This mainly deals with carefully evaluating all the available
opportunity and grabbing the best opportunity that minimizing the risks involved and aids
to follow a pathway that leads to maximization the value of it's crucial investments . It is
important for them to undergo situational analysis in order to make best decisions by
being well informed about the market conditions specifically in their industry and
economy and adopt the same as it is vital for their survival.
 Creditability: It is very much important for improve and make the decision making
process more creditable. It is carefully evaluate the alternatives and select the most
reliable decisions. This further support the Company to fulfil the desires of the company.
It is important for management accounting experts to look towards the interest of all its
stakeholder and on a timely basis by taking regular feedbacks and addressing their
overall issues at the earliest (Gibassier and Schaltegger, 2015). It is crucial for experts of
management accounting to consider the feedbacks of all it's stakeholders in order to take

the most appropriate decision that is in the best interest and maximizes That will be
fruitful for them in enhancing their productivity and become more creditable. This will
ultimately be beneficial for them to become leader in their industry.
It is important to understand the different management accounting system in to generate
significant information to become profitable. The some of the various types of management
accounting can be explained in detail below:
Cost accounting system: This is important system as it aids to make an accurate estimates for
making crucial decisions including ways to minimizing cost by eliminating unproductive
expenses and maximizing their profitability (Phan, Baird and Su, 2017). Adding to this, it is also
fruitful for doing accurate estimates to determine the closing stock with respect to raw material,
work in progress and final goods.
Inventory management system: This is basically defined as the computer based system to
record, update and monitor the company's stocks that includes closing inventory amounts, sales,
orders and deliveries. Many Organization has implemented this system in order to balance their
inventory by recording the information in a organized and systematic manner.
P2 Explain different methods used for management accounting reporting
Management accounting is also called by another name as cost accounting. It focuses on
engaging attention to account for financial information of the previous year. It is important for
the firm to generate relevant information that helps them to analyze their performance and take
corrective actions that is essential for their growth. It is vital to include factors such as it's
usefulness,timeless and completeness. The report is mainly used to plan, engage in regulating all
their activities at each steps by crucial decision-making by measuring performance and doing the
improvement needed to enhance their processes. There are number of methods used for reporting
the same. Some of them can be explained below;
Budgeting reports: The main aim of these reports is to compare the company's actual
performance with that of budgeted or standard performance for a particular period. Budget is
made by taking last year's data and taking the average of three to five years. But, an impressive
budget is one that also include unforeseen situations that may arise in the future (Novas, Alves
and Sousa, A., 2017). It comprises of all the revenues as well as expenditures that will aids them
to reach closer to their standard performance. This report is helpful for the manager's to measure

the performance of each of their talented force and accordingly provide them incentives in order
to sustain as well as further improve their performance.
Account receivable aging report: This report's purpose can be implied by it's name itself. It
keeps a record of each of the outstanding balances in turn keeping record of their receivable and
it's level of important on the type of activities company is engaged in. It is very crucial for their
catering business. It states the issues faced by them in their collection process. This report will
aid the company to identify their defaulters and generate information with respect of their credit
worthiness. This further helps them to know their liquidity position and accordingly make
changes in their credit policy.
Cost managerial accounting reports: This report consists of all the cost the goods that are
manufactured by them. These cost mainly includes raw material, direct material, direct labour
and overhead expenses (Joshi and Li, 2016). The total costs arrived is divided by total amount
of productions. This measures helps to determine profit and to estimate profit margins.
Performance reports: This reports is created to monitor the performance of each of it's
department. It helps the managers to plan and implement powerful strategies that are essential
for the growth of their organisation. Individual, who perform well are rewarded that is vital for
ensuring that they are able to sustain their performance. While, under performers are either laid
off or one who have a higher potential are motivated to become efficient to be able to arrive at
their standard performance.
Other Managerial accounting reports: This report includes all the other that are not mentioned
under specific heads but are vital for their smooth and easier operations. These mainly includes
Order information report, competitor analysis reports and other related reports. They are either
generated within the organization or outsourced, by selecting the most appropriate method that
minimizes their cost (Amara and Benelifa, 2017). It is crucial to access are highly reliable in
generating the most creditable as well as authentic reports.

Task2
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.
It is must for “Connecting Catering Services U.K' to have a thorough understanding of
the technique that is most appropriate for them. There are very techniques and their usefulness is
highly dependent on the nature and size of different company (Alsharari and Al-Shboul, 2019).
As this project, emphasizes more absorption and marginal costing so, it's explanation is detailed
below for it's better understanding.
Marginal Costing: This costing comprises of all those cost that includes at the start when the
company is established. There have variety of benefits that they include bifurcating the cost into
fixed and variable. This help in appropriate computation of cost and helps in determine
profitability. Thereby, identifying their profit margin and taking the necessary steps for it's
improvement.
Absorption Costing: This basically includes all the cost that are associated with expenses that
are incurred in connection with direct material, direct labour and overhead expenses. It is must
for them to follow all the requirement of generality accepted accounting principles(G.A.A.P).

Preparation of income statements:
Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Fixed Manufacturing Overhead per unit 6 5
10 9
Income statement under absorption costing
Particulars April may
Sales 16000 16000
Less: Cost of sales (2000*10) (2000*9) 20000 18000
Fixed Manufacturing Overhead 15000 15000
Variable Manufacturing cost (2500*4) (3000*4) 10000 12000
Closing stock (500*10) (1500*9) 5000 13500
Opening stock (500*9) 0 5000
Gross loss -4000 -2000
Less: Fixed Non-Manufacturing Cost -4000 -4000
Net loss -8000 -6000
Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Particulars April May
Sales 16000 16000
Less: Marginal cost of sales 8000 8000
Variable Manufacturing cost (2500*4) (3000*4) 10000 12000
Closing stock (500*4) (1500*4) 2000 6000
Opening stock 0 2000
Contribution 8000 8000
Less: Fixed Manufacturing Overhead 15000 15000
Less: Fixed Non-Manufacturing Cost 4000 4000

Net loss -11000 -13500
Reconciliation statement:
Particulars April May
Net loss under absorption costing -8000 -6000
Less: Closing stock -3000 -7500
Net loss under marginal costing -11000 -13500
Working Notes
Marginal Cost of sales
Particulars April may
Opening Inventory 0 500
Add: Cost of production 10000 12000
Less: Closing inventory 2000 6000
8000 8000
2 a)
1. Fixed and variable costs
Fixed costs:
Activity Amount
Manager’s Salary 5000
Rent 5000
Insurance 500
Utilities 500
Advertising cost 1000
£12000
Variable cost:
Activity Amount
Direct material costs per Pizza 3.50
Direct labour costs per Pizza 1.50
Direct overhead costs per Pizza 0.50
£5.50

2. Break-even point in units and in sales value
BEP (In units): Fixed cost/contribution per unit
Contribution per unit: Selling Price-Variable cost per unit
= 9.50-5.50
= 4.00
BEP: 12000/4
= 3000 Units
BEP (In revenues): Fixed cost/PV ratio
PV ratio: Contribution/selling price*100
= 4/9.50*100
= 42.10%
BEP (In revenues) = 12000/42.10%
= £ 28503
4. Margin of Safety at sales of 3500 Pizzas
Margin of safety= Sales units - BEP in Units
= 3500-3000
= 500 Units
5. Effect on BEP in units and in sales value, in case of increase in manager's salary to
£6,000
If manager’s salary will increase than it will affect to fixed cost and revised fixed cost will be of
£13000.
New BEP (In units): 13000/4
3250 Units
New BEP (In revenues): 13000/42.10%
= £30878
2 b Preparation of graph:
Activity Amount

Total Costs (12000+55000) 67000
Revenues per Unit (95000-67000)/10000 2.8 Per unit
Total Fixed CostCompanies prepare cost
budget which is used to find variance in
actual cost incurred and budgeted target. Cost
budgets shall be flexible enough to
incorporate changes in targets as and when
they arise.
12000
BEP point 28503
Flexible budget
Items Actual Budgeted Variance
Sales price 10 9.50 .50 Favourable
Sales units 12000 10000 2000 Favourable
Revenues 120000 95000 25000 Favourable
Fixed cost 15000 12000 3000 Adverse
Variable cost 5 5.50 .50 Favourable
From this financial information, it can be interpret is company is quite closer to it's standard
performance. It needs to just concentrate on doing a gap analysis on their fixed cost in order to
be able to realize it's objectives.

Task3
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control
Planing tools is defined as tools that track the performance of each of their department at
every stage. It is must for identifying the gap analysis and taking immediate corrective actions
by implementing by way of initiating program that helps to address the issues and take
sustainable measures to realize their aims . It is must for them to a very effective budget have
increases the efficiency as well as effectiveness of organization as a whole (Collis and Hussey,
2017). They comprises of diverse tools that includes pricing strategies, budget, implementing
powerful and effective strategies that enhances customer satisfaction. Some of the main planning
tools can be explained below in detail:
Cash Budget: It is the budget that comprises of all expected or standard revenues and expenses.
It is mainly report for estimating the cash that will be available in the near future.
Advantages:
It helps them in carefully monitoring their actual cash inflow and utilize their cash
effectively. It is even helpful as it acts as an provision meet any cash deficiencies that may arise
in the future and identify it's cash position in the future.
Disadvantages:
It's one of the major demerit is that , cash budget it is highly dependent on the accuracy of
it's estimates. Adding to it, it is highly inflexible and faces difficulty in changing as per dynamic
situations arising in the market.pestle analysis of marks and spencer
Variance analysis: It helps to provide a detailed summary of actual performance in comparison to
that of it's planned or standard performance.
Advantages:
This technique helps in breaking down the cost and in turn is simpler to understanding
wherein budgetary control can be possible (Malina, 2017). It is easier for mangers to take
efficient as well as taking sustainable measures for their future growth.
Disadvantages:
The main disadvantage of variance analysis is that it is very much time consuming as it
takes a longer time and monitoring this tool delays in making appropriate changes.

Zero based budgeting: This is another tool that is used more commonly in today's changing
times. This states that that the upcoming years is estimated as nil. It means that amount of
estimated revenue is equal to estimated expenses.
Advantages:
It is beneficial for doing cost and benefit analysis. It further helps the company to take
appropriate measures by accessing accurate and relevant information. Adding to this, it involves
each and every staff's and leads to making better and enhanced decision (Wilkerson and Bassani,
2020).
Disadvantages:
It's main limitation is that, the company implementing this techniques can face difficulty
in determining whether a particular expenses are essential or not. It is due to the fact that some
expenses are qualitative in nature and it isn't possible to measure them.
Adjustment of Funds: It is another techniques, that helps the top management to make proper
adjustment to funds from utilizing the funds arising from one project to another.
Advantages:
This technique is beneficial wherein there are surplus funds arising from one project and
helps to prevent misuse of funds and by effective decision making . This further aids in utilizing
the funds in another project.
Disadvantages:
It is difficult to apply this technique wherein the funds from one project is exhausted or cannot
be utilized for fulfilling the funding requirements for another project.
Capital expenditure budget: This budget concentrates on mainly fixed assets that can include
purchase new plant and machinery or land. Organizations, usually acquire these assets by a way
of taking loan through long term debt or securities.
Advantages:
This tools is fruitful for the organization for managing their capital assets appropriately.
It is critical for them to be able to smoothly realize their aims (Mitter and Hiebl, 2017).
Disadvantages:pestle analysis of marks and spencer
The only demerit for this tools is that it requires a lot of finance. If they take excessive
loans and aren't able to payback. It may be riskier for them and may negatively impact their
brand image.

Task 4
P5 Compare how organizations are adapting management accounting systems to respond to
financial problems.
In today's modern time, when businesses throughout the world have developed as they
have become well- information about the latest technology and also adopted the same that have
resulted in improved performance of each of their talented task force. Thereby, enhancing the
performance of their organization as a whole. It is essential for them in order to be ahead of their
immediate competitors by identifying and solving their financial issues. In order for them to
improve as well as sustain their performance it is important for them to improve their processes.
Thus, it aids them to be effective in managing their operations. It is important for the company,
to identify their financial issues that mainly includes errors occurred due to difference between
standard and actual performance. Due to this, many companies have utilized different
management accounting techniques to solve both their financial as well as non-financial issues.
This will be beneficial for the company to be focused in taking appropriate measures to
minimize the gap and arrive much close to their standard performance. This will ultimately be
fruitful for them to accomplish their desires.
It is important for them to have a proper understanding of various financial indicators
that will aids them to measure their performance. Some of the indicators is stated below:
Liquidity, Solvency ratio; Liquidity mainly identifies the short term positions and it is
further dividend into different ratio including current ratio, quick ratio. This states wherein the
company have enough cash to meet the requirements of any unpredictable circumstances that
may arise in future. Solvency ratio comprises of their capital whether the finanncial manager of
connect and Catering services have to address the concerns that have presently arised due to
corona pandemic that includes cash flow return and increase in cost. For doing this, manager
need to make use of ratio including debt-equity ratio and debt service coverage ratio (Gatti,
2018)..
Balanced scorecard approach is a very common and important technique applied in
many diverse organization for evaluating the financial performance of the company. This criteria
helps in improving the decision making capabilities of the companies. This aids the financial

managers to easily evaluate the company's performance by carefully going through their
financial metrics mainly profit percentage,EBIT,ROE,ROA,market share,etc. That are pertinent
for the company to know how the companies are performing financial that includes revenue per
guest, revenue available per room in order to address these problem at a faster pace. Thereby,
enhancing their overall efficiency.
Profitability ratios: Profitability ratio is one of the most important as the company
operate and maintain their performance as it is important for their survival (Szychta, 2018). As
the company has been existing from a very large period and are inclined towards serving to the
families they should shift to multi market caterer and served their food consisting of high quality
at a faster pace to cope up with the crisis that presently include corona pandemic in order to
sustain themselve in the industry. This can be done by them by utilizing ratios include return on
equity, gross profit ratio, net profit ratio, return on assets and operating margin ratios. Adding to
this, they should even measure their performance consistently in order to become the leader in
the catering indusry.
Comparision among Connect Catering Services and Clerkenwell Green
Clerkenwell Green Connect Catering Services
By undertake careful analysis of report, the
department utilizing cost management system
in terms of sudden expenses that could
include managing the profitablity, controlling
as well as eliminating unproductive expenses
As per this system, the financial managers of
the company are highly efficient to identify
number of activities that be favourable for
them to identify the factors and take
appropriate measures in for to enhance their
financial performance
As per the findings, it is identified that the
managers of the company utilizes the inventory
management system with the main purpose of
identifing financial problems in order to acess
the value of inventory and reduce the cost on
immediate basis . It is also identified that
uncertain expenses and identify the most
appropriate method of costings in order to
reduce their costing that is highly been
unprofitable. This will enhance on the activites
that requires priority and thereby enhance their
profitablity.
In context of this, the financial manager of In Connect Catering, the management has

Clerkwell Green, manages their funds
optimally by taking appropriate consideration
on ways they can minimize their financial
cost. In addition to this, it has also been
identified that is unable to address their
funding requirements in order to meet their
production requirements. By implementing
this system, the company has been much
effective in address their financial issues by
adopting the most favourable way.
considered price optimisation system for
making appropriate financial measures by
undertaking optimum utilizing their finances
and other funds. This is done by them by
developing a value pricing system in their
menu that enhances their customer value with
the aim to boost their profitablity without
encountering any reduction in their guests .
Along with this, management s have addressed
their financial issues in context of poor
funding and have managed their different
activities appropriately by organizes them and
monitoring the prices of their different food
products in a consistant manner.
CONCLUSION
It can be concluded from the above mentioned report,That management accounting is
helpful in improving the efficiency and effectiveness of the company and ultimately improves
the financial performance by applying various tools and techniques described above. It is
important for them to evaluate their performance by utilize liquidity, profitability ratios that
helps in improving the process of budgetary control. This will help the companies to reduce their
expenditures and enhance their performance.

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Malina, M. A. ed., 2017. Advances in management accounting. Emerald Group Publishing.
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