Management Accounting Report: UCK Furniture, Financial Analysis, UK

This management accounting report focuses on UCK Furniture, a UK-based furniture manufacturer and seller. It defines management accounting and its role in decision-making, emphasizing the analysis of financial information for organizational improvement. The report details various management accounting systems like cost accounting, price optimization, job costing, and inventory management, explaining their benefits for UCK Furniture. It further explores essential reporting systems such as budget, performance, inventory management, and accounting receivable reports. The report also delves into costing methods like marginal and absorption costing, providing calculations and comparisons. Additionally, it discusses budgetary control and flexible budgeting as planning tools. The report concludes by highlighting the interdependencies between management accounting systems and reporting, showcasing how these are crucial for achieving organizational goals and objectives. The analysis aims to assist managers in making informed decisions for the financial stability and enhanced performance of UCK Furniture.

Management Accounting

INTRODUCTION
Management accounting is defined as an activity of analysing financial information
available in financial records with an aim of making an effective decision for future
improvement in financial position of an organisation (Arroyo, 2012). It requires support from
finance department for recording accurate and reliable data that truly indicates the financial
position while overviewing financial statement of an organisation. It makes easy for stakeholders
to decide rather to stay with company or not according to their profitability. The present
assignment report is based on UCK Furniture which is engaged in manufacturing and selling
various designs of furniture in United Kingdom. The report explains the management accounting
concept with its different systems useful for chosen organisation. Along with this, the report also
describes the different costing methods along with calculation of net profitability, planning tools
to control budget and techniques to resolve financial issues faced by an organisation.
TASK 1
P1:
Management accounting is considered as a process of framing plans and making
decisions to enhance the performance level of an organisation by analysing the financial
statements prepared on annual basis (Badolato, Donelson and Ege, 2014). It is useful for
stakeholders to get information about the company’s present financial position on the basis of
which further investment decision should be made. It consists of various systems that
management of UCK furniture can adopt in order to maintain financial stability in competitive
market for longer period of time. These systems include:
COST ACCOUNTING SYSTEM
It is a system which used in manufacturing industries for purpose to evaluate flow of
inventory through various stage of production. Cost accounting involves various cost of product
in organisation which are measuring, recording and reporting cost with updated information of
cost (Christ and Burritt, 2013). Cost accounting system is a framework used by firms to estimate
the cost of their products for analysing profitability, stock valuation, control cost and accounts
for various manufacturing cost. Cost accounting system helps UCK Furniture to estimate the
closing value for material inventory, work-in-progress and finished goods inventory in preparing

financial statement of company. UCK Furniture can plan properly and take effective decision
with the help of cost accounting system.
PRICE OPTIMISATION SYSTEM
Price optimisation system: It is a mathematical analysis of the company which shows
the customer's approach in terms of different services and product cost direct with different
channel. Optimisation means to evaluate the best way out of all by which UCK Furniture gets the
profit and that will be evaluate by price distribution. Also defines the best result of pricing to
achieve the goals and objective of the company and adheres the profit (Dekker, 2016).
JOB COSTING SYSTEM
It involves primary expenses of material, labour and overheads. It is a system for
assigning and accumulating manufacturing cost of single unit of outputs. Job costing system is
evaluating the accounts of cost and revenue by individual job. Job costing system is also known
as job order costing which help to create unique products with tracking their cost. In job costing
system an accountant keeps all record of each job of cost and maintaining those data which help
easily operating business. Job costing system help UCK Furniture manager to calculate profit
earned on individual job. UCK Furniture can keep tracking records of individual or team job
performance by analysing their efficiency, cost control and productivity with job costing system
(Englund and Gerdin, 2014).
INVENTOTY MANAGEMENT SYSTEM
It is a system to maintain and record each inventories in every firm. Inventory
management system is the process that managing company's inventories in ordering, storing,
purchasing, shipping, receiving, tracking, warehousing, turnover and recording. It includes
management of raw material, work-in-process and finish products for a company. Inventory
management system help to control inventory of a firm by generating maximum profit from least
amount of inventory used to produce finished good with best quality and full customer
satisfaction. UCK Furniture should follow inventory management system which help the
company to minimise their inventory cost with maximise sales of product and generate profit.
Inventory management system can help UCK Furniture to manage their overall product cost by
less wastage of raw material (Hiebl, 2014).

P2.
There are various management accounting reporting which are essential to prepare by the
manufacturing companies such as UCK Furniture in order to maintain records that truly indicates
the financial performance of an organisation. These reporting systems includes:
BUDGET REPORT
It is a report that compare a company’s actual performance to prepare estimate budget for
company during accounting period. Budget report also referred as a financial report of a
company in which financial data is prepared and recorded in a budget report. Budget report is
mainly prepared for a person, family, business, government and country. A budget report is an
internal report used by management to compare the estimate budget of a company. A budget
report can help UCK Furniture to organise their expenditure and saving of money which able to
save unexpected cost. UCK Furniture can control over flotation of money which help company
to invest in right place where they get more benefits with the help of preparing a budget report
(Honggowati and et.al., 2017).
PERFORMANCE REPORT
It is the report which addresses outcome of a work performance for an individual in
company. A business performance report is a valuable business tools that provides an overview
of business performance. Its combine all information and analysis the expenses, revenue and
profit of upcoming year in the company. The performance report is designed to assist the
management for develop their business which help a company in collecting and analysing data
from various source like customer feedback. It helps to improve business performance which
help an organisation identify their problem which was facing in the business. A performance
report can help UCK Furniture improve their business productivity and accuracy by analysing
company's performance which also make effective decision making and minimizing cost (Kober,
Subraamanniam and Watson, 2012).
INVENTORY MANAGEMENT REPORT
It is s report by management to accessing the report of inventory. It helps to record the
inventory of raw material which is prepared a finished good. Inventory management report is
prepared to look wastage and usage of inventory to make the final product. It helps to find out

the estimate cost of product and control unnecessary wastage. Inventory management report help
to build balance focus between inventory investment and customer services. An inventory
management report can help UCK Furniture to prepare a report where company manger can
identify reducing wastage of inventory which help them save capital. UCK Furniture can make
their product performance report where summarized document prepared with the help of
inventory management report.
ACCOUNTING RECEIVABLE REPORT
It is a record that show the invoice of unpaid balance along with duration from which
they have been outstanding. The accounting receivable report is the primary tools used by
collecting overdue payment of client in the company. It contains every detail and contact
information in company for checking their dues and schedule time for payments. Accounting
revisable report help to categorised the due payment on the basis of their given date of collecting
their invoice. UCK Furniture should preparer accounting receivable report for updating their
payment due by suppliers and customer. Account receivable report help UCK Furniture to
invoice the report of each client and keeping sloe paying client on top which may become easy
for company to evaluate report (Melnyk and et.al., 2014).
M1.
Management accounting systems Benefits
Cost accounting system It assists management in framing pricing
policy by examining the actual perception of
targeted customers while buying products and
services.
Inventory management system It facilitate management in identifying the
level of inventory the company have at
present which makes easy for them to order
further stock if required, to meet customers’
needs and requirements.
Cost accounting system It directs an organisation to analyse total cost
incurred in manufacturing process so that an
effective price can be charged after adding

margin on it.
D.
Management accounting and reporting system are very much dependent on each other in
order to achieve organisational goals and objectives within pre-determined time period. For an
instance, price optimisation system assists in framing pricing policy that will be easily accepted
by targeted customers. For this, such system requires to gather information from cost accounting
report which contains details regarding total cost company incurred in manufacturing furniture
products. It expands the profitability and customers’ satisfaction level.
TASK 2
P3:
COST
Cost can be defining in terms of monetary they have been spent by company in order to
produce company's goodwill, revenue, effort, material, resources and good or services. It is
express as cash equivalence for an asset where all expenses incurred in company are cost. UCK
Furniture required cost to produce their goods and services. The expenditure of cost is required
in UCK Furniture to produce and sell their products which is prepared for customer.
MARGINAL COSTING
It is the change in total production cost that comes from making or producing one
additional unit. Marginal costing is effecting profit that change in volume or output by
differentiate between fixed and variable cost. It determines the economics of sale in organisation
to optimized product and overall operation. UCK Furniture should have utilized marginal cost
which help company to know their cost involve in production and quality of products (Nitzl,
2016).
Cost card for this method for two months is as follows:

ABSORPTION COSTING
It is defining as all manufacturing cost are absorbed by the unit produced which includes
fixed and variable cost. Absorption costing is the cost accounting method for valuing inventory
in which cost are include direct and indirect labour, cost, material with accurate figure of cost of
inventory. UCK Furniture can use absorption costing method for knowing exact figure to their
inventory production cost which also conclude the cost of selling, general and administrative cost
(Absorption costing, 2018).

M2:
The management of UCK furniture can opt various management accounting techniques and
documents in order to increase performance level of an organisation. It includes price
optimisation system, cost accounting system, inventory management system as well as
budget report, account receivable report etc. These all are used to maintain record of
financial transactions so as to evaluate the accurate and reliable financial position of an
organisation. It assists managers to make future decision related with further investment in
order to make financial stability of company more strong.

D2.
There are various techniques which is used to calculate net profit of UCK Furniture. While using
marginal costing method, 81000 comes as profit for January whereas 103500 comes as net
profit for the month of February. On the other hand, using absorption costing method, 74000
and 91000 comes as net profit for the month of January and February respectively. These
differences come due to inclusion of fixed cost.
TASK 3
P4.
BUDGET
A budget is a formal statement of estimated income and expenditure based on future plan
and objective. It is an instrument of management which is used in planning, programming and
control cost of business activity. UCK Furniture can get essential benefits for planning a budget
to know maximum expenditure and revenue incurred every year (Quattrone, 2016).
BUDGETARY CONTROL
It is a process by which budget is prepared for future period and then compared with
actual performance for finding changes in cost. Budgetary control helps to describe budget for
planning and controlling the cost of selling and producing goods or services. It helps a firm to
eliminate the waste and excess cost. UCK Furniture control on their wastage of cost by applying
budgetary control to minimise cost and invest in right place.
FLEXIBLE BUDGET
It is a financial plan to estimate revenue and expenses based in actual amount of output.
Flexible budget is a budget that varies from whole company or department need and demand. It
determines the accounting system for comparison to actual expenses in completed period where
all variable cost change to measure activity. UCK Furniture can calculate expenditure on
different level for increasing manager efficiency and effectiveness by flexible budget method
(Senftlechner, and Hiebl, 2015).
Advantage of flexible budget:
 Have less workload or stress and has relatability.

 Provide information of actual budget.
Disadvantage of flexible budget:
 More complex.
 inappropriate.
 shows variation thus create confusion.
MASTER BUDGET
It is a tool used to make management strategic plan for future of the company. Master
budget is one-year budget planning and collect all smaller budgets to compile budget in
document for over viewing financial statement. Master budget includes all ether financial
budgets as well as budget of income statement and balance sheet. With the help of master
budget, UCK Furniture can make their overall plan of financial budget.
Advantage of master budget:
1. Helps to motivate the staff and to plan for the future.
2. It helps to accomplish the goals of the company.
Disadvantages of master budget:
 Sometime difficult to understand.
 It may fluctuate.
VARIANCE ANALYSIS
It is an analysis of derivatives in budget and actual financial performance of a company.
Variance analysis is mainly used to maintain control over a business expenses. It is used to
identify difference between a manufacture or planned cost of input that can calculated from
actual product manufacture.
Advantage of variance analysis:
 Used to measure the fluctuation for future need.
 Budget estimation will be adjusted.
Disadvantage of variance analysis:
 It takes long time to examine.
 Future oriented thus focus on future without know the past.

M3.
Flexible, Master budget etc. are different planning tools which are useful to reduce
unnecessary expenses incurred on sudden basis. In the context of UCK Furniture, the
management can use these budgets in order to control unwanted expenditures. For example,
flexible budget is used to control cost by updating figures in budget according to the contingent
situations comes in the progress of project. This saves cost and increase profit of company.
TASK 4
P5
Calculation of Ratios:
BENCHMARKING APPROACH
It is an approach where company compare one employee performance from other
employee performance. Benchmarking approach may also compare business with their
competitors about their product or services, processes, cost to know their performance level. This
is also used to compare the customer satisfaction level over their product, services, price, quality.
Benchmarking approach include internal approach and external approach where internal help to
improve the performance of employee and external help to improve performance from
competitors. UCK Furniture can have adopted benchmarking approach for internal and external
assessment which help them to enhance their product or service with their competitors (Shah,
Malik and Malik, 2011).
KPI APPROACH

It is basically known as key performance indicators which is used to measure strategic
objective of an organisation. KPI approach help an organisation for decision making, monitoring,
and tracking performance to achieving strategic goal. It measures the progress of an organisation
for achieving business objective. KPI is used to tracking the operational performance of
departments, project or individual against their target or goal in the organisation. UCK Furniture
can use KPI to track performance of business is achieving their target goal or not which help
company to take decision properly.
UCK Furniture UCK Woodworks
A company gets maximum return on their
investment as ROCE is 17.24% which is good.
A company has 8.6% ROCE which indicates
that it has failed to get maximum return on
investment in comparison with UCK Furniture.
A company has 0.68 time Asset turnover ratio
which depicts that it has attained high
efficiency.
Such company has low asset turnover ratio as
in comparison with UCK furniture which
indicates low efficiency of company.
The company have good operating profit
margin as it has 25.03%.
The profit margin is much less as if compare
with other company thus managers need to
make an effective plans and decisions.
M4
Both UCK furniture and UCK Woodworks faced huge financial issues which includes low
operating profit margin and asset turnover. Thus, to resolve all such issues various tools are
available that can be used by both of them which includes:
Price optimum system: It is used to set prices which customers willing to pay for
company’s products and services. This brings profitable result in terms of overall revenue of
company.
Job order costing: It is used to assign cost to particular product or bunch of products. This
will make easy for management of UCK Furniture to control the manufacturing of low
demanded products as well as increase high demanded products.

Inventory management system: It is used to identify the level of inventory that can meet
customers’ needs and requirements. It makes easy for UCK furniture to meet customers’
expectations on time which strong loyalty and retention of customers.
D3
There are specific planning tools that are useful to deal with various financial issues that
includes KPI, Benchmarking, Financial governance etc. KPI is used to enhance the performance
level of employees by comparing their past year performance with present level performance.
Improving performance level of employees increases the productivity level of company as well.
Benchmarking is used to analyze rival’s strategies and on the basis of which setting target in
order to compete with them in rivalry market.
CONCLUSION
It has been concluded from the above discussion that management accounting plays vital
role in the improvement of financial performance of an organisation by representing the accurate
financial data towards the stakeholders with a hope of receiving huge amount as an investment. It
is important for management to use various accounting and reporting systems so as to identify
the causes of impacting financial performance negatively. Apart from this, there are various tools
such as KPI, benchmarking etc. which are more useful in resolving financial issues faced by an
organisation.

REFERENCES
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