Management Accounting Techniques and Applications in Unilever

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Management Accounting
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Table of Contents
Introduction...................................................................................................................... 4
Lo 1.................................................................................................................................. 5
Lo 2................................................................................................................................ 11
Lo3................................................................................................................................. 12
Lo4................................................................................................................................. 16
Conclusion..................................................................................................................... 20
References.....................................................................................................................21
Appendix........................................................................................................................ 22
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Introduction
In this study management accounting will be briefly explained and how management
accounting information managers will access this information as a source of decision
making through the help of management accounting techniques, determination of cost,
planning tools and cost control. All these information and techniques help management
in taking sound decision for a company which ultimately improves the growth of the
organization. Financial problems will be discussed in this study and an organization can
deal with those problems through management accounting information.Financial
problems can be solved through management accounting information. Unilever
Company Take as a case study to briefly explain the fundamentals of management
accounting. Unilever Is a British multinational company of manufacturing which is work
across the world and dominates most part of world. The headquarter of unilever
company is located in London.
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Lo 1
Management accounting is a process of decision making through accounting
information. management accounting furnishes accounting statements for policy
formulation and decision making (Otley, 2016.). Management accounting also helps in
functional areas like- planning, staffing, controlling and directing .these are important
functions of a company through the help from management accounting a company
would overcome with financial issues but this is not the specific solution for their
problem but they might overcome with financial issues with the help from these tools.
The systems of management accounting are using organizations according to their
need.
These are some common accounting systems which are most organizations use
 The System of management accounting
 The System of inventory management
 The System of job costing
 The system of price optimization system
The system of cost accounting is a substructure of cost estimation for their product
to control cost of company. Estimating the accurate cost is essential for
organizations but it is a critical decision to take. An organization must identify which
product is most profitable for them and which is not, and this can be only done
through the correct estimation of the cost.
The system of inventory management check goods through the entire supply chain
that including manufacturing to customer, warehouse to shipping and all the
activities of the supply chain (Fullerton et. al., 2014). Inventory management is an
important unit of any business and firms control inventory through different software.
Small inaccurate information hinder the entire supply chain, so every unit manager
takes care about the effectiveness of software so that the entire supply chain runs
well ordered.
The system of job costing is used by company to accumulation of cost per unit
manufacturing. The system of job costing is crucial when a company have diversify
product portfolio, so cost associated with them also different, so on that time job
costing system key because job costing system is required a separate cost record
for every cost activity of company. A separate record of cost for each item provides
information about expenses related to a specific product so that it helps in the
identification of a profitable product for firm.
the system of price optimization is mathematical analysis which is used by company
to calculate the demand of customers at different levels of price the company
amalgamate that data with inventory reports to determine the prices of their product.
These are some requirements of systems of management accounting.
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 Information
Information is consider as most vital requirement toolof management accounting.
These are some important things which must be kept in mind while applying
management accounting systems
 Relevancy
Information must be relevant and it should affect decisions because entire
information is not counted in relevant information.
 Accuracy
The accuracy of information is requisite if the information is indistinct then there
is no meaning of such information at all.
 Sources
The source of information is also important it's dependent on the need for
information. Firms collect information from internal sources and external source.
 Structure of the organization
The systems of management accounting are also helpful in improvement of
structure of organization. It is helpful in transition of information from one place to
another place.
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Management accounting reporting methods
 Budgeting Report
A Company uses budget information for decision making and Vodafone Plc. Is
using Budget is an important Source to analysis the cost and revenue of the
company. They simply analysis budget and find a derivation in it means if cost
exceeds our planned cost than It's not good for carnival corporation. So they try
to reduce costs and increase revenue.
 Account receivable Report
If the Business of a company is Rely on credit facility than account receivable
information is important. If they provide credit services to their customers so it’s
important for them to check accounts regularly so that debt can't increase so
basically a Company use this tool to reduce debt. If the debt for unilever
companyIncreases then the company from heavy loss which is ultimately
Creates a burden on the entire company.
 Cost accounting Report
Cost accounting information is very useful from a company perspective and Cost
accounting information means cost related with employees and incentives. This
information is useful for managers to reduce overall expenses. A Company uses
effective tools for analysis cost accounting information. If the cost of a Company
increases then management take effective decisions to curtail expenses so that
they come on break-even point.
 Managerial accounting Report
Managerial accounting information includes information about trial balance, profit
and loss statement and trading account. This information is useful for managers
to make decisions without this information they don't know about expenses and
profits. So this information is very useful from the manager's perspective.
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Benefits of management accounting systems and their application within an
organizational context.
Financial accounting pivots on preparing information for external users' like- investors
and stockholders. On other hand, management accounting systems prepare information
for internal use to make decisions.
Benefits of management accounting within an organization context.
 Working efficiency of organization increases
Many Companies are approaching towards management accounting systems
because it is more important tool in performing operations of company. It also
helps the organization in effective performance through analysis of data,
comparison of data, interpretation of data and summarization of data.
Management accounting systems also motivate employees through the better
performance which lead to the promotion of employee as a result, growth of the
whole organization.
 Improve profitability of company
Management accounting is provide useful tool to management which is a company
apply in their operation and increase their profitability. Through the help of
management accounting reporting a company is also liable to save cost and improve
their budget.
 Simplifies the decision making process
When management of a company is stuck in a difficult situation than they need
financial statements to take effective decision for company. For this effort,
management accounting system create a detail report about financial statements
which include income statatement, cash flow statement and balance shhet.
 The monetary fund is an essential part of any business, Tool and techniques of
Management accounting helps in enabling control over monetary fluctuation
through proper control on inflow and outflow of cash. Furthermore, it also helps in
the case when urgent funds required for operations. If through any source,
misuse of fund happen infirm than through management accounting a company
canelimination that misuses.
 Cost transparency
Management accounting is bringing cost transparency in a company through
proper analysis of financial statements and records of the financial transactions.
Record of transactions helps the company curbing extra expenditure and cost
transparency.
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Management accounting systems or tools is flexible in nature because in this
case it is not mandatory for an organization to make reports early, monthly and
weekly. So overall management accounting helps organizations in running
operations smoothly.
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Management accounting reporting are integrated within organizational
 Budgeting reports with the organizational process
Organizational process of a company gets help from budgeting reports to
forecast about their expenses, a prediction about cost gives them a coherent
idea about companies' expenses.
 Report of account receivable with the organizational process
Report of account receivable is providing a Company a clear view about their
debt through account receivable report which provides a clear idea about debt.
Account receivable reports help a Company in recovering debt from the market; it
also helps in framing market debt recovery policies (Ponisciakova et. al., 2015.).
 Job cost report with the organizational process
The main aim and operation of a company is must guide towards achieving cost
objectives of the company, which is making easier for a Company to frame price
strategy for their products.
 Inventory and manufacturing report with the organizational process
A Company uses inventory and manufacturing reports to increase the accuracy
of its order process. Inventory and manufacturing reports is bringing coordination
and communication in a company which is ultimately improves efficiency of
company.
This is the whole process of integration between a Company process and management
accounting report.
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Lo 2
Marginal Costs: Fixed Cost is a method of costing in which is constant and variable cost
changes in every level. Marginal Cost is on the based on behavioural of cost with a
volume of output (Parker, 2012). It is a process that calculates the cost which variable
and fixed cost are measures and the breakeven analysis for cost control, it helps to
minimize the unnecessary cost which helps to maximize the profit and for decision
making. This information helps in accuracy and controlling the management.
Absorption Cost
It is the expense of the operational or manufacturing cost of an organization which is
also called direct cost (Nixon, and Burns, 2012). The requirement of labor wages,
electricity bills, Direct materials, etc which use to manufacture a product are calculated
by absorption cost to minimize the cost and control the expenses. Absorption Costing
includes anything which required manufacturing a product directly.
Income statement under marginal and absorption costing for Unilever Company.
income statement under marginal costing
Sales 16000*50
800000
Less: variable cost @5per unit
90000
Fixed manufacturing overhead cost
100000
Direct labour cost @20 per unit
360000
Direct material cost @ 10 per unit
180000
Net profit 232000
income statement under absorpation costing
Sales 16000*50
800000
Less: variable cost @5 per unit
90000
Fixed manufacturing overhead cost
100000
Direct labour cost @ 20 per unit
360000
Direct material cost @ 10 per unit
180000
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Add: closing stock
100000
Net profit 332000
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Lo3
Budgets are considered a very important tool in order to manage the business of the
unileverCompany. With the help of the budgets, effective planning for the company by
the management can be framed that further contributes to accomplishing the desired
objectives of the said company. In this report, various types of budgets as a planning
tool their advantages, disadvantages, and importance is going to be discussed. The
implementation of management accounting tools and technique contributes in
budgetary control and also leads to the development of the business. Planning tools of
budgetary control is helps in estimating the future needs of the business and thus leads
to accomplishing that future need in accordance with the business of the company that
is unileverCompany. Budgetary control is an essential tool that helps in preparation of
the budgets for the company and achieve the key targets of the firm. Budgetary control
technique is also help in determining the variances by making a comparison between
actual workwith the estimated plan. A company is using different types of planning tools
that contribute to budgetary control in an effective manner and smoothly that further
contributes to accomplishing the desired objectives of the company. Budgets are always
measured in monetary terms that present the sound financial position of theunilever
Company. Budgets also help in forecasting or predicting future results or performances
on the basis of the historical data. Incorporation of the perfect budgetary planning also
helps in determining the loan or borrowings requirements of the company and also
enhances the productivity of the business. Budgets help in evaluating the performances
of the business with the help of the optimum utilization of the available resources. These
are some different types of planning tool that is used by a firm such as Zero-based
budgeting, Master budget, Sales budget, etc(Koochakpour, and Tarokh, 2017).
Budgets help in evaluating the performances of the company by comparing actual
results with targeted outcomes, hence it is essential planning that contributes to
effective decision making and controls the budgets
Budgeting zero based:-budgetingZero-based is the technique that is used for re-
evaluating the cash flow statement and further it condones all the costs incurred within
the department. Hence it is a very useful tool that prepares the budgets with a zero
base and vital process of computing the cost of a new period on the basis of actual
expenses (Trautman, et. al., 2016).
Advantages and Disadvantages of the Zero Based Budgeting:
Advantages Disadvantages
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