Management Accounting Report: Unit 5 - The Berkeley Partnership

This report on management accounting provides a comprehensive analysis of key concepts and techniques. It begins with an introduction to management accounting systems, including their essential requirements and the types of reports used for decision-making, planning, and control within organizations like Essentra Packaging and The Berkeley Partnership. The report delves into cost analysis techniques, such as marginal costing, and their application in preparing income statements. It explores various management accounting techniques, including inventory management, job costing, and price optimization systems, highlighting their benefits. The report also examines different types of planning tools, their advantages, and disadvantages, with an emphasis on their role in budgeting and financial problem-solving. Furthermore, it discusses how management accounting systems contribute to long-term sustainable success and the integration of reports within organizational processes. The report provides valuable insights into how businesses can effectively manage their finances and operations through the application of management accounting principles.

UNIT 5

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1 Management accounting system and their essential requirement..........................................1
P2 Type of management accounting reports and its importance to management.......................3
M1 Various type of system and their benefits ...........................................................................4
D1 Management accounting systems reports integrated in organisational processes.................5
TASK 2............................................................................................................................................5
P3 Cost analysis techniques to prepare income statement to calculate cost...............................5
M2 Range of management accounting techniques......................................................................9
D2 Financial reports that accurately apply and interpret data...................................................10
TASK 3..........................................................................................................................................10
P4 Advantage and disadvantage of various types of planning tool..........................................10
M3 Evaluation of planning tool for preparing budgets...............................................................1
TASK 4............................................................................................................................................1
P5 Adaption of management according to respond financial problem.......................................1
M4 management accounting system lead to long term sustainable success. .............................3
D3 Financial problem avoid with the help of planning tool.......................................................3
CONCLUSION ...............................................................................................................................3

INTRODUCTION
Management accounting is a formative procedure in which preparation of management
accounts and reports are done that in turn provide data and financial statistics in accurate and
timely manner. Management accounting is considered as an branch of accounting that effectively
offer accounting information in a systematic way with the help of which business organisations
can able to perform their functions of decision-making, planning and controlling (Anderson and
Sedatole, 2013). Thus, management accounting is determined towards undertaking of best
policy and formulation of plans in order to accomplish desired set of organisational objectives.
Thus, with the help of modern management techniques organisation can effectively able to
accomplish their operations in best effective way. Present report has been made on, The
Berkeley Partnership. Present organisation was established in 1990. Company effectively engage
in the functions of offering services in Independent management consultancy along with this
organisation is having numerous number of Client Company. In addition with this, present
project include Essentra Packaging, which is mainly a manufacturing company that produce
seals, tear tapes, labels etc. Along with this report include the formative discussions on concept
of management accounting along with cost suitable techniques that will effectively aid
organisation to perform their operations. Lastly, in this report advantages and disadvantages of
planning tool is covered.
TASK 1
P1 Management accounting system and their essential requirement
Management accounting is termed as an formative process within which various
activities are done which is mainly related to analysation, presentation and collection on
monetary as well as non monetary terms. This lastly offer different types of advantages to
organisation with the help of which they can effectively operate their functions related to
planning, organizing, controlling and decision-making. With the help of management
accounting system Essentra Packaging can effectively able to accomplish there desired
objectives. Thus, it is important for an organisation to effectively consider effectiveness of
management accounting characteristics as with the some of this they can effectively able to
conduct their operations. Mentioned below some of the certain characteristic are defined:
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Reliability:
Within this it is important to have all related information in reliable form with the help of
which effective decision-making can be ascertained for future improvement.
Up to date:
Mangers are required to ensure that all the informations within accounting statements are
up to date and time accurate as to measure actual performance in well defined manner.
Accounting system aid organisation to maintain their financial records in well effective format as
to strengthen their market image.
Price optimisation system –
In order to gain competitive advancements it is essential for an organisation to set price
of their products and service in a structured manner. With the assistance of price optimisation
system company can increase their overall profit. In this regard company is required to evaluate
market as well as consumer behaviour regarding to products and service. Thus, with the help of
inventory management system Essentra Packaging can able to make an increase within there
sales margin and can further able to use their resources as to set best effective price range for
their products.
Inventory management system -
As to effectively manage organisational functions and activities related to manufacturing
and production it is important for an organisation to manage their inventory and stock and keep a
proper track on organisational resources. This will aid company to effectively utilize
organisational resources that simultaneously benefit them to check a regular track on their
inventory and production ratio. With the help of this organisation can effectively able to operate
their functions in best effective manner along with this company can lower down their overall
level of wastage and further produce products and services in cost effective manner. In addition
with this, Inventory management system allow Essentra Packaging to effectively check their
inventory segment and control use of raw material as to utilize them in best effective manner as
to increase overall productivity of organisation. It further aid company to record their level of
wastage as to further formulate strategies in order to control excess wastage. There are numerous
form of techniques defined below that will aid organisation to manage their ratio of inventory.
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 LIFO – As per this method stock which come last will goes out first. Thus, LIFO is
simply last in first out.
 FIFO – There are stock coming first and sale out first. Thus, it depends that in FIFO
method first in first out take place.
 AVOC – It is calculating cost of inventory on average basis.
Cost accounting system –
Cost accounting system effectively provide number of benefits to organisation, as with
the help of this they can concentrate of organisation cost input of different activities that in turn
allow them to effectively make an increase organisation overall profitability ratio. This form of
accounting system include various set of activities such as evaluation, understanding, summarise
of cost of goods and service. In addition with this with the help of cost accounting system
Essentra Packaging can able to conduct their operations within estimated cost with the help of
which company can see significant increase in their level of productivity which in turn lead
organisation towards increase in profitability.
Job costing system –
Job costing system aid organisation to make an evaluation of their overall rate of
expenditure that occurred in the time of particular job. With the help of this company can
effectively able to perform their operations by evaluating every single detailed information
related to cost within an accounting period (Hilton and Platt, 2013). Along with this, job costing
system allow Essentra Packaging to extract information which is linked with assigned job.
Mentioned below there are some information and data that can be evaluated by organisation
with the assistance of job costing system that are defined below:
Direct material –
Direct material is one of the most important element in within variable cost as this assist
an organisation to have a track on their production unit level as to effectively manage cost that is
required to be allot in a particular job.
Direct labour –
In this factor labour cost can be effectively able to track specific related job. This will
further help to complete their time as per accordance with time sheet.
Overhead -
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At the end of every accounting period the total amount of each cost to apply methodology
regarding to allocation.
Difference Between Management Accounting and Financial Accounting
Management Accounting Financial Accounting
 Within this form of accounting system,
it is mainly for internal use while
having no external regulations.
 In financial accounting, it is mainly for
external use and are basically regulated
by law.
 It offer detailed evaluation of financial,
non-financial and qualitative form of
information.
 It covers overview of organisational
performance that covers financial
information.
 There is no such legal requirements as
to prepare management accounts.
 In this there is limited liability on
companies by law as to prepare
financial accounts.
P2 Type of management accounting reports and its importance to management
There are different type of management accounting report with the help of which
organisation can effectively able to maintain proper record. This will in turn allow them increase
overall profitability of organisation. There are some certain system with the help of which
organisation can effectively able to conduct their operations:
Cost managerial accounting report:
Cost managerial accounting report aid an organisation to make an estimation of their
expense and cost which they spend on their manufacturing as well as on production process.
Along with this, with the help of this report organisation can operate their business operations in
well effective manner. With the help of this they can able to have formative control on their cost
that will lead towards increase in overall profitability. In addition with this, it also benefits them
to have assurance to operate their activities in proper framework of time.
Budget report:
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This kind of report maintain all the valuable information regrading different spendings
done by organisation annually . The budget report should be genuine and it ends in accounting
year of the company. The company managers use this kind of budget report to do comparison
between budget and actual report in accounting. Further this report is accountable the upper level
management for assessing the authenticity of the report depending upon the condition ODF the
business and its growth. This is also useful to manage the expenses and other cost for the
company.
Performance report:
A performance report is a systematic layout which include cost incurred while
completing a project taking in considerations all resources effectively utilised by leader in
achieving short and long objectives on any organisation. The performance report gives an
accurate informations about actual position are equally balanced with set standards, while
comparing performance of project. This report helps leader to implement critical planning for
achieving outcomes in an effective manner. The performance report give an estimations that how
much profit could be attained after completing the project. The objective are based on small,
medium or large scale project. The managers critically allocate funds in operating business
activities so that short and long term objective could be effectively achieved for expanding
business at international market. The performance is regularly monitored by supervisors to know
weather the activities are on planned track or not. It helps manager to expand business and attain
competitive advantage in industries.
M1 Various type of system and their benefits
System Benefits
Cost Accounting system  With the assistance of this scheme organisation can
effectively able to evaluate their unexpected cost
that will further benefit them to improve their profit
level.
Inventory Management System  This system allow to have proper record of overall
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inventory within organisational structure in order to
offer products and services to customer as per
accordance with their demand.
Job Costing system  With the help of this system organisation can
effectively able to evaluate their activities and
maintain adequate level of profitability.
Price Optimisation System  This system allow organisation to effectively
increase their client base with the assistance of fair
cost.
D1 Management accounting systems reports integrated in organisational processes
Management accounting system helps to manage the reports of finance in organisational
process. It has been identified that various kind of report can and accounting system are both
useful in terms of organisational procedures to achieve the productive output for company. All
system and support file are important to for making genuine report without any fault or
misinformation. In addition it create useful decision and and to solve different problems which
occur in business anytime. There are different kinds of report in management accounting such as
cost report, budget report, accounting report which are used by Essentra packaging to keep track
and maintain all the essential information regarding transaction done in current years.
TASK 2
P3 Cost analysis techniques to prepare income statement to calculate cost
Marginal Costing:
Marginal costs is a variable cost that mainly include, consisting of labour along with
material costs as well as estimated part of fixed costs that are selling expenses, overheads and
administration. In simple terms it is a process within which charging of variable expense is done
all-out unit of expense. With the help of this accounting techniques organisation can effectively
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able to increase their net benefit and can further determine it in the period of bookkeeping year.
Mentioned below there is a basic formula of calculation of marginal costing:
Marginal Cost= Direct material+ Direct Labour+ Direct expenses+ Variable overheads.
Income statement under Marginal costing method for month of May & June
Particular May June
(in £) (in £)
Total Sales 50 15000 25000
Less: variable cost
Opening stock - 3200
D.L. 5 2500 1900
D.M. 8 4000 3040
Variable Cost 3 1500 1140
Less: Closing stock -3200 -1280
Total Variable cost 4800 8000
Contribution 10200 17000
Fixed indirect production cost 4000 4000
Selling & Distribution costs 4000 4000
Administrative costs 2000 2000
Sales commission cost 750 1250
N.P. (Net profit) -550 5750
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Absorption Cost per unit
Direct Labour cost per unit 5 5
Direct Material cost per unit 8 8
Variable cost per unit 3 3
Marginal Cost per unit 16 16
May June
Opening stock - 200
Produced units 500 380
Sold Units 300 500
Closing stock 200 80
Absorption costing:
Absorption costing is mainly linked with costing strategies which is also termed as an
cost bookkeeping and administrative. With the help of this organisation can effectively able to
incorporate their cost which is linked with creation of a particular decent. In addition with this, it
also cover fixed as well as variable cost such as, different overheads, compensation and cost of
crude material.
Income statement under absorption costing method for month of May & June
Particulars May June
(in £) (in £)
Total sales 50 15000 25000
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Less: Cost of Goods sold
Opening stock
D.L. 5 2500 1900
D.M. 8 4000 3040
Variable production cost 3 1500 1140
Fixed indirect production expenditure 4000 4000
Closing stock -4800 2122.4
Total cost of goods sell 7200 7957.6
G.P. (Gross profit) 7800 17042.4
Selling & Distribution expenses 4000 4000
Administrative cost 2000 2000
Sales commission expenditure 750 1250
N.P. (Net profit) 1050 9792.4
Absorption Cost per unit
Direct labour cost per unit 5 5
Direct material cost per unit 8 8
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