Management Accounting Report: Zylla, Financial Analysis and Strategies

This report provides a comprehensive analysis of management accounting practices within Zylla, a small-scale business. It begins with an introduction to management accounting, its importance, and various system types, including price optimization and cost accounting. The report then explores different management accounting reporting systems, such as budget reports and performance reporting, highlighting their significance in business operations. The core of the report delves into costing methods, contrasting absorption and marginal costing, and their application in financial analysis. Furthermore, it examines the benefits and drawbacks of planning tools and techniques, and the adaptation of management accounting methods to address financial issues within the company. The report concludes with an overview of the findings, providing valuable insights into Zylla's financial management strategies.

Management Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Concept of Management accounting and various type of management accounting systems 1
P2 Various System used for management accounting reporting................................................3
M1 Merits of using management accounting approach..............................................................4
D1 Desegregation of management accounting systems and reporting.......................................5
TASK 2............................................................................................................................................5
P3 Compute cost using absorption and marginal costing...........................................................5
M2 Use of management accounting method...............................................................................9
D2 Financial reports that utilize for understand business activities............................................9
TASK 3............................................................................................................................................9
P4 Benefits and disadvantages of various kind of planning tools...............................................9
M3 Evaluation of planning techniques.....................................................................................11
D3 Planning tools or technique for respond financial issue......................................................11
TASK 4..........................................................................................................................................12
P5 Adaption of management accounting method to respond financial issue............................12
M4 Evaluation of financial problem.........................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is the analysis, communication and sourcing and use of decision
link to applicable financial and non-financial data to preserve and generate value for enterprise.
It is an effective techniques and processes that are emphasised on the proper use of business
resources in order to help administrators in their task or project of improving both shareholder
and customer value (Bebbington, Unerman and O'Dwyer, 2014). It is a system of collection and
demonstration of accurate economic information and data relating to an organisation for
monitoring, decision making and planning. This assignment is based on Zylla, it is a small scale
under which 50 employees are work together. This report also shown about management
accounting concepts and necessitate of various kind of accounting methods. Different types of
management accounting reporting and integration of company activity with the approach of
management accounting also determined in this study. Further, different approaches which an
enterprise use for measurement such as marginal and absorption costing is shown in this
assignment. Disadvantage and benefits of planning tool, and tools of management accounting
method also used in this project in order to decrees financial issues in the business entity.
TASK 1
P1 Concept of Management accounting and various type of management accounting systems
Management accounting: It is an essential process of accumulation, determination,
evaluation, analysis, interpretation, communication and preparation of information that supports
managers in certain decision creating within the structure of accomplishing the company goals
and objectives (What is management accounting system, 2018). According to American
Accounting Association; Management accounting consist of concepts and methods which are
necessary or essential for proper planning and selecting among alternative business activities for
control the evaluation of performances.
In Zylla, management accounting very important and necessary for the business entity to
mange their all financial and non-financial information systematically (Bennett and James,
2017). This system also useful and valuable for the organisation to accomplish their
predetermined goals and target in given time duration. There are some other importance of the
management accounting for the company to increase their sales and revenues, these are
determined as below:
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Qualitative Data or information: For analysis all business activities and operations
effectively, manager of the company collect necessary information regarding company services
and products (Bovens, Goodin and Schillemans, 2014). It is essential for the enterprise to
increase their turnover and sales in limited duration. Management accounting assist in attain the
same and support in analysing the critical situation in easily.
Ongoing training or activities as well as data: It is essential for Zylla in order to
organise training activities for its workers so they can know and acquire regarding this approach.
Management accounting important for the company to handle daily basis activities and function
in an effective and efficient manner.
Give relevant information:Main benefits of this system is that it assists administrator in
gather and evaluate relevant data which support them in take appropriate judgement about
business operations and functions.
TYPES OF MANAGEMENT ACCOUNTING SYSTEM: There are some methods of
management accounting which are determined as below:
Price Optimisation System: It is a mathematical method which is use by each and every
organisation to evaluate how audience react to various prices or value of product (Brewer,
Sorensen and Stout, 2014). It is essential and beneficial tool for the Zylla and its administrator to
fix the accurate prices for the services and goods. It assist the business administrator to set
accurate cost of their products in a systematic manner. Therefore, company can easily attain their
desired and long term goals or objectives in allotted time period. Data which is use by
organisation for optimisation of price including historic prices, sales, operating cost and
inventory.
Cost Accounting System: It is an effective system of management accounting which
assist the manager to estimate and calculate the cost of services and goods. It is essential for the
company to analysis their profit and control cost effectively. Evaluate the accurate cost is not
easy for the enterprise success and development (Chiwamit, Modell and Yang, 2014). This
approach is used by the Zylla in order to create their business operations and activities more
profitable.
Inventory Management approach: Management accounting system support the business
administrator to maintain and keep the perfect level of cost. It assist in decrease entire cost or
value of business activities and operations. There are certain elements which are includes in this
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approach such as just-in-time, Economic order quantity and many other. These are valuable for
the organisation maintain production process and accomplish predetermined objectives of
company.
Job costing system: This technique includes accumulation of different kind of cost like;
managerial, overhead, labour etc. Main purpose of company for applying this tool is to control
entire expanses of company and maximise sales of them (EBRAHIMI and MOGHADASPOUR,
2015). Zylla measure the production cost value which is chiefly classified into three parts such as
overhead, direct material and Labour cost.
P2 Various System used for management accounting reporting
Management accounting reporting: It is identify as a record of reporting forms which
including a set of non-financial and financial performance indicators. It provides necessary and
essential information to the different group of user. Reporting is also beneficial for the business
entity to introduce their all pictures in marketplace and in the customer's mind. It is critical for
the referred firm in order to derive their essential strategic and policy insights from these
important document. It is determine as a continues and essential activity which is highly
beneficial in the process of decision making (Klychova, Faskhutdinova and Sadrieva, 2014).
Effective and accurate report is important for the company to achieve best outcomes and results
in limited time duration.
Significance and essential of management accounting reporting: There are some importance of
accounting system which are described as below:
Essential in profitable operations of the business: Management accounting reporting is
the best and essential for the success and development of company. It also beneficial in
achievement of long term growth and accomplishment of predetermined goals of company. With
the use of these tool business entity easily organise their business operations and activities
effectively.
Effective in handling system of control: It is also important for the organisation for
setting up long term objectives and goals. It is the main role of manager to observe after the
workers about attaining of objectives and goals effectively. In order to analysis accurate position
of the company, such type of tool highly supported.
Different methodologies of management accounting reporting: There are certain approach of
reporting which are followed by Zylla. All these are determined as below:
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Budget report: It is a best methodologies which is being followed by referred
organisation in the process of identifying the performance and profitability level of company. It
can be determine as necessary report or statement which is being applied by the upper level
administration in order to analysis budgeted project or task with the real level of performance, so
that objectives and targets can be accomplished easily (Lavia López and Hiebl, 2014).
Requirement of main chances is completed if the past year budget or fund has been allocated in
order to create accurate budget for the actual year as per the need of company.
Job costing reports: It is a part of accounting report which is important for the company
to shown their actual expanses related with specific task of company. In order to increase
profitability level, it is mainly significant that the expenditure should relate with the calculated
revenue of business. Main aim of the Zylla is to using this tool is to decreasing wastage and
maximising profit margin properly. Instead of activity, management costing reporting is linked
with the approach of production. With the use of this technique, manager of the business easily
track their all record and report of work which is completed along with the employees
performance.
Performance reporting approach: Main focus and aim of company for applying this tool
is to identifying the financial statement or report so that real performance of the company can be
developed effectively (Melnyk and et. al., 2014). It is essential to make an end report of business
and employee performance, so that proper judgement can be proceed for getting maximum
advantages. Measurement can be completed due to relevant information from the past and
current years.
Inventory and Manufacturing report: It is important tool for the management
accounting reporting that should be followed for creating an effective process of production. It is
mainly utilised by the company who have types of physical stock. It includes different kind of
cost such as overhead, labour, inventory, wastage and many other. Therefore manager of the
Zylla can control the availability of the inventory in the enterprise.
M1 Merits of using management accounting approach
Management accounting consists different methods such as Price Optimisation, Cost
Accounting, Inventory Management and Job costing. All these are important for the company to
maintain their performance and profitability in daily basis. All these are also assist the business
manager in order to achieve predetermined goals and targets of company in given time period.
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With the help of all tools of management accounting Zylla easily increase their performance in
marketplace.
D1 Desegregation of management accounting systems and reporting
According to the James, (2017) management accounting reporting and system both are
valuable tools for the business success and development. All those are includes some types are
beneficial; for the organisation to maximise their sales and turnover in limited duration.
On the other hand Bennett, (2017) those technique's are beneficial and essential for the
company to maximise their profitability and performance level in limited time duration.
TASK 2
P3 Compute cost using absorption and marginal costing
Cost: It is one of the valuable and necessary part of the every business entity in order to
do their all activities and functions in an appropriate manner. Without this aspect company can
not grow and develop their operation in different level.
Costing: It is also important and significant part of each and every company to measure
their performance and profitability ratio (Messner, 2016). It evaluate the cost of product and
process for the motive of controlling, budgeting and pricing. It is available in the business as the
form of direct and indirect cost, it is essential for the Zylla to calculate their productivity and
effectiveness level systematically. Costing is mainly classified into two parts which are
determined as below:
Absorption Costing: These is the essential tool for the company to designing and
preparing their financial report for external objective. Such type of cost mainly linked with the
manufacturing of products and services. It is important for the Zylla to measure their profitability
and performance as compare to other businesses. It assist the administrator to calculate their
turnover and revenue in an essential manner (Mistry, Sharma and Low, 2014). It is beneficial
method of costing a products in which both fixed and variable cost are provided systematically.
Marginal Costing: It is also important method of the company to evaluate their sales and
net profit systematically. With the help of this technique's business entity easily measure their
performance and effectiveness level in limited time period. With the use of this approach,
company view fixed expanses or expenditure on regular basis. This assist the manager to
decrease their addition cost and maximise cost of production. This methodologies is very
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effective in nature where both variable and fixed cost of value modify for particular time
(Nørreklit, 2014).
Difference between absorption and marginal costing can be understood in better manner,
these are determined as below:
Basis Marginal costing Absorption costing
Definition In this approach of costing,
variable cost are reduced as
per unit cost of particular
goods and fixed cost to
measure as per net profit of
company (Difference Between
Marginal Costing and
Absorption Costing, 2018).
Under this methodology of
costing, measurement of
production cost value with
entire overheads like direct
expenses is completed.
Cost determination In this approach, production
cost is calculated on the basis
of fixed and variable cost.
Under this method, both fixed
and variable cost is calculated
as the final cost of
manufacturing.
Inventory and costing
valuation
In order to measure business
sales and revenue, business
entity only use variable cost
(Quinn, 2014).
In this variable and fixed cost
are used by the company in
measurement of the business
turnover and inventory value.
Management of fixed overhead
or cost
In this approach, fixed cost is
included as the type of period
cost and effectiveness of
different commodity is
calculated by profitability
ratio.
Under this methodology, fixed
cost is considered against the
production cost. All goods
included fixed cost due to
allotment of actual overheads.
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Unit cost of production It is not influenced by
modification in closing and
opening inventory.
It is effected and influenced by
the production unit cost
through to effect of actual cost.
Lucrativeness In this marginal costing,
performance and profitability
is measured with the assist of
cost volume ratio.
Through deduction of actual
cost or price this impacts the
entire profitability of
company.
Classification of expanse In this approach cost are
mainly grouped into headings
of variable and fixed cost. This
assist in analysis net profit and
contribution in an easy and
separate way.
In this methodology , cost is
gathered due to customary
way.
Calculation as per Absorption costing.
Working notes:
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
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Fixed overhead: £2000
Total £100(over absorbed)
Administration Cost: In this measurement, Actual cost is £700 and budgeted cost is £800
Production Cost: £700
Selling cost: In this calculation, Actual cost is £600 and budgeted cost is £400
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod.
O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
Fixed selling expenditure
Over absorption
Net Profit
0
11200
(1600)
600
700
600
(100)
21000
(9600)
11400
(1800)
9600
Working 1: Calculate variable production cost £
Direct material 6
Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
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Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
2000
1300
600
21000
(7800)
13200
3900
9300
M2 Use of management accounting method
Management accounting is very essential and important method for the organisation in
order to achieve long term goals and objectives. There are different methods which are being
used by Zylla to accomplish the predetermined goals and financial stability (Renz and Herman,
2016). The main emphasis of the administration should be on applying the monitoring tools so
that all resources can be handled in optimum way. Absorption and marginal costing is valuable
for the organisation because it measure financial performance of the company.
D2 Financial reports that utilize for understand business activities
Financial report is beneficial and valuable for the enterprise to maintain their profitability
and productivity ratio. In order to measure business profit, company used absorption and
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