Management Accounting Report: Zylla Company Performance Analysis

This report provides a comprehensive overview of management accounting principles and their application within Zylla Company. It begins with an introduction to management accounting, emphasizing its role in decision-making and cost control. The main body delves into various aspects, including cost accounting, inventory management, job costing, and price optimization techniques. It discusses different management accounting reporting methods such as cost reports, budget reports, performance reports, and inventory reports. The report then explores absorption and marginal costing, comparing their respective income statements. Furthermore, it examines different planning tools used in business, such as zero-based budgeting and activity-based costing, highlighting their merits and demerits. Finally, the report discusses how Zylla Company adapts its management accounting system to effectively respond to financial problems, concluding with a summary of key findings and references.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1 Management accounting and essential requirements of various types of management
accounting in organisation......................................................................................................1
P2 Discussing methods of management accounting reporting...............................................3
P3 Calculation of absorption and marginal costing and preparation of respective income
statements...............................................................................................................................4
P4 Different types of planning tools in the business and stating merits and demerits...........5
P5 Discussing how organisation is adapting management accounting system to effectively
respond to financial problems................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management accounting is the process which help to know the actual performance of the
company. It help to make better decision and control the cost of product . This entire report is
based on management accounting and help to know the financial and statistical information
required by the mangers. This report show that Zylla is a company who use this accounting
system and compares its past and present performance. This report shows the essential
requirement of various types of management accounting tools and also show different types of
management account report which help to know the actual performance of the organisation and
this also shows tools which help to know the status of every department. There are various
management accounting tools which help to sort the problem related with financial. This report
also depicts the relationship between marginal costing and absorption costing and shows which
is better for reducing the cost .
MAIN BODY
P1 Management accounting and essential requirements of various types of management
accounting in organisation
Accounting plays crucial role in the business as it various transactions can be recorded
and overall picture of organisation can be carried out with the help of preparation of financials.
This method of recording business transactions and extracting financial statements is known as
financial accounting. From this, management accounting information is taken out which is
beneficial for top managerial personnels so that they may analyse performance of organisation
and take structured decisions thereof (Management accounting, 2018). In simpler words, such
accounting information serves as a guide for management by which it can strengthen internal
operations in that way by which customers may be provided with better and good quality goods.
The management accounting is required because company operates in an dynamic environment
where frequent changes occur and as such, it increases costs to carry on business activities. In
relation to this, one of the fundamental concept of management accounting is to control costs so
that more production can take place and revenue may be increased up to a high extent (Suomala,
Lyly-Yrjänäinen and Lukka, 2014).
Zylla Company also effectively uses management accounting by which it is able to get
clarity about manufacturing expenditures and thus, control can be initiated with much ease.
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When costs are controlled, then eventually revenue maximises which is the ultimate objective of
firm. Thus, by taking into account, such information management can easily take well-structured
decisions which will be helpful in increasing profits in effective manner. In relation to this, there
are various types of management accounting that are essentially required in the business. They
are listed below-
1. Cost accounting-
It is one of the important type of management accounting as it help to effectively initiate
control upon expenditures in the best possible manner. It is required in Zylla Company so that it
can easily control costs in effective way (Ueno and Scarbrough, 2016). It helps organisation to
reduce amount on unnecessary expenditures and as such, manufacturing can be injected in a
better way. Management of firm can analyse cost reports and thus, measures to reduce the same
can be done. Cost accounting is vital for firm so that profits may not be affected by increased
expenses and thus, production costs are easily eradicated and higher production is achieved.
Usually expenditures are fixed, semi-variable, direct, indirect and variable which forms total part
of manufacturing cost of company. Thus, it can be said that with the help of cost accounting,
higher production may be accomplished by reducing overall cost in the best possible manner.
2. Inventory management-
Inventory is an important part of production process as without stock in hand, desired
production cannot be achieved by the company (Malmi, 2016). For carrying out customer's
demand, manufacturing is done so that timely delivery of goods can be provided which fulfils
their requirement. Thus, for accomplishing production, inventory is needed in adequate manner
so that no wastage may occur and company can achieve the level with much ease. Stock is
required in optimum manner so that no spoilage may prevail. It is essentially required as it
increases additional handling costs in the warehouse and as such, firm will face difficulty
accomplishing production because expenditures would increase. On the other hand, if stock is
not available in desired quantity, then also desired production cannot be achieved. Thus,
inventory is purchased as per the reports prepared by production department and imparted to
management to assess the same and inventory is managed in effective way.
3. Job costing-
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It is defined as the process which involves certain activities such as collecting the cost
related to materials, workers and certain overheads for the specific task. This is the most
effective approach that helps to trace all the cost which related to individual task and evaluating
them to see if that cost can be reduced further. This concept is used at a small level. It requires
some considerable quantity of precision in costing (Otley, 2016).
The activities which are involved in job casting are discussed below:
Material: It evaluates the cost of every component and further assign it for a project
Labour: Every worker contribute time for those task which are included in the cost related.
Overhead: It includes those cost which are involved in pooling various cost.
4. Price optimisation technique-
Price Optimisation in a company involves the specific usage of mathematical analysis for
determining the response of the customers on the pricers of their various products and services
with the help of various channels. It facilitates the process of deciding the perfect price which is
appropriate for accomplishing the objectives like maximisation of profit related to several
operations. The data which is used for this process are inventories, operating cost and past data
of prices and sales. Big data is utilized in this concept for predicting behaviour of consumers for
different pricing. Organisation uses various models for optimising the prices of their offerings
and the related structures for promotional pricing, initial pricing and further discount pricing. For
this concept segmentation of the customers are done and each segment is analysed.
P2 Discussing methods of management accounting reporting
As management accounting help in making decision better and used to controlling cost,
planning. Cash flow statement, balance sheets these all financial statement are depend on
management accounting only and apart from this it is used in making reports which are mention
below:
 Cost Reports : This report help the management accountant to evaluate price of the
item. As it is calculated by labor, overhead, and any other extra expenses incurred during
manufacturing. In cost reports, data are presented in brief form but after calculating
everything the actual cost is determine of the product and then they allot selling price .
This report is used in planning and also manages product income too.
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 Budget report : This report help in small business. Budget report help to see the
performance of the employee and also provide incentives too for complete the financial
goals of the company as they convert bonus form into their incentives (Jermias, 2017) . If
the budget is not fulfil or it may be overcome then company has to adjust it according the
allotted budget. Company's estimated budget is based on prior budget as if the budget is
overcome then owners and managers has to find different cost to trim it and may
increased the level of budget.
 Performance Report : This report help to see the performance of every employee and
when the new budget is determined, there is need to change or alter in previous data,and
the entire data are listed on performance report. Performance report is calculated by Zylla
company too and make them monthly, quarterly and yearly based on what is the strength
of the company. This report also help to warn the directors to meet the upcoming future
goals.
 Inventory and manufacturing reports : This report maintain the stock of every item as
it checks the in and out of product and this also shows the shortage of item too. For
running a business must follow the inventory format because this is the only method by
which once can determine the availability and shortage of the item (Mättö, T. and et.al.,
2017). By maintaing the stock, managers can also determine which product is used in
daily basis and consumption of this product is more than others.
P3 Calculation of absorption and marginal costing and preparation of respective income
statements
Marginal costing : for making one extra unit of product this term is used. And in other
word we can say that the increase and decrease in total cost of production used to made one more
extra unit is known as Marginal costing. This costing is the sum of all the material, labor,
expenses and the overhead.
Absorption costing : this is used while creating the inventory and is defined as the sum of
all the cost incurred during the production process and dividing them in individual product. It is
a managerial accounting . it is consider and dealing with both variable expenses and fixed
expenses.
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Form above income statement chart it is concluded that absorption costing consider both
fixed and variable expenses while calculating manufacturing cost so it is more beneficial than
marginal cost.
P4 Different types of planning tools in the business and stating merits and demerits
Zylla company used many tools in order to help in management accounting, some of
them are discussed below:
 Zero based Budgeting (ZBB) : In this type of budgeting, accounting starts from zero
based. It justify all the expenses occur during the manufacturing of the product and re
evaluate the statements too. Under this method, cost will be determine, revenue will be
explain according to generation of the company.
As ZBB has also its plus point such as the accuracy of ZBB is so fast and it gives a clear cut
image of cost from the desired one (Cooper, , Ezzamel, and 2017). It help in motivating the
employees and help them to make in decision power as the coordination and communication
should be good among them. On the other hand ZBB has some negative points too like it is quite
time consuming and in this present era, time is the most precious thing then ever. As it need too
much entry to do and this consumer our almost time. When installing ZBB in the company this
need large employees to operate it and department have not enough time and enough employees
to do so. Another drawback is it need experts to start the system and this is quite difficult task to
do so because there is lack of experts.
Activity Based Costing : this tool help to see the actual performance of the business, as
Zylla Company also used this method to determine the position in context with financial as well
as management. It deals with both short term and long term variable cost.
Most important advantages of ABC is it provide exact cost the product and help in determine the
actual cost of the product. It also identify the actual nature and behaviour of the cost which help
in reducing the cost. It also help in making better decision. As it also have some plus point like
ABC help in making the cost in reducible form and help in providing the various information
related to product. As it help in managing the cost and whole work is based on the basis of the
departmental’s activity so that the mangers can easily see the quality of work done by the
management (Cooper, , Ezzamel, and Qu, 2017). ABC focus on value added services and
eliminates non value added activities. While managing the product it needs more extra expenses
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like advertising though it is non manufacturing expenses but it is also count in ABC as it help in
controlling the cost. It also check which activity is helpful and also eliminate those activity
which is going to harm.
On the other hand, it also have some negative point like it is not useful for small
organization but Zylla is a big firm so it is used in this company. This activity is not used when
the overheads of the company are less in amount then there is no use of ABC. If the company is
producing only single product then it is not useful for those companies. The statement are not
made monthly during the use of activity based costing.
P5 Discussing how organisation is adapting management accounting system to effectively
respond to financial problems
Organization use different ways to adapt the management accounting in response to financial
problem which are mention below:
Benchmarking : it is accounting tool which help in comparing two different organization with
their best performances. It help in making good decision power and help in comparing
performance on the basis of their activity. On comparing the activity, firm can get to know
which organization is performing well and who is going to achieve the targets.
Benchmarking evaluate the performance on the basis of some indicators and they are :
measurement of cost per unit, measurement of product per unit and measurement of cycle
per x unit.it is used to know all type of information. Benchmarking is used to handle such
different types of complex issue and help in reducing the cost and controlling the cost also.
the primary advantage of using Benchmarking is that it help in analysing the performance of
the business (Otley, 2016). It identifies which part of the activity is helpful in business
organization and also state the difference between estimated cost and actual cost of the
product.its more focus on change occurs during the process and also provide new ideas to
take better decision in choosing the product.
On the other hand, it also have some drawbacks like it only help in operating areas as it does
not help in overall area of the product. It is fulled with complexity as the whole process is
quite rigid that no one can remember it in his whole life, that is why many businessman
ignore the use of Benchmarking. Some of them use only benchmarking as it is not used
alone while doing any kind of activity work because it is not helpful in measuring all kind of
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parameters. As benchmarking is used in continuous improvement for the business firm but
still many ignore it o run the business in more innovative form.
Balance scorecard: In UK almost 50% of the business firm use Balance Scorecard as it proves
a beneficial strategy while doing business. It is a process of planning and management
system of the organization which help to communicate with each others. It also measure,
and analyze the strategy used in a business to grow more in the competitive field. It also
measure the performance of all the activity done by the staff and tries to improve it while
having some issue. It also present performance report of all the department of the business.
Almost all the big firm use Balance Score Card method to show the level of business
performance (Latan, and et. al., 2018). It is just used to calculate the extra incentive given by
the firm to the employees while doing extra work to achieve the goals. Balance Scorecard
has its own control while monitoring the activity done by the employees and also remove
any obstacle created by the employees in order to save the goodwill of the firm.
Balance Score card has many advantages like it always help in communication and provide them
easy learning for growth. By setting objective, and measuring all the performance of the
activity it help in balancing for judging. The strategy of the organization is clear and cut and
vision is also transparent then it is going to help in different parts of the activity as it never
deviates from its fundamental duties. On the other hand, it also have some limitation like it
only focus on four perspective but there are other important perspective like managerial
management, social forms but it does not focus on that. For controlling the business growth,
it is not setting standard goals and keys but only focus on those fours perspective.
Key Performance Indicators : It is also used in measuring the performance of the business but
the main focus of this is on finance activity that is why this makes different and unique
from other. As it measure the performance of all the activity whether theyare achieving the
targets or not for better growth of business (Latan, and et. al., 2018). There are two types of
KPI’s, high level KPIs help in measuring all over the activity while Small level KPI’s help
in measuring different different or small department types of activity such as sales and
marketing department. To know the performance of the organization, business always focus
on level of performance and help to increase the level they use KPI.
Key Performance Indicators has some advantages such as to achieve the best result, organization
must follow the planning system and use different parameters to avoid difficulties and by
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using KPI they attain quantifiable result in future. It is quite difficult to put all the
department to work for single goal but by the help of KPI, it convert the complex metrix into
simpler one and understandable form. Information gained through the KPI is a big platform
for future planning (Otley, 2016). On next hand drawbacks of KPI is it focus on competing
task rather then giving best result which enhance the productivity of goods. As it figures
only single and exact term as it provide the exact financial report to the owner which creates
wrong impact.
CONCLUSION
From the above report, it is concluded that management accounting help to know the exact
performance of the business and for Zylla company it is concluded that it uses different types of
indicators just to check the performance of the company and develop keen relationship among
employees to achieve the targets and complete its mission. It is also concluded from above report
that Zylla company uses different types of management accounting report to show and difference
between the actual income as this report help in maximizes the profit and expand its business. It
also show absorption cost is more beneficial than marginal cost as it deals with both cost . this
report also shows different types of tools which help in managing accounting tools. From above
report it is also concluded that there are different key indicators parameters which help to
analysis the performance and growth of the business.
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Online
Management accounting. 2018. Available through: <https://efinancemanagement.com/financial-
accounting/management-accounting>
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