Management Accounting Report: Costing Methods and Income Statements

This report provides an overview of management accounting and its significance in managerial decision-making. It delves into various costing methods, including direct and indirect costs, and explores absorption and marginal costing techniques. The report presents calculations and examples to illustrate these methods, including the preparation of income statements under both absorption and marginal costing. Furthermore, it highlights the differences between these costing approaches and their impact on financial reporting. The conclusion emphasizes the importance of management accounting systems in generating managerial reports for effective decision-making. References from relevant academic journals are also included to support the analysis and findings presented in the report. This report is a valuable resource for students studying accounting and finance.

MANAGEMENT ACCOUNTING

Introduction
Management accounting (MA) can be identified as a kinds of
accounting that is related to process of preparing internal reports
and needed data is gathered from different sources.
In the presentation, different types of costing methods are
describe which are beneficial in preparing income statement to
determine net profit.

Micro-economic techniques:
Cost- This can be defined as a sum of expenses which occurs in
order to complete different types of operations and activities.
There are various kinds of costs such as direct, indirect cost, labour
cost and many more.
Absorption costing- It is a form of costing technique in that total
amount of occurred cost is absorbed in fully manner to prepare
income statement.

Cost of inventory
Inventory cost- It is a type of cost which is aligned with
procurement, storage and effective management of stock.
Different valuation method:
Last in first out method- It is a technique in that material which
is stored in last in the warehouse is used first for production.
First in first out method- It is a technique in that material which
is stored first in the warehouse is used first for production.

Calculations
Absorption costing
Particulars Amount (per unit)
Direct material cost 400000
Direct labour cost 150000
Production overhead 260000
Total cost 810000
Absorption cost per unit 810000/50000= 16.2

Cont...
Marginal costing
Particulars Amount (per unit)
Direct material cost 8
Direct labour cost 3
Variable cost per unit 6
Marginal cost 17
Total cost (50000*17) 850000

Cont...
Income statement under absorption costing
Particulars Amount
Sales (50000
*30)
1500000
Less: cost of goods sold:
Direct material cost
(50000*8)
40000
0
Direct labour cost 15000
0
Variable manufacturing
cost
10000
0
Fixed manufacturing cost 16000
0
810000
Gross profit 690000
Less- Other fixed cost 60000
Net income 630000

Cont...
Income statement under marginal costing
Particulars Amount
Sales (50000*3
0)
1500000
Less: Variable cost-
Direct material cost (50000*8) 400000
Direct labour cost 150000
Variable manufacturing cost 100000 650000
Contribution 850000
Less: Fixed cost (160000+60000) 220000
Net income 630000

Conclusion
From the above presentation it can be concluded that
management accounting and it systems are used to prepare
various managerial accounts and reports which helps manager
to take efficient decisions.

References
A. Hammad, S., Jusoh, R. and Ghozali, I., 2013. Decentralization,
perceived environmental uncertainty, managerial performance
and management accounting system information in Egyptian
hospitals. International Journal of Accounting and Information
Management, 21(4). pp.314-330.
Abdel-Kader, M. G. ed., 2011. Review of management accounting
research. Springer.

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