Management Accounting Report: Costing, Budgeting and Planning

This management accounting report examines various aspects of financial management for a company named Azio, a manufacturer of gaming and lifestyle accessories. The report delves into the benefits of management accounting, various accounting reporting methods, and the analysis of different accounting systems. It explores costing methods like absorption costing and marginal costing, along with the calculation of costs using distinct tools. The report also covers the application of planning tools in budgetary control, analyzing their advantages and disadvantages. Furthermore, it discusses how to differentiate organizations facing financial issues and respond to those issues using planning techniques. The report highlights the importance of effective financial management for achieving organizational goals and objectives, including inventory management, cost control, and the use of different accounting reports for decision-making and performance evaluation.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1&M1 Management accounting and its benefits..................................................................3
P2 Various methods used for accounting reporting...............................................................5
D1 Analysis of accounting systems........................................................................................6
TASK 2 ...........................................................................................................................................7
P3 and M2 Calculation of cost by using distinct tools ..........................................................7
D2 Critical analysis of accounting techniques.......................................................................9
TASK 3..........................................................................................................................................10
P4 Different planning tools use in budgetary control..........................................................10
M3: Analysis of planning tools............................................................................................12
TASK 4..........................................................................................................................................12
P5 Differentiate various organisation those are facing financial issues ..............................12
M4: To respond to financial issues.......................................................................................13
D3: Analysis of planning techniques ...................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting includes several system which can be adopted by the business
entity so that they can manage all the operational activities and also assist in providing best
services to their consumers so that they can not face any issues. Along with this it aid in
improving the performance of the company as well as employees in the market when business
entity is facing high competition (Baldvinsdottir Mitchell and Nørreklit, 2010). Management
accounting assist in gathering, analysing along with the evaluating the data so that the employees
can do the developments of the business. Moreover, managers of the firm have to make the
proper and appropriate financial reports which helps in attracting the investors to do investments.
The present assignment is focused on Azio which is a manufacturer of keyboards, mice, audio
devices as well as mobile accessories in the style of gaming, vision and colourful lifestyle series.
In the below mentioned report discussion based on cost which is to be calculated by using the
different techniques whether it is absorption costing or marginal costing. Further, discussion on
the distinctive planning tools which assist in doing the control on the budgets and the advantages
and disadvantages of these budgets so that they can attain success.
TASK 1
P1&M1 Management accounting and its benefits
Management accounting refers to the presentation of the distinct accounting data in a
proper manner. so that they can help the administration in the planning of the plan of action as
well as daily transaction in the business. Along with this it is related to the usage of business
data which is assembled with the aid of fiscal as well as cost accounting as it helps in
formulating the policy, planning, control along with the decision making by the management
(Bennett, Schaltegger and Zvezdov, 2013). It is the utilization of the appropriate and relevant
techniques along with the concepts which assist in doing processing to maintain the historical
and projected data of Azio to succour the supervising in making or establishing the plans for the
reasonable economic objectives and rational decisions to attain objectives. Management
accounting having a wide scope which helps in planning and organising all the business activities
so that they can attain the targets. Moreover, it aid in managing the financial accounting which is
a for doing the investigation and reading for providing the significant data to the management. It
also aid in budgeting and forecasting so that they can express the program, plan of action and

goals of the firm for a specified period of time. Along with this it assist in doing the inventory
control as well as statistical method so that the employees of Azio make the information
impressive and it is highly useful for planning and forecasting (Busco and Scapens, 2011).
There are different management accounting system which is the essential requirements of
Azio to accomplish the goals and objectives. They are:
Cost accounting system: It is a system which can be adopt by the business entities to manage the
cost of the product which assist in improving the productivity and performance. There are
various costing system such as normal, standard and actual costing methods which are used by
the company in order to analyse the direct cost in manufacturing process. The main advantage of
this system is measurement and improvement of efficiency and fixation of prices by doing the
profitable and unprofitable activities.
Job costing system: It refers to as job order system which is used by the company in order to
determine the manufacturing costs to an single product or batch of a goods. It is used mainly
when the goods are produced are different from each units or product from that slots (Christ and
Burritt, 2013). The main advantage of this system is that it helps in doing the proper
management. So, that they can determine total cost from the previous Job units.
Inventory management system: It is categories with different stock control devices such as
floating device so that they can do the streamline with the supervising of the inventory or stock.
By doing the proper work they can control the inventory by tracking the two main functions
which includes receiving and shipping. The goal of inventory control and which includes the
inventory levels as well as assist in minimising the under-stock and overstock situations.
Traditional management system: It refers to that system which assist in focusing on the goals
and objectives that are established by the senior level management. This helps in increasing the
sales as well as profit so that shareholders can do the proper investments that provide attainment
of objectives at the marketplace at the time of huge social event (Cinquini and Tenucci, 2010).
They have to do organise all the activities with the effective communication which assist in
maintaining the standards in the market.
Lean accounting system: It is a approach or rules and regulations which assist in running the
business entity which assist in supports the concept of continuous improvement so that a long
term approach as well as long term approach so that they can do the work in a systematic manner
so that they can make the changes according to the process which assist in improving the

efficiency and quality. Along with this it assist the staff members of Azio in attaining the goals
and objectives and the targets in the proper and efficient manner (Contrafatt and Burns, 2013).
P2 Various methods used for accounting reporting
It refers to as managerial as well as cost accounting which assist in differs from the
financial accounting which helps in producing the reports for a internal stakeholders for a
business entity as supposed to the external stakeholders. It helps in attaining the maximum
competitive advantage. The company is using income statements in order to categories revenues
and expenditures that are incurred by the company during the production process which are
accessible to the managers that indicate profit and loss which are earned or generated by the
operations as well as different activities of the firms (Dillard and Roslender, 2011). It includes all
the information in a proper format or report. It is done in order to acquire more benefits in
coming future. Accounting reports are a crucial part which assist in making the pictures in front
of the clients that how the business are performing. It prepares by the manager of the finance
departments. so that they can manage and put control on the different financial resources which
helps in maintaining the standard in the marketplace as well as assist in managing all the
operational activities so that they can accomplish the targets. Management accounting reports
includes the different methods which are adopted by the Azio and they are:
Job cost reports: This report is made by the vendor as well as supplier which helps in
maintaining the list of the job costs which have incurred for the job as well as project and it is
subtotalled by the vendor. This report is helps in showing the detailed list of all the jobs which
are related to the cost which are incurred by vendor and supplier as well as it is subtotalled by the
job (Weißenberger and Angelkort,2011).
Inventory management reports: It is also a type of the management accounting report
which helps in managing the stock which are remained at the end so that the employees of Azio
can do the proper utilisation of the resources. Along with this it can help in calculating the
overall stock that is how much used in doing the project or how much remaining. It aid in
improving the working capital within their supply chain which helps in management. They have
to use the appropriate management strategy so that they can secure the information and maintain
their data and attain success.
Performance reports: A performance report is a report which is based on the performance
of Azio and it is calculated on the basis of operational activities. They have to do analyse the

routine which are introduced by the government bodies which is financed by the public money
and the money which was spent on the them it was on the efficient and effective manner. In this
for improving the performance, employees have to provide the best services in attaining the
targets (Fullerton, Kennedy and Widener, 2014).
Operating budget reports: To maintain this report employees of Azio have to make proper
budget so that they can not face any issues in doing the spending for purchasing the material so
that they can provide best services to the consumers. It helps in assessing by using the different
functions in the small business environments. In this they have to use the different facts and
figures so that they can plan for the expenditure in the future. So, that they can make the track
spending variances through the use of budgets. Along with this it helps in managing all the
information and data so that performance report can be maintained.
Products and service profitability report: The employees of Azio have to do strong
documentation so that they can start with separating the products on the basis of different
situations which includes economy, core as well as growth. They have to use appropriate strategy
so that they can manage all the work and have to develop the action plan to improve or develop
the profitability of the under-performers or plan so that they can achieve in a specified time
frame. This strategy have to do clear documentation, measurable targets and have take the
reviews which helps in improving the products and services. By using the appropriate and
relevant strategies they have to capture the opportunities which are generated in the market and it
having a impact on the profitability of the products (Håkansson, Kraus and Lind eds., 2010). To
attain the success at the time of high competition the employees of Azio have to do the
anticipated changes whether it is inelastic and elasticity of demand.
D1 Analysis of accounting systems
From the above discussed various accounting systems company's can plan their business
operation in most appropriate manner (Herbert and Seal, 2012). Some of the various tools which
are used under reporting methods are inventory reporting and Job costing reporting. Along with
this they have to utilise the data so that they can do make and buy analysis so that they can attain
the success.

TASK 2
P3 and M2 Calculation of cost by using distinct tools
Absorption costing is refers to that costing in which every cost that are associated with
production process are accumulated and then apportioned to the products individually. In
Absorption costing any cost that is considered as direct cost in producing a good is being
included. There are so many direct cost which are directly associated with the production process
include the raw material, the overhead costs, and all other utility expenses incurred in producing
the product (Hiebl, 2014). Due to this absorption costing is also known as full absorption costing
method or can also be called as full costing.
Income statement as per Absorption costing
Selling price
Unit costs
Direct materials
Direct Labour
Variable Production overhead
Variable sales overhead
Budgeted production for the period is 600 units
£35
£6
£5
£2
£1
Fixed costs for the month are given below
Budgeted cost Actual cost
Production overhead £1,800 £2,000
Administration cost £800 £700
Selling cost £400 £600
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Inventory at the beginning 0
21000

Production
Inventory at the end
(Under)/ Over absorbed fixed prod. O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
Fixed selling expenditure
Net Profit
13300
(1900)
1800
700
600
(11400)
200
9800
(3100)
6700
Marginal costing: Whenever there is an increase in production by one unit then some change in
opportunity cost arises, that change in opportunity cost is known as marginal costing. In simple
words it can be said, that costing which is used by the company in order to produce one
additional unit of production with the same amount of cost (Ward, 2012). Whenever the break
even point is achieved i.e. all the fixed costs have been absorbed and accounting of only variable
costs or direct cost is required to be done then in that situation marginal costing is required to be
used.
Income statement as per marginal costing
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
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
Net profit using marginal costing £ £

Sales
Less Variable costs
Inventory at the beginning
Production
Inventory at the end
Variable sales
Contribution
Less Fixed costs
Fixed Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9800
(1400)
2000
700
600
21000
(8400)
(1800)
10800
3300
7500
ABSORPTION COSTING MARGINAL COSTING
In absorption costing all the cost in relation to
production of a product whether it is fixed cost
or the variable cost all will be included
(Setthasakko, 2010).
In marginal costing only the variable costs in
relation to production of a product are
included.
In this type of costing the overheads are
classified in three broad categories that are
administration, selling and distribution and
production overheads.
In this there are only two broad categories in
which overheads are classified that are fixed
overheads and variable overheads (Lee,
2011).
Here per unit cost will be increased or
decreased on the basis of variances that arise
between the stock in the beginning and at the
end.
In this there will be no effect of variances
between the opening and closing stock on the
calculation of per unit cost.
Measurement of profit is done by using gross
margin in which all the applied overheads are
included in case of absorption costing i.e. net
In case of marginal costing profits are
measured by using the contribution margin in
which the applied overheads are to be

profit will show the profits made (Jansen,
2011).
excluded i.e. profits can be ascertained using
profit volume ratio.
D2 Critical analysis of accounting techniques
According to the profit and loss statements, it ha been observed that company have both
the option which they can used in order to get appropriated Net profit. As absorption costing and
marginal costing which are helpful in calculating net profit for the cited company. From either
of the methods results are difference.(Kaplan and Atkinson, 2015). After analysis of the costing
method the results are clear that absorption costing is the most appropriate method which a
company can use in their operations.
TASK 3
P4 Different planning tools use in budgetary control
Planning is very important for any organization. A framework is being provided by it for
taking various decisions by establishing goals, objectives and strategies. For the achievement of
both short and long run goals of ajio planning is very essential. Budgets are the financial plans
made which shows how resources will be acquired used in all operations (Van Helden and et. al.,
2010). A detailed description is being provided of what is to be done by managers in a short
period of time. They will be of great help in managing the spendings of the company and in also
managing the funds available. Planning and analysing budget together will be very beneficial in
identifying the waste expenditure and hence taking measures to control them and will also help
in adapting to the financial changes quickly and thereby achieving the goals in relation to
finance.
Planning tools that Azio can use in budgets
Cash budget:- It is a financial budget which is being prepared for the calculation of
budgeted cash flows of a cited company during a financial year. It is useful in identifying
whether any surplus cash is lying idle or there is any shortage of cash which can be expected
during the particular period of time (Luft and Shields, 2010). By obtaining all of this information
managers will be able to make their plans according to this information. There are many
advantages and disadvantages of cash budget also. The major advantages are that it will help in
identifying whether the available cash is sufficient in meeting the regular obligations and also to
maintain minimum level of cash balance and liquidity requirements. And is also helpful in

knowing whether large amount of cash has been retained which could otherwise be used in other
productive works. Along with the advantages there are many disadvantages also of using cash
budgets which include that they are very susceptible to manipulations and can be misleading
(Lukka and Modell, 2010). Other major disadvantage is that it is based on estimates and on the
basis of budget management decides to use funds for various projects and then it is very difficult
to reallocate those funds in case of any change in circumstances. Below is given an example of
cash budget.
Cost plus pricing:- Under this method, price of a particular product is determined. The
different cost which are used under this process such as direct material, direct labour and the
overhead cost for that relevant product that are to be added together and then a fixed percentage
i.e. markup percentage is also required to be added to the cost which are ascertain with the final
goods (Macintosh and Quattrone, 2010). There are various advantages and disadvantages of cost
plus pricing. The major advantages are that it is a very simple and a easy way to determine the
price of a product. As in this chances of incurring any losses are almost nil so the contractors are
always willing to accept this approach of price determination while entering into a contractual
agreement with its customers. After advantages the major disadvantages of it are that this
approach neglects the competition as company fixes its products price on basis of cost plus
formula and then afterwards find that other are charging different prices for the same products.

Another major disadvantage is that it ignores the replacement costs as this is completely based
on historical cost concept (Nandan, 2010).
Target cost pricing:- target cost pricing is an approach in which company determines
the products total cost along with the profit margins in advance i.e. it sets the total cost to the
maximum level which can be incurred and then also the required profit is to be earned by selling
the product at a particular selling price (Pipan and Czarniawska, 2010).
Market led pricing:- market led pricing is an approach in which the price is determined
on the basis of the price prevailing in the market of the similar type of products. Due to this
feature it is also known as competition based strategy (van der Meer-Kooistra and Vosselman,
2012).
M3: Analysis of planning tools
In the cited company, there are various tools which are used under the the planning of
budgets. Planning can make clear all those critical aspects which are making huge impact on the
profitability of the company. The budgets are prepared in order to overcome the extra costs and
to increase the productivity. The main objectives of these tools is to reduce the financial issues
and achieve their desire objectives.
TASK 4
P5 Differentiate various organisation those are facing financial issues
Supervising system of rules as well as its different tools and techniques which are useful
in answering the several financial and non-financial obstacles. It provides a base for the business
entity to attain the sustainable success by utilising the appropriate and available resources so that
they can attain long term success as well as they can use for the future (Quinn, 2011). Along with
this it assist in improving the efficiency in the sustainable so that they can not face any issues in
the economy. While doing the work and providing the best services then the employees of Azio
may face issues. So, many problems are found in an organisation so they want to handle the
problems with there own working style but company like AZIO follow some general tools and
techniques for solving financial problems-
Key performance indicator- Problems like product and service quality is basic problem
for every company so company try to solve it very strictly. problem occur when company did
not maintain the service quality gaps these gaps are explain the communication between the

customer and company so company use KPI for solve it properly (Talha, Raja and Seetharaman,
2010). In this the company follow its goal and try to set performance according to goals and
standards of the company in this an KPI metric is used for set the performance indicator.
Budgetary targetting: Budget means advance financial planning for the company and
budget target means work for achieve the amount of budget used in budgeting planing. In end of
year company realise that budget is not only tool of planning the financial goal. They decide to
planning for controlling and decision making. Budgetary target means to planning to achieve the
sales and financial target for the company as well (Renz, 2016).
Benchmarking : It is an identification of every company benchmarking of an company
is made by the quality and improvement abilities maintain by the company. Every company
have own benchmarking and customer have different mind set of different company according to
there benchmarking. So its important to give better service and provide good quality product to
the customer (Why lean accounting?. 2017).
Financial governance: The employees of the company have to use proper laws and
regulations so that, financial issues should be identified and overcomes all those issues before
implementing it into the business. Along with this to manage all the financial information they
have to use the policies which are introduced by the regulatory bodies which helps in attaining
the success.
Another company is Unicorn Grocery and that business entity is also using these
techniques to manage the data or maintain the records so that they can not face any obstacles in
completing the work. These technique is used to specify the total amount required to be invest in
a project by the organisation (Cost Volume Profit Analysis, 2013). The most of the company
objectives is to plan their resources in the most appropriate manner in order to get most of it. In
that context, various techniques can be used by the company to manage there operations and plan
regarding control of extra cost which are incurred on the product development.
These techniques helps in resolving the problems which they are facing and according to
that they can improve the profitability along with the productivity level (Shah, Malikand Malik,
2011). Moreover, they have to provide the best services with the quality and deliver those
services in a specified time period which assist in expanding the growth level in the marketplace
and attain maximum revenue as well. They have to use proper and relevant resources so that they
can improve the liquidity levels of the cited company (Vaivio and Sirén, 2010).

M4: To respond to financial issues
After analysis of various financial issues in the above, it is clear that which accounting
techniques can be more effective in order to solve financial problems. Company have key
performance indicators, benchmarking techniques which are more effective in order to resolve
financial issues. From these two tools, company can manage its performances and set a
appropriate range in front of other competitors. So that, company would enhance its profitability.
D3: Analysis of planning techniques
In order to make business more effective a manager need to take various crucial decision
which are necessary for the development of that particular company. So first of all various
factors which are affecting the profitability of the business are to be identified (Sánchez-
Rodríguez and Spraakman, 2012). In relation to planning tools a managers must analyse the
impact of accounting systems whether they are appropriate to provide positive outcome for the
company in future. Different problems that an organisation faces should be find out and
overcome all those by applying valuable techniques on it.
CONCLUSION
From the above report, it has been analysed that the managers of the company have to use
the relevant tools and techniques by which investors can make the judgement and on the basis of
the investment and on the basis of that they can find the net profit as well as distinctive
techniques can be used by them. The staff members of Azio have to present their financial
statement in a appropriate way so that investors can not face any type of issues. Along with this
they have to use appropriate planning tools so that they can control on their budgets which assist
in accomplishing the aims and objectives. Overall, project report explains effective use of
management accounting system in order to take positive decision regarding growth of the
concern business.

REFERENCES