Management Accounting Report: Strategies for Tech (UK) Business Growth

This report delves into the application of management accounting principles within Tech (UK). It begins with an introduction to management accounting, differentiating it from financial accounting and highlighting its significance as a decision-making tool. The report then explores various cost accounting systems, including actual, normal, and standard costing, along with inventory and job costing systems. A key focus is on presenting financial information through reports such as job cost, inventory, and budget reports. The report further analyzes the calculation of net profit using both marginal and absorption costing methods. The report also covers budgeting, its different types, and its importance for planning and control. Lastly, it examines the balance scorecard approach for responding to financial problems. The analysis emphasizes the use of management accounting tools and techniques to enhance business operations, maximize profitability, and achieve strategic goals.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
A). Meaning of the management accounting and its types:........................................................1
B). Presenting financial information: .........................................................................................4
TASK 2............................................................................................................................................5
A & B). Calculate the net profit under the marginal and absorption costing:............................5
M2...............................................................................................................................................8
D2................................................................................................................................................8
TASK 3............................................................................................................................................8
A). Budget and its types..............................................................................................................8
B). Different types of costing systems which are used for preparation of budgets:.................10
C). The importance of budget as tool for planning and control purposes:................................11
M3.............................................................................................................................................11
D3..............................................................................................................................................11
TASK 4..........................................................................................................................................11
Balance Score card approach for responding financial problems and compare:......................11
M4.............................................................................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is the main process which can be used by the organisation in
order to gain the sustainable development in an effective manner. there are so many tools which
can be used by the organisation in order gain the sustainable development effectively. Although,
this can be rightly said that the management accountant uses various kinds of accounting systems
which can further used by the Tech (UK) organisation for attaining their business objectives in
an effective manner. Net profit by using costing method such as net absorption costing and
marginal costing method. On the other hand, this is rightly said that the management accountant
need to explain their business objectives in an effective manner. Various planning tools for
budgetary tools. Financial tools are used by tech UK in order to overcome the financial problems
in an effective strategy in an effective manner (Vinayagamoorthi and et. al., 2012). Tech (UK)
company would gain an effective and efficient information that could lead to make sustainability
in an effective manner. However, management accountant would use various tools that can be
used by the organisation in an effective manner.
TASK 1
A). Meaning of the management accounting and its types:
Management Accounting reflects of accounting information of an organisation in this
way assist the management for formulating the policy and regular work of the organisation in an
effective way. This has been concerned that the accounting information which is formulating to
the management of the cited organisation. This is rightly said that the accounting information
which is crucial to the management of the cited organisation. It is concerned with the accounting
information that is essential to the management of the company (Macinati and Anessi-Pessina,
2014). It means that all the accounting information are not presented to management but only
that information is collected, analysed and interpreted which is useful in operating the business.
1. Financial accounting vs. Management accounting
Basis of difference Financial Accounting Management Accounting
Purpose Financial accounting purpose
is to communicate the
financial position of the
company to external.
Management accounting
purpose for decision making
for the internal so that the
1

financial position is become
strong.
Requirement Mandatory Optional
Primary audience In financial accounting the
users are the external who
uses the financial information
to take the decision on the
investment in the company.
Management accounting the
users are the internal who
makes the decisions, policies,
etc. and uses in internally to
achieve the targets.
Frequency Financial statements in the
financial accounting are
prepared at the end of the
month.
Management accounting the
statements are prepared at
regular intervals.
Focus Financial accounting focuses
on the past data.
Management accounting
focuses on the information to
aid decisions for the future
achievements.
2.Importance of management accounting information as a decision making tool:
The present rigid industrial world, the management accounting has become an essential
part of management. The management accountant guides and advises to the management at
every step. Management accounting not only improves the efficiency of the management but also
maximize the efficiency of the workers of the company.
1. It determines the aim for the company and also tries to find out the route through which it can
reach to the goal.
2. Helps in the preparation of plans to the departments so that these plans satisfy the needs of
the consumers. Before taking any plan the manager must study and investigate the present
and future scenario for the business (Amoako, 2013).
2

3. Provides better services to customers by providing quality product and services to them. The
customers are supplied goods and goods quality at affordable price.
4. Maximum profits can be obtained by using the management accounting system. In this
process every possible effort is made to make control on the unnecessary expenses.
3. Cost accounting system: (ACTUAL, NORMAL an d Standard Costing):
This system gives useful information about the management and financial accounting to
the manager of the company. The cost accounting system helps out the managers to find out the
cost of the units which they are produced in the manufacturing process (Management
Accounting, 2017). This system controls the operation expenses and helps to generate the
operational profits for the business concern. This system helps the manager to take the decisions
regarding the cost for the future product which they want to produce.
By using the actual, normal, and standard costing in the product costing are:
ACTUAL COSTING NORMAL COSTING STANADRD COSTING
1. The cost of the
product is
determined by the
actual direct
material, direct
labor, and
employed
overhead by using
the actual overhead
rates.
2. The cost of product
is determined by
the actual direct
material, direct
labor, and
employed overhead
by using the
predetermined
overhead rates.
3. The cost of the
product is
determined by the
standard direct
material, direct
labor, and
employed overhead
by using the
predetermined
overhead rates.
3

Actual variable
indirect rates x
Actual quantity of
cost- allocation
bases used
Budgeted variable indirect
rates x Actual quantity of
cost allocation bases used
Standard variable indirect
rates x Standard quantity
of cost allocation bases
allowed for output for
actual output achieved.
4. Inventory Management System: The inventory management systems keep track the resources
which is used in the manufacturing the product in the business activities. This system
monitoring the stock levels, orders, deliveries and sales of the product. TECH (UK) LTD.
integrated with this system to smooth functioning of their stock in whole system. This system
shows the over stock and under stock to the manager of the company so that deficiency or
outdated stock problem does not arise in the production process.
5. Job costing systems: A job costing system provides the information relating to the job
which is gathers from the various useful sources within the organization. This
information used by the customer to make the order to the company regarding the
particular product which they want to manufactured. In this information the price,
quantity and material are used is the previous particular job is shown to the customer so
that they accordingly tailored the product and price of the job (Lim, 2011). This system
used by the cited company to keep monitoring on the identical or specific job order and
related expenses.
B). Presenting financial information:
The various different types of reports which helps the management of the company by providing
them the essential and useful financial information to them which is described below:
1. Job cost report: This report shows the various list to the management regarding the each
specific job to the user of this report. In this report all the previous and present
transactions are recorded in most effective manner so that the management tracks
unnecessary costs and reduce on the spot.
2. Inventory report: In this statement the items relating goods produced and other raw
materials are track down in this report. A quality inventory or stock should be precise in
clear and simple. By utilizing this report, the management rectifies the flow of inventory
4

in the whole system of the company. The monitor and eliminate the unnecessary
wastages in the storehouse of the company.
3. Budget report: It is utilized inside the company by the management to do comparison in
between the estimated and actual performance by the various divisions or departments
and note down in the budget report for future use. The report shows the entire past budget
in which all the success and failure are prescribed in the appropriate manner.
4. Importance of using above accounting reports systems:
By utilizing the above reporting system in the company makes the business
operations flows effectively and efficiently. These reports contain all the useful
information which the manager wants to make the effectively useful strategies for the
company. All the reports have their own advantage and they give appropriate information
to the user of the report. All the failure and success of the business operations are
recorded in this report.
M1:
By applying the management accounting system tools and techniques helps TECH (UK)
LTD. to run their business functions effectively and efficiently together achieving the goals and
objectives. Management accounting system gives an idea and useful methods to make the
strategies and objectives to the company (van Helden and Uddin, 2016). Under this, management
of the company uses the Job, inventory and costing system to generate the more profits, reduce
the unwanted cost and avoid the unnecessary wastages in whole management system of the
company.
D1:
The management accounting system assists TECH (UK) LTD. to prepare the useful and
informational full management accounting reports for them in order to make success of the
business operations. With this reporting the manager of TECH (UK) LTD. makes decisions so
that they could achieve predefined objectives. This is the most appropriate procedure used by the
company for the level functioning in the business operations. Hence, both the management
accounting reporting and system is necessary or important to integrate with each other so that the
company attain their pre- set objectives and goals.
5

TASK 2
A & B). Calculate the net profit under the marginal and absorption costing:
Income statement on the basis of Marginal costing method:
6
Working 1: Calculate variable production cost £
Direct material cost 8
Direct labour cost 5
Variable production Overhead 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production Closing
inventory
Nil 2000*15 = 30000 500*15 =

Income statement on the basis of Marginal costing method:
Income statement on the basis of Absorption costing method:
Selling Price per unit ￡35
Unit costs
Direct materials cost ￡8
Direct Labour cost ￡5
Variable manufacturing overhead ￡2
Total variable production cost ￡15
Fixed production overhead
Fixed production overhead incurred actually
Fixed selling & distribution expenses
Variable selling & distribution expenses
Sales
￡ 5
￡15,000
￡10,000
15% of sales value
2,000 units
7
Net profit using marginal costing ￡Amount £ Amount
Sales value
Less: Variable costs
Stock at the beginning
Cost of production
Stock at the closing
Variable sales overheads
Contribution
Less: Fixed costs:
Fixed Production overheads
Fixed Selling overheads
NIL
30000
(7500)
15000
10000
52500
22500
(7875)
22125
(25000)
Net loss -2875

Absorption costing working notes
Working Note 1: Calculate full production cost
Direct material ￡8
Direct labour ￡5
Variable cost ￡2
Fixed cost ￡5
Total ￡20
Working Note 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2,000*20 = £40,000 500*20 = £10,000
Working Note 3: under/ over absorbed fixed production overhead
Actual fixed production: ￡15000
Fixed overhead: ￡10000
Total £ 5000 (under absorbed)
Net profit using absorption costing Amount ￡ Amount ￡
Sales value
Less: Cost of Sales:
Opening stock
Cost of production
Closing stock
(Under)/Over absorbed fixed production overhead
Gross Profit
Less: Selling Expenses
Variable sales expenditure
Fixed selling expenditure
NIL
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875
8

Net loss -375
M2
In the above case, the company is applied the important management accounting tools and
techniques to maximize the profitability of the business operation which they are conducted. This
technique helps the TECH (UK) LTD. to full concentrate on their business and makes the
effective strategies for the upcoming projects. By using above two methods of the cost
management system, the company increases their profits and product sales in the market. These
techniques of management accounting assist all departments to prepare the effective goals and
targets for the company and for them.
D2
By using the cost management method in the company, the net profits which are arise in
different way because both the methods have different procedure to give the profits outcome to
the company. In the marginal costing method, the company faces the loss of (£) 2,875 and in the
absorption costing the loss of (£) 375 is faced by the business. So, it is beneficial to the company
to adopt the method of absorption costing because the loss is less than the marginal costing.
TASK 3
A). Budget and its types
Budget is the important source of planning which assist the company to maintain the
financial position in the market (Gates, Nicolas and Walker, 2012). It includes the preparing and
applying the budgets so that the company utilized its resources in the proper way so that they
achieved their targets on the predefined time. The budget reflects the estimated amounts which
are just opposite to the old financial data of the company’s performance. The differences or
variances from the budgets are get from the performance of the departments and business
operations which should be frequently identified by manager by doing effective monitoring and
also find out the reasons behind such deviations which should not occurs on the future.
Some different useful budgets are mentioned as under:
Sales Budget: This budget involves the estimated sales volume and selling expenses.
The sales volume budget is derived from the company’s sales forecast and selling expenses
9

budget consists of sales and administration expenses. It gives detailed break-down of estimates
of sales revenue and selling expenditure to the manager of the company.
Advantages: -
- It is helpful to estimate the future sales to the business.
- It is useful to the manager of the company to forecast sales and selling expenses to the
particular product which they want to sale in the future.
Disadvantages: -
- This budget does not always forecast the accurate future events which occurred any
time.
- It uses so much time to prepare and does not simply adopted by the all members of
the company.
Production budget: After the sales budget is completed, the company can prepare the
production budget. This budget is based on the expected level of sales, changing levels of
inventory and also includes the decisions about outsourcing production, if the company will
purchases finished products or parts from an external supplier (Hiebl and et. al., 2015).
Advantages: -
- Resources, machinery, and labor hours can be used to the maximum extent.
- This budget uniforms the production process without any interruptions.
Disadvantages: -
- It increases the cost of the product if the resources are not effectively utilized and
there are wastage in the production.
- When the production process cannot attain its targets, it unbalances whole the process
of the production.
10