Detailed Management Accounting Report: Oshodi PLC Financial Analysis

This report provides a comprehensive analysis of management accounting practices within Oshodi PLC, a UK-based company manufacturing JOJO fruit juice. It delves into various management accounting systems, including cost accounting, inventory management, price optimization, and job costing, outlining their essential requirements and benefits for effective decision-making. The report further examines different management accounting reports, such as inventory management reports, accounts receivable reports, job costing reports, performance reports, and cost accounting reports, highlighting their significance in organizational processes. Additionally, it explores cost analysis techniques, specifically marginal costing and absorption costing methods, and their application in determining net profit. The report also discusses the advantages and disadvantages of different planning tools used for budgetary control and examines the adoption of management accounting systems to address financial problems, emphasizing the contribution of management accounting to the sustainable success of the organization.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essential requirements of management accounting systems1
P2 Different method of management accounting report........................................................3
M1 benefits of management Accounting systems..................................................................4
D1 Integration of management accounting system and report within organisational process5
TASK 2............................................................................................................................................5
P3 Techniques of cost analysis...............................................................................................5
M2 Applying range of management accounting techniques..................................................7
D2 Interpretation of above data..............................................................................................8
TASK 3............................................................................................................................................8
P4. Advantage and Disadvantage of different planning tools which is used by the organization
for budgetary control..............................................................................................................8
M3 Use of different planning tools and their application for preparing and forecasting budgets
..............................................................................................................................................15
TASK 4..........................................................................................................................................16
P5 Adoption of management accounting systems to respond financial problems ..............16
M4 Contribution of management accounting in sustainable success of the organisation while
responding financial problems.............................................................................................18
D3 Application of planning tools to respond financial issue along with attainment of
sustainable success...............................................................................................................19
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Management accounting is the procedure of gathering, determining and reporting
information regarding the operations and finances of a business (Bartelmus and Seifert, 2018). It
is utilized by the manager for the provision of accounting information to better inform
themselves before deciding matters within their organization. Every type of organisation uses
management accounting to make effective decisions and control business activities in efficient
way. It is also known as managerial accounting and cost accounting that determine the cost of
business to prepare financial reports. This report focuses on Oshodi plc that is UK based
company and manufacturing JOJO fruit juice to keep people healthy without extra preservatives.
The presented report consists of different types of systems and reports of management
accounting that help to conduct the procedure of an organisation. Calculate the net profit of the
company with the help of costing method absorption and marginal costing method. Besides,
apply different planning tools that forecast situation of company for the future and apply a
management accounting system to sort out financial problems of the company.
TASK 1
P1 Management accounting and essential requirements of management accounting systems
Introduction - Management accounting system involves preparing various types of
reports that assist determine the performance data of inner offices. There are discussing different
type of accounting systems such as cost accounting, job costing, inventory management, etc.
These systems applied by the Oshodi plc, which is a production-based organisation and conduct
operations to manufacture JOJO fruit juice. Management accounting systems improve decision
making to get set outcomes. This task defined different types of a management accounting
system and their fundamental requirement (Bennett and James, 2017).
Management accounting – It is a method of creating reports which provide precise
quantitative and financial data that organization’s managers require to make choices on a day to
day basis. It is different from the financial accounting because in management accounting
financial data present in front of internal members while financial accounting present financial
information to internal as well as external members.
Management Accounting systems – The particular system has been developed by the
management accountant to grab the information of real working in the context of various kinds
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of sections of a company. The various types of schemes that the organization's accountant
usually formulates include cost accounting, work costing, price optimization, stock management
systems, etc. The fundamental role that is further performed by organization leadership by
analysing the data collected from the various accounts involves scheduling, organizing,
managing and choice-making (Christ and Burritt, 2017). Different types of advantages gain by
Oshodi's leadership from these schemes are efficient policy-making, cost reduction, greater profit
yield, etc. There are defined fundamental requirement of various types of management
accounting system in the context of Oshodi plc -
Cost accounting system – This system has been applied as accounting method by
Oshodi to discover the amount of total cost of manufacturing after the determination of input
costs of every step that consider into manufacturing procedure. It is utilised by the selected
organisation to calculate the cost to produce JOJO fruit juice. In this manner, firstly accountant
evaluates and record these costs on an individual basis to compare input outcomes with real to
discover the financial performance. It will help company to receive data regarding the
contribution of the fruit juice in the profit generation of company.
Inventory Management system – It is an important system for manufacturing company
that is utilised for track and evaluate the level of stock, sales, purchase, and orders. All detailed
information gathers in detail through accounting system and utilised by Oshodi to the
conceptualization of work order. The essential requirement of this system in the selected
organisation is to gather information on work order, bill of materials and other production
documents process for the preparation of JOJO fruit juice. The different types of methods used
by companies for the calculation of stock such as LIFO, FIFO, and AVCO. The company has
been used the FIFO method to produce juice otherwise raw material goes to wastages and cannot
properly utilise of resources. FIFO method means firstly sell out those products that came first in
company.
Price optimisation System – This system has been utilised by management of Oshodi to
evaluate the behaviour of consumers to set different prices of their products. In the present time,
this system is utilised by company to determine the impact over the sales of JOJO fruit juice due
to increase or decrease of prices (Janin, 2017). It is will help to set an accurate price structure to
fulfil the requirement of customers. The essential requirement of this system set price structure
and get maximum results in deference of sales revenue.
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Job Costing System – It is utilised by the production business that has various
production activities and jobs. Generally, mostly accountants apply this system to know cost and
revenue for particular job. It will further aid in ascertainment of the quantity of profit to achieve
good performance in the job. The management of Oshodi utilised this system for JOJO fruit juice
to find out the cost and revenues in their production.
Conclusion – As per the discussed all accounting system it is concluded that these
systems applied in the organisation procedure and help to develop good relationships between
different sections. Through these systems get detailed information regarding sales, revenues and
improve decision making a purpose to improve profitability (Kaplan, 2017).
P2 Different method of management accounting report
Introduction – Management accounting report is an internal part of every organisation
that presents all detail information regarding different divisions. In the part define the accounting
reports and their importance.
Management accounting Report – The presented reports have been produced by the
management of Oshodi Plc to carry out interaction among the functioning of a section of a
company to grab wanted outcomes. All reports have their own importance that provides help to
gain high productivity as well as profitability.
Inventory Management Report – This report presents information on inventories
regarding production process. The main aim of the report carries out balance between inventory
investment and customer service. Through the report get information about utilisation of
different sources such as raw material regrading to JOJO fruit juice. The advantage of this report
is to easily track the number of materials to arrange stock level as per requirement. Through this
report aware of material and order on-time for more stock to produce goods at the right time in
the Oshodi.
Accounts Receivable Report – The particular report provides information about those
customers who did not pay their due amount on time and are recorded as credit memos. It is
utilised by the selected company to know about their overdue payment customer's information.
Therefore, it analysis that how much time given to client for payment and when they were paid
that time determine and calculate late period in Oshodi (Kranacher and Riley, 2019). This report
is beneficial to find out the fact to develop tighten credit policies and retrieve their due money in
set time.
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Job costing report – It is an accounting report that is utilised by the company to record
or track costs and generate profit for the job. There are including profit and loss to prepare a
statement for the job that helpful for a manager of Oshodi to create effective strategy. It is
beneficial for company because this report selects by a company to recognise the problem and
make sure that will not repeat in the future.
Performance Report - According to this report it consists of information about
employees as well as the organisation. The management of Oshodi develops this report to
determine the performance of their staff members according to the task into different sections
(Lee and Smith, 2018). The benefit of this report is that it enhances the performance of
employees efficiently and provide rewards according to performance. There are comparing
standards to take suitable decisions to improve performance and achieve objectives.
Cost accounting Report – In this report define the raw material, labour, overhead, and
any other cost incurred during production procedure. Through this report collect detail
information of products and know their actual cost. It is produced by the Oshodi to know the cost
of different material that is used in the manufacturing process it can help to set profit for the
company. It is beneficial for the selected business to understand all expenditures that help to
better optimizing the available resource.
Conclusion – It has been concluded that all the mention reports are playing an important
role and become a reason for growth and development for the organisation.
M1 benefits of management Accounting systems
Cost Accounting System:
 According to this system calculate the skill of several processes that will assist to carry
out more improvements. It is applied for fixation and deduction of amount.
Inventory Management System:
 It will help in proper utilisation of resources and reduce wastages. This will apply in the company to maintain accuracy and take right decision on time.
Price Optimisation System:
 This system applied in the selected organisation to set effective price structure for the
customers. It will help Oshodi to generate more income with selection of best prices.
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Job costing System:
 Through this system predict all types of cost to produce of JOJO fruit juice.
 There is deduction of duplication of efforts.
 It is applied to know Actual cost of every product.
D1 Integration of management accounting system and report within organisational process
Different types of management accounting system and reports are produced by the
management of Oshodi plc in order to proper run their business activities. These systems are
applied to analysis that company position such as inventory management determine that
company have or not enough stock for manufacturing process and with the help of get detailed
information how much raw material used in every stage (O'Leary, 2017).
TASK 2
P3 Techniques of cost analysis
Introduction: Cost accounting techniques are utilised as tools that apply by Oshodi to
calculate net profit. Through these costs calculate their profitability with different methods after
that company apply suitable method to ascertain their profit. There are applied marginal costing
and absorption costing method.
Marginal Costing – It is a type of costing system which consist of only variable costs
against the sales revenues. On the other side fixed cost is charged and written off completely
against contribution but only for that certain period of time.
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Absorption costing method – In this method consider all expenses whether fixed or
variable assertion against sales revenues. There are consisting of different types of charges such
as selling & distribution, administration Charges that deduct from the gross profit to calculate net
profit (Penn and Pennix, 2017).
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Conclusion – As per the above content it is getting that from both methods get different
result to calculate net profit. Due to variation of opening and closing stock.
M2 Applying range of management accounting techniques
Capital budgeting It is defined as planning processor where focus on the new machinery,
replacement and new products that launch by company in future. Management accounting
techniques are defined as method that help to calculate the cost as well as profit for develop
financial reporting documents. These documents are produced on the basis of two costing
techniques such as marginal and absorption. These is also defining the range through capital
budgeting (SAFARI and Dehghan, 2017).
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D2 Interpretation of above data
There are applying both methods to prepare income statements it has been interpreted
that there are calculating profit for the month of November and December. After apply marginal
costing method get result of 61000 in November and 101000 in December. Through absorption
costing method get result 79000 in November and 83000 in December. It is recommended that
Oshodi select Marginal costing method to present proper allotment of direct and indirect costs.
TASK 3
P4. Advantage and Disadvantage of different planning tools which is used by the organization
for budgetary control
Introduction: Planning tools are characterised to the important tools or instruments that
are used by organisational members while implementing any initiative in order to control
deviations in operational functions so to attain profits. Management authorities of Oshodi Plc
uses numerous planning tools in order to manufacture fruit juice as well as enhancing
effectiveness in their workings.
Budgetary control: The mechanisms that are used by financial managers of any
company in order to limit the spending as well as setting performance together with financial
objectives with budgets are termed as budgetary control. The control involves procedures related
with monitoring, controlling and comparing actual results together with making adjustments in
performances as per the requirements. Budgetary controls are used by accountants of Oshodi Plc
to monitor revenues together expenses as to ensure payments and receipts of cash. Description of
some of the budgetary control are as follows:
Production Budget: This type of budget involves number of units that are to be
manufactured during financial period. Production managers of the company uses such budget to
derive estimates of fruit juice units that they are required to manufacture in future by estimated
sales number.
 Importance: Production budget is important for Oshodi Plc as it helps in projecting future
demands, production procedures, scheduling work as well as planning workflow so that
products are produced in an appropriate time (Schaltegger Burritt and Petersen, 2017).
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 Advantage: Production budget provides benefits to managers of selected entity in
stabilizing production, controlling raw materials addition to work in progress together
with managing stock of finished goods.
 Disadvantage: Properly preparing production budget takes lot of time as well as requires
efforts which is uneconomical for the company to manage. It reduces profit margin when
there is increase in unit product costs.
Purchase Budget: The budget which involves inventory amount that an organisation
purchases in a budget period is defined to purchase budget. It includes expected material usage
during production along with determining requirements of materials or inventory.
 Importance: Purchase budget is important to plan business costs, controlling expenses
and coordinating activities to make fuller utilisation of available inventory for meeting
objectives at Oshodi Plc.

 Advantage: Purchase budget is a forecasting tool that is used by managers of the
organisation to have more control on inventory levels as well as to confront holding
excessive level of inventory or materials.
 Disadvantage: There are various time when purchase budget fails to provide accurate
results and influences profit margin of Oshodi Plc.
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Sales Budget: It refers to estimating sales of products for future accounting period.
Production management team of the company uses such budget in order to forecasting
production requirements, setting departmental objectives together with making estimates for
earnings. It encompasses items related with organisational sales estimations in terms of dollars as
well as units (Schönsleben, 2018).
 Importance: Sales budget is important for Oshodi Plc as it helps in building core
strategies, establishing particular sales goals, determining overhead costs, evaluating
profitability potentiality together with strengthening cash flow management.
 Advantage: Sales budget benefits managers of Oshodi Plc in business budgeting, setting
growth goals, analysing performance of sales team and expanding the business by
meeting sales objectives. It requires huge planning to enhance future sales.
 Disadvantage: Sales budget fails to forecast future trends as well as requires professional
experts to prepare sales budget which adds additional costs to Oshodi Plc.
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