Management Accounting Project: UCK Group Financial Analysis

This report provides a comprehensive analysis of management accounting principles, focusing on the financial performance of the UCK group. It begins with an introduction to management accounting and its role in effective business operations. The report then delves into diverse costing methods, including historical, absorption, and marginal costing, and their application in income statement preparation. A comparative analysis of marginal and absorption costing is presented, highlighting their respective advantages and disadvantages. The report further explores budgetary control, outlining the merits and demerits of planning tools like forecasting, scenario analysis, and contingency planning. High-low method forecasting is applied to estimate variable costs for specific months, followed by a cash flow estimation. Finally, the report examines the adoption of various accounting systems to determine financial problems, including the use of financial ratios such as ROCE and operating profit margin, to assess the financial health of UCK woodworks and UCK furnitures.

MANAGEMENT
ACCOUNTING
PROJECT - 2

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Diverse cost and tools use while implementing income statements:....................................1
1.2: Different range of management accounting techniques:......................................................3
1.3 Interpretation of both costing methods used to assess net profits:........................................3
TASK 2............................................................................................................................................4
2.1: Merits and demerits of implementing planning tools implemented in the budgetary
control:........................................................................................................................................4
2.2 High and low method forecasting needed for July and August:...........................................5
2.3: Cash flow estimation............................................................................................................5
TASK 3............................................................................................................................................6
3.1: Adoption of various accounting system in order to determine financial problems:............6
3.2: Making analysis to overcome financial issues:....................................................................7
CONCLUSION................................................................................................................................7

INTRODUCTION
Management accounting is the tool which is used by the company's management
accountant who are keen to make the operations in an effective manner. However, this is the best
part via which the company can make an effective efforts. Here, various tools are used by the
management accountant for gaining the decisions in order to gain an effective strategy. Various
strategies are used by the organisation for gaining sustainability (Zang, 2011). By taking help of
management accounting tools, manager are not only required to record cost of transaction but all
those influence and direction which is mostly affect on the business activities.
In this report, there is a short discussion about diverse costing methods that were helpful
in assessing total profits for UCK group of the organisation. In addition to this, this report is
totally delivered vast information related to the financial constraints and their respective
measures in order to overcome them henceforth, effective results can be identified.
TASK 1
1.1 Diverse cost and tools use while implementing income statements:
In each producing business, they required to handle their work in higher and in an
efficient manner for gaining desired outcomes. This is an efficient recording of each costs that
which is covered in a organisation so that they could be used in order to form valuable changes
in the operational department of a company. Cost is a kind of value of amount through which
manager can gather something. These are those costs that are directly or indirectly linked up with
the manufacturing process. Cost accounting is a kind of recording, classifying and assessing and
diverse alternative course of action for gaining control on a entire costs.
This is an accounting tools which would render aims for gathering an organisation's
entire costs of production via evaluating input costs of each of the process for producing sectors.
This is implemented to calculate and assess total costs that is linked with the manufacturing
projects. This is implemented to calculate and assess total costs which is going to the linked with
the manufacturing of goods. Henceforth, higher reliability outcomes will be produced for more
quick time (Setthasakko, 2010). There are diverse kinds of costs that would be charged at the
time of production process like direct, indirect, fixed and operating costs. Apart from that, there
are few other costs which are likewise implemented at the process. Some of them are discussed
as under:
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Historical costs: This is the costs which are associated to the historical facts and figure.
This simply refers to the most effective value measuring process which is usable in accounting
under which the price of an assets on the balance sheet. This is normally relied upon its nominal
or genuine costs which is required to be achieved at the time of total manufacturing process. This
is the fixed measurement units assumptions.
Absorption costing: This is required to be known as the costs which is incurred on an
entire production of the services. Under this, all the costs which are related to the cost of
production considered. Fixed and variable costs are considered to be known as directly forming
impacts in the performance if a company. As entire costs are to be known as the identifying as
entire costing. Products costs is more than the costs which is known measure according to the
variable costing.
Marginal costing: This simply means to those costs which includes with an extra
manufacturing of products and services. This simply means to be the considered only variable
costs and fixed costs are ignored while calculating contribution. This kinds of costs are required
to be known as the period costs. The entire costs is much lower than those calculated as per the
absorption costs. Valuation of closing stock is lowering in marginal costing as compare to
absorption. This is highly reliable for intention of forming an effective decisions (Salehi,
Rostami and Mogadam, 2010).
Computing Net gain by preparing incomes statements though using marginal costing
PARTICULARS January February
Sales (35 per unit) 315000 402500
less:
Cost of Production (12+8+5) 275000 237500
variable selling overheads (1 per unit) 11000 9500
variable cost 286000 247000
Contribution 29000 155500
less:
fixed manufacturing overheads 20000 20000
Fixed Admin & selling cost 2000 2000
total fixed costs 22000 22000
NET INCOME AS PER MARGINAL COST 7000 133500
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NET INCOME AS PER ABSORPTION
COSTING: January February
Sales (35per units) 315000 402500
less:
Cost of Production (12+8+5+1.82) 295020 254790
Gross Profit 19980 147710
LESS:
Fixed and variable cost:
variable sales overheads (1 per unit) 9000 11500
Fixed selling cost 2000 2000
Total costs 11000 13500
NET INCOME AS PER ABSORPTION
COSTING: 8980 134210
1.2: Different range of management accounting techniques:
This is required to be known as the each business organisation, this can be said that
financial transaction is required to be done in highly systematic manner (Bromwich and
Bhimani, 2005). Management accounting is the one of the important aspects for UCK group of
organisation to assess their data by implementing valuable outcomes produced at the time. In
addition to this, this is mostly difficult in order to form assess nature of accounting tools.
Standard costing is implementing in highly operating situation and form comparison of actual
along with the budgeted outcomes. Budgetary control tools is the other crucial tools which is
helpful in analysing diverse activities of UCK business.
1.3 Interpretation of both costing methods used to assess net profits:
From the above mentioned calculation, this can be done that both marginal and
absorption costing, this can be found that the results are incorporated and these are different from
each other. The net profits addition from implementing marginal costing is 7000 for January and
133500 for February months. Whereas, by taking help of absorption costing would be 8980 and
134210 for similar months.
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 Advantages of marginal costing: This is required to be one of the most important
costing method which would assist for assessing total profits for the year. This is known
as the best suitable method for future decision making. The main part of costing is that
both variable and fixed costs are considered for making into consideration.
 Disadvantages: To form a segregation of total costs into diverse variable is highly
difficult task (Horngren and et.al. 2002).
 Advantages of absorption costing: As per the variable costing, absorption costing is
delivered effectively representation of a product cost via fixed manufacturing overhead
costs.
 Demerits: There are various investors who presumes that this would be not effectively
reliable for future decision-making.
TASK 2
2.1: Merits and demerits of implementing planning tools implemented in the budgetary control:
In each organisation, planning is a foremost aspects that would incorporate vast impacts
for enhancing goodwill of the organisation. They are needed to have much effective system
which would help out for enhancing profitability for a company. The main aim of the UCK
group is to form that expenditure would not reverse its total income incurred during the time.
Budgets is a forecasting of future costs which would going to invest by the organisation for the
manufacturing of furniture, desk (Chapman and et.al. 2006). This is a most effective financial
plan which is implemented at the time of efficient period of the time which are formed for one
year. This covers of planned sales, volume and total revenue. The total forecasting is
incorporated for a particular period of time in order to form sales estimation for the entire
working capital needs. For managing them, managers are mostly implemented for the aim of
incorporating entire assessment of producing optimum return for the organisation for a particular
period of time (Horngren and et.al. 2005). There are various planning tools which are used for
budgetary control. Some of them are as follows:
Forecasting tools: This is the most effective planning tools which assist the management
for addressing the uncertainties that could arise in the near future. These are started with diverse
assumptions which is relied upon the management experience, knowledge and assessment.
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Advantages: The crucial advantages of implementing forecasting tools which is used to
incorporate decision related to the safeguarding future losses of the organisation.
Disadvantages: This is much difficult to form forecasting of future in a most appropriate
manner due to of their qualitative nature of forecasting.
Scenario tools: This is the most effective tool which is totally based on the scenario for
forming analysis of future. A group of executive fix in order to incorporate a small number of
scenario that will help out for dealing with diverse problems. This tool refers to their capability
to gather a vast range of possibilities in a great extent. This will help out for assessing current
trends and uncertainty.
Advantages: This will help out in getting higher level of production by avoiding all
those aspects which influence the performance of a company. Excess line of code could be easily
remove by addressing with major problems that can arise.
Disadvantages: These tools are much costs expensive tools of testing total costs for the
organisation. This is highly complex in order to maintain growth and uncertainties of UCK group
of organisation.
Contingencies tools: This will render a large funds, time and resources that could help
out for using them to unavoidable risk events. This risk is evaluating for each element during
introducing of budgeting process (Hoque, 2002).
Advantages: This is perfect tools for incorporating risk evaluating in order to have much
efficient outcomes for the organisation.
Disadvantages: Contingencies tools suffers from inappropriately of literature. This can
not be done higher efficiently tools as risk can't calculate accordingly (Ezzamel and et.al. 2003).
2.2 High and low method forecasting needed for July and August:
For aiming of assessing high and low activities level of variable costs are assessed by
measuring total costs of organisation.
(Total expenditure of high activity – Expenditure from low activity)
Total cost=
(Highest activity per hour spend – Lower hour spend)
Total Expenditure: (9820-7410) / (795-505)=8.31 Per units
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Total expense for the month of July:
= 650*8.31=5401.5
For August:
= 750*8.31= 6232.5
2.3: Cash flow estimation
Cash budget Amount
Particulars September
Opening balance 9000
Cash sales 39000
Sale on account 5648
Total Cash collected 53648
Less:
Purchase -16800
Selling and administration
expenses -13000
Equipment cost -18000
Dividend paid -4000
1848
Add: minimum cash balance 5000
Expected cash at the end of
September month 6848
TASK 3
3.1: Adoption of various accounting system in order to determine financial problems:
In case of production of business like UCK group of organisation covers of UCK furnitures and
Woodwork (Kotas, 2014). They are known as the working for assessing diverse financial issues
which could lead to form vast affects on the earnings position of the organisation.
Various ratio's Formula UCK woodworks UCK furnitures
ROCE This is calculated by
using formula:
6955/81230*100 5890+3600/23100+31
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Operating
profit/Capital
employed*100
=8.56% 930*100
=9490/55030*100
=17.24%
Operating profit
margin
This is calculated by
using:
Operating profit /
sales *100
6955/81230*100
=8.56%
9490/13000+24900*1
00
=25.03%
Assets turnover ratio This can be measured
by using:
Total revenue / Net
Sales
8150/81230
=0.100 times
13000+24900/23106+
31930
=0.68 times
UCK WOODWORKDS UCK FURNITURES
UCK Woodworks is best better-known for
providing raw material and precious input to
UCK furniture (DRURY, 2013).
They are accountable for the production of
only one product which is Desks.
As per this, 8.56% of total return achieved for
generating optimum profit for the year.
The ROCE ratios reflects healthy return with
17.24%.
Total assets vary throughout the time is about
0.10 times out of total sales.
Under this, organisation is acquiring a total of
0.68 time assets from their total selling.
3.2: Making analysis to overcome financial issues:
For incorporating in an appropriate assessment of financial issues those are being found
in UCK group of organisation that can be found in both of the organisation. UCK Woodworks is
having most markets or return in compare to other diverse organisation. For solving them are
discussed as follows:
 KPI (Key performance Indicator): This is highly recommended financial tools which is
ultimately helpful in resolving financial problems which can occur in a company. This
can be identify (Hansen, Mowen and Guan, 2007).
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CONCLUSION
From the above document this has been concluded that management accounting is an
effective tool that assist in keeping records of financial data in an appropriate manner. It assist in
controlling the inflow and outflow of cash which further assist in achieving the targets of a
particular financial year. Apart from this the concept of budget was also discussed in detail
which shows how they help in maintaining balance in the expense of different departments.
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REFERENCES
Books and Journals
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