Management Accounting Report: Systems, Methods, and Tools Analysis

This report provides a comprehensive overview of management accounting, focusing on various systems and methods, including cost accounting, inventory management, and price optimization. The report uses Unilever, a UK-based company, as a case study to illustrate the practical application of these concepts. It covers the benefits of management accounting systems, their integration with organizational processes, and different reporting methods such as budget and performance reports. The report also explores costing methods, comparing absorption and marginal costing through financial statements. Furthermore, it examines the merits and demerits of planning tools like scenario and contingency tools used in budgetary control. The analysis includes interpretations of financial data and an evaluation of the tools that help maintain sustainability within an organization.

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Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
LO2..................................................................................................................................................3
LO3..................................................................................................................................................3
LO4..................................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCE ..................................................................................................................................8

INTRODUCTION
Managerial accounting is the base of any enterprise which is used to manage or control
the provisions of accounting data and provide accurate information. In additional, it is the
procedure of evaluating business expenses and operations to make internal financial reports in
context to accomplish corporation's goals. To understand the importance of managerial
accounting Unilever has been selected that is UK based company and is providing food and
beverages products, beauty care and home care products (Ahmad, 2012). This report will cover
various topics like as different types of managerial accounting system, benefits, accounting
management method, planning tools and its advantages and disadvantages, accounting system
that helps to find financial problems and management accounting tools that will help to be
maintain sustainability.
LO1
Management accounting & different type of management accounting system
Management accounting is the managerial process which help the manager to handle
their financial information in order to take any decision that further helps in to achieve business
objectives & goals. This accounting is useful for the internal analysis and it includes the
management reports which provide accurate & exact information. In the Unilever company,
manager take important decision on the basis of financial information. There are some different
type of management accounting system which followed by the managers are discussed below:
Cost Accounting System: It is a managerial framework which help the manager to
identify the cost of each unit. Manager analyse the cost through evaluating their profit margin,
involuntary valuation and try to reduce product cost and control it. Manager of Unilever
company, follow this system to manager their product cost and its required for the organisation
to control each unite cost. Which further helps in Unilever to achieve their business goals &
objectives and help the manager to take effective decision (Bromwich and Scapens, 2016).
Inventory management system: It is a system or software which help the organisation
to track their inventory level on regular basis. Because physical counting will take enough time
so this system help the manager to improve their warehouse system. In the Unilever company,
manager use the different devices to keep track their items such as barcode scanner or software.
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It is required in the organisation to centralize the information regarding inventory and it is also
required at the time of purchasing, shipping & analysis of reports.
Price optimization: It is mathematical analysis which done by the organisation to
identify that how particular customer react at different price of their products & services. It will
also helps in determining the price which meet with business objectives that is profit
maximisation. Price optimization system required in the Unilever for the identification of price
of product which they offer to their customers(Carlsson-Wall, Kraus and Lind, 2015).
Benefits of management accounting system and it's application
Cost Accounting System:
 It will help the manager to to identify the cost of each unite and it will include the labour,
material & other overheads. Manager of Unilever company use this system to reduce or
control their product cost at every level and build develop further strategies.
 With the help of cost management accounting manager can easily identify the overall
expenses or revenue of the organisation which further helps in achieving business
objectives & goals.
Inventory management system:
 With the help of inventory management system organisation can increase productivity or
efficiency in the operational functions. So manger of the company adopt this system and
it will help to reduce the wastage of material as well as provide prior information before
shortage.
 It will provide the accurate information and reduce the manual burden to record each
entry with the use of human resources. Manager use this system to reduce time as well as
money at the time of managing inventory (Hall, 2016).
Price optimization:
 By use of this system, manager can easily determine the key area where they have to
focus such as number of conversion or margin of sale. This system provide the revenue
benefits to the Unilever company which help in expansion or in growth.
 It will help the manger to take quick or better decision in respect of product price and
help the Unilever company to analyse the pattern of consumers to buy any product. Also
identify the price preference and manager take decision on the basis of these analysis.
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Critically evaluate the management accounting reporting integrated with organisational
process
Management accounting reports are integrated with organisational process due the inter-
related function. Such as different accounting reports required various information which will be
collected through organisational process and it include the business goals & objectives.
Performance or budget report required the information related to employees or operational
functions which perform in the organisation. Manager of Unilever company have to perform
organisational process and it will be done through budget report because it include the each and
every information regarding material, planning, funding & other activities.
Explain different methods of management accounting report
Budget Report: It is an internal report which help the management to compare estimated
data with the actual performance. Budget report present the financial information of the
standards that follow by the manager of Unilever company. There are various standard in this
report and manger compare the performance on the basis of it. It will further help the manager to
take decision in respect of business as well as employees (Bennett and James 2017).
Performance Report Accounting: This report include the experience of workers or
organisation at the time of performing their task. It will include the individual performance of an
employee then manager evaluate and identify that either it is beneficial or not. Manager of
Unilever company prepare this report to measure their actions and how profitable for the
organisation to achieve their business goals & objectives.
Cost Managerial Accounting Report: This report include the all product cost related
information as well as strategies which help the Unilever company to control their product cost
or try to reduce each unit. Because it will increase the profit margin or help the organisation to
achieve their goals & objectives very effectively and it will also increase the productivity.
LO2
Absorption costing: It is an accounting methods which include the manufacturing cost
of product. Absorption costing not just include the material and labour cost it also include the
production overheads. It will include direct or indirect cost of manufacturing.
Marginal costing: This costing system determine the changes when quantity increased
by every single unit. It is helpful technique to find out each cost of product, where variable cost
considered as cost of unit and fixed cost as period cost.
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Income statement by absorption costing methods: -
Particular Amount
Sale(40000*15) 600000
Less: - Cost of goods sold
Material Cost (40000*4) 160000
Labour Cost (40000*4) 160000
Variable Cost (40000*2) 80000
Fixed overheads 50000
150000
Less: - Other fixed overheads 100000
Income 50000
Income statement by marginal costing methods: -
Particular Amount
Sale(40000*15) 600000
Less: - Variable cost 400000
Contribution 200000
Less: - Fixed overheads 150000
Income 50000
*Working Notes: -
Calculation of Variable cost of sales: (160000+160000+80000) = 400000
(Direct material+ Direct material+ Variable overhead)
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Calculation of fixed overheads: (50000+100000)= 150000
(Fixed manufacturing overhead+ Other Fixed overheads)
Interpretation: On the basis of above calculation, net income of the Conway Ltd is
£50000 according to marginal & absorption method. Marginal costing is calculated by adding
Labour, Material, overheads or fixed overheads and subtract from sale. Remaining amount called
contribution and then again subtract fixed overheads so company get the net income from
marginal costing.
In the absorption costing, add all the direct & indirect overheads including fixed and then
subtract total sale. After this, less other fixed overhead amount and business get the net income
through absorption costing.
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Interpretation: Net income of the Conway Ltd is increase from $163,472 to $421,476 in
the year 2016 to 2017. Due to it's excellence performance in their operational functions. Current
assets of the company also increase from $6,000,771 to $6,682,222. due to increment in cash and
account receivable. Total assets also increase because of the company's goodwill and investment.
Liability of the Conway company increase due to the incremental of income tax amount paid in
the year 2016 to 2017 or account payable. Debt of the company is decrease because company
pay off their borrow amount.
LO3
Merits and demerits of planning tools used in budgetary control
Budgetary control is the continuous process that arrange the budgets to set the financial
performance and compare with actual results. Moreover, this is a system who manage and
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controls revenues and expenses in an organisation and compare actual budgets with estimated
spending and incomes. Such as Unilever is a multinational company that provides different
services to its customer and earn profits by selling its products and services (Modell, 2014). This
company prepare budget reports every year and compare with actual budgets that helps to get
information that plans should be change or not in order to make profitable firm. Following
planning tools are followed by the enterprises such as:
Scenario tool: The main purpose of scenario tool is to make a number of possible
outcomes which may be occur in future. This tool helps to make planning for future that what
should be done to increase profit margin. For example, manager of Unilever build budget each
year with the help of spreadsheet that helps to get information about enterprise's profit and loss
situation.
Advantages:
 It helps to measure, manage and control the risk in which may occur further in any
enterprises. By making scenario tool manager of Unilever can measure the risk.
 It helps to make best possible outcome by making planning and give solution to reduce
the risk. Thus, manager need to make planning that would be helpful to get expected
results (Quattrone, 2016).
Disadvantages:
 It may be expensive and costly to predict and build estimated planning. Unilever's
accountant prepare scenario plans which is based on imagination and assumptions and
need more finance.
 It is complex planning that creates lots of confusions by using various copies of plan. If
Unilever build use this technique then it may be situation of misunderstanding.
Contingency tool: Every firm should be ready to bear the contingency situation that may
occur any times. This is an emergency situation which can be arises in any enterprises so, to
reduce this risk a company should make contingency provisions. For example, accountant of
Unilever should make contingent provision that will help to compensate the risk which may arise
in future such as bad debt, loss of food products, low production due to staff strike etc.
Advantages:
 This helps to compensate with future possible risk and losses. Thus manager of Unilever
can assess the risk and also can try to reduce the emergency risk (Shields, 2015).
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 It helps to make a structure plan for decision making by recording day to day business
activity. Manager of Unilever use contingent tools that help to minimize incidently risk.
Disadvantages:
 It based on future risk that is expected so it requires more finance in order to arrange the
risk. For Unilever's manager will be difficult to measure future risk because it need to
have more finance.
 Managers suffers inadequate literature because contingency depends on future situation
of business.
Forecasting tool: This is very effective tool that is used by every organisation to prepare
estimate future budgets with the help of past information. Moreover, it makes future budget that
helps in further business planning and growth of the business. In Unilever, manager build a
forecasting budget by analysing past financial statements. By using this method accountant can
get information about what actions should be take to increase profit margins (Schaltegger and
Burritt, 2017).
Advantages:
 This help to assure about future planning and give suggestions that how to solve the
future financial problems by analysing past information.
 This also helps to make golden future of organisation by making effective decision. Thus
manager of Unilever can calculate the risk which may be arises in business activity.
Disadvantages:
 This may be difficult for Unilever in order to understand the data and business decision
because it is based on assumptions that is not actual information.
 Manager of Unilever who prepare the forecasting tool can not get appropriate data to
make budgets because not proper and accurate information.
Application of planning tools
From above mentioned planning tools it has been considered that if Unilever apply this
tools and techniques it can help to predict the future budgets that is beneficial for further growth
of business. By using this tool an organisation can get ideas about future risk, profits and actions
which should be taken to reduce or minimize the risk. Forecasting budget help to get future
finance information which may be required to run a business effectively. It also give ideas that
business should be continue or not and what should be done to make better decision.
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LO4
Organisations follow management accounting systems to respond to financial problems
Financial problem: It will occur financial pressure and it happen due to the shortage of
money in the organisation. Financial problems affect the individual's mental health as well as
affect the profitability or productivity of the organisation. Almost every business face these
issues, so it's better to build some effective strategies to overcome from this situation. There are
some financial problems face by the Unilever company are as follow:
 Maintain price & profit margin: Company need to maintain their product price
because it will affect the profit margin. So manger of Unilever company have to follow
costing methods to reduce or control each unit cost and it will further helps to maintain
their profit margin (Malina ed., 2018).
 Sales problem: Unilever face the issues regarding falls in the sales which will stop the
growth of the business. Manager required to identify the reason to decrease the sale and
then build some string strategies to overcome with this problem.
Management accounting approaches: It is the management accounting techniques which help
the organisation to solve the financial issues which occur in the business. Some of the techniques
are discussed below:
KPI: Key performance indicator measure the performance of employees as well as
organisation to compare with business objectives. It the management accounting tool which help
the manager of Unilever company to analyse the various factors which affect the productivity or
employees performance (Wouters and Kirchberger, 2015).
Benchmarking: It is the comparison tool between different companies which help to
determine the performance in comparison to other. Manager analyse the key areas of operational
activities and same as in other organisations. Unilever adopt this approach and build the report
on the basis of money management, different functions or strategies. This techniques help the
manager to improve their efficiency or productivity.
Comparison between the organisation and how they adopt management accounting system
to solve their financial problem
Basis Unilever P&G
Problem Company face the issue regarding P&G suffer from shortage of inventory
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product price because low product price
will decrease the profit margin.
at the time of production.
Approach To deal with this problem, manager of
the company follow the KPI approach.
Which helps to identify key factors
which affect the cost or increase the
price of product.
Company adopt Benchmarking
techniques and measure how other
firms handle their production system
effectively, so they don't need to face
shortage at the time of production.
System Company follow the price optimization
system which help the manager to
identify consumer's willingness to pay
the price of particular product.
P&G follow the inventory
management system to track their
regular stock. By using this manager
get the prior information regarding low
inventory level. So company can order
more material according to the
requirement.
Evaluate how planning tool help the organisation to solve their financial problems
It is recommended that planning tools are helpful to make effective business decision by
solving financial problems such as maintain price,profit margin and sale. For instance, Unilever
is facing profit margin issue because of less selling and high prices of products and services
(Salterio, 2015). In this situation manager need to use planning tools like forecasting and
scenario that will help to solve financial issues such as to make attractive selling strategy such as
discount offer,buy one get one free, black Friday etc. It will help to increase the sale as well as
increase company's profits.
CONCLUSION
From the above report it has been considered that management accounting is the essential
part of any organisation that helps to manage, organise accounts and control on budgets. A firm
can use planning tools to solve the financial issues by providing discounted products and services
that will help to increase sales. Moreover, marginal costing helps to decrease cost of production
and increase profitability. Management accounting system help to give information what should
be done to make profitable organisation.
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