Management Accounting Report: Cost Analysis and Financial Planning

This report provides a comprehensive analysis of management accounting, focusing on its application within Unilever PLC. It begins with an introduction to management accounting and its various systems, highlighting its importance in decision-making. Task 1 delves into management accounting systems, including cost accounting and inventory management, emphasizing their benefits for Unilever PLC. Task 2 explores different methods of management accounting reports, such as budget reports and accounts receivable aging, and their significance. Task 3 focuses on the preparation of income statements considering different cost structures, including absorption costing. Task 4 discusses the advantages and disadvantages of various planning tools, and Task 5 examines how management accounting systems can be useful in addressing financial problems. The report concludes by summarizing the key findings and their implications for Unilever PLC's financial management.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK1 ............................................................................................................................................3
P1Management accounting and its different system...................................................................3
P2 Methods of management accounting reports.........................................................................5
TASK2.............................................................................................................................................6
P3Prepration of income statement by considering different cost................................................6
TASK3...........................................................................................................................................11
P4Advantages and disadvantages of different planning tools...................................................11
P5 Management accounting system useful in financial problems............................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Accounting is the method which helps an organisation to keep their financial records
safely so that they can take effective decision which are helpful for them in long run.
Management accounting helps in taking the decision which are related with the day to day
operations of the business as well as also enables a firm to take short term decision which helps
them in operating their business activities in a proper and appropriate manner. It provides an
advice to all the managers of large organisation to take effective decision. The main purpose of
using the managerial accounting is to take care about the welfare of the internal audiences of the
business. Managerial accounting is a process of measuring, identifying, analysing, assuming ,
interpreting and communicating information which are used by the managers. It is totally
different from the financial accounting. Financial accounting helps an organisation to prepare
their financial data which enables them to take effective decision. The present report is based on
the Unilever PLC which is one of the largest consumer goods company. It is a manufacturing
company and they want to start a new project in which they want to spend more. This assignment
includes the management accounting system which is used by an organisation in their business.
Along with this cost calculation is also going to be discuss in this report with various costing
techniques. Moreover also the organisation deal with financial problems is discussed in this
assignment(Baldvinsdottir, Mitchell and Nørreklit, 2010)
TASK1
P1Management accounting and its different system
For taking long term and short term decisions management have to prepare several
reports through which decision making process become easy and appropriate (Bodie, 2013).
Unlike annual accounting it does not shows the whole year report but it provides the available
cash, sales revenue generated and amount of orders in hand information. The report is basically
prepare for the internal audiences of the organisation which are employees and chief executive
officers(Burrittand et. al., 2011).
Management accounting aimed at helping the managers of an organisation to take
decision which are beneficial for them. This branch of accounting is also known as the cost
accounting. It helps the managers in plan and manage the daily operations of the business.
Hence, for taking the short term decision of the business the management accounting is a best

and suitable method in this concern. Management accounting helps in providing more
information than the financial accounting because as in the annual accounting approach the
decision and strategies are totally based on yearly system where as on the management
accounting technique the decision are taken on the daily operation (Garrisonand et. al., 2010).
So, if managers found any deviation in business then they can apply suitable and appropriate
methods for over coming such deviation from an organisation. There are several number of
benefits are identify which are helpful for the managerial accounting process in an organisation.
For Unilever PLC, they have to identify various advantages which an organisation can gain
through this method:
1. Identify availability of products
2. Supply adequate quality goods and serviced to all users
3. Take frequent decisions on such things which are not appropriate for an organisation
4. Remove deviations from business.
According to the present cited organisation they are generally deal in the consumer
products through which they can earn maximum profit so, this method is very useful for them in
their long term purpose. They can maintain report of their stock and cost of their products and
manage their sales and future production on such basis. It helps them in minimise the wastage
and control the overhead cost of the goods.
Management accounting have different approaches and system which are helpful for an
organisation while considering them. These system provide them daily operation report so that
their business activities get managed according to that. There are various number of management
accounting system are identify which are written as below:
1. Cost accounting system: By using this system process, management become able to
identify the cost which is associated with manufacturing and production. By applying this
concept into business an organisation will increase their profitability and production as
well.
2. Inventory management: It is essential to determine the stock and inventory on regular
basis so that entity can manage the whole inventory in an adequate manner.
3. Job costing: This process is usually for such organisation who have specific nature of
working and mostly indulge in large projects. This apply on such measure of things or
production on products which are sufficiently different from each other.

These system are as used by an organisation to control their day to day operations of their
business. It enables them to control the cost of the -production and the price of the goods which
they offer to the target customers. It also enables them to control the stock of their products
through which their warehousing cost get reduced (Herzigand et. al., 2012). Hence, All such
factors are beneficial for them according to the customer point of view.
By using the appropriate system of the management accounting it helps an organisation
to plan their activities according to that. Hence, this method is beneficial for them in making the
planning and controlling.
Planning helps them in plan such activities which promotes the company to survive in
competitive market for long term. Although it also helps them to control their cost of production
goods and services which they serve in target market. Hence, for the customers point of view it is
most suitable approach for them.
Along with this management accounting also promotes the controlling function which
means the managers can easily control the deviations and dynamic environment of the market by
applying suitable approach.
Unilever managers can apply this technique because they are generally deal in consumer
goods hence, their profit margin is higher than others(Li and et. al., 2012). So, they can apply
this method because it helps them in plan their monthly activities in such a manner which
provides them long term benefit. Along with this it also helps them to control the inventory of
their goods and other activities at workplace.
Management accounting helps the Unilever PLC in managing their day to day operations.
It provides certain benefits through which managers can control business activities and deviation
which affects the business most. The benefits by management accounting is as follow:
1. It helps in reducing the wastage of resources.
2. Helps in clearing out the deviations which affects the business efficiency.
3. Helps in taking the decision on daily basis so that all task can be done in a proper and
systematic manner.
4. It helps an organisation to make plan according to the daily operations which further
leads in effective outcome.

These are some of the benefits which are useful for the Unilever PLC which helps them
in manage their business activities. It also helps them in performing the projects and minimise
the wastage of resources.
As per the above argument it is clear that for any organisation long term success and
survival managerial accounting is a helpful measure for them to plan and control their activities
according to the business purpose.
P2 Methods of management accounting reports
Management accounting reports are helpful for many business owners and managers to
make the decision on their basis(LukkaModell, 2010). It can be prepare on the monthly,
quarterly, weekly and on the daily basis. It helps in estimating the budget, account receivable and
job cost reports which helps organisational managers to take effective decision which provide
benefits for the long run. It includes the following reports of the business enterprises:
1. Budget reports: Budget reports helps an organisational to analyse their performance and
in the large business enterprise the department managers perform this task because it
helps them in control their cost. The estimated budget is prepared on the basis of actual
expenses from the prior years. It also helps them to provide incentives to their employees.
2. Accounts receivable aging: The account receivable aging report is a critical tool for
managing cash flow for companies that extend credit to their
customers(Macintosh&Quattrone, 2010). It helps the manager to find out the problems
which are related with the company collection process. If customer is not tend to pay
their debts on time the major duty of an organisation is just to tighten their credit policies.
It also helps the collection department to overlooking on the old debts. This helps the
Unilever PLC to find out the debts by their clients which still not recovered. This process
helps them in manage their policies along with this also helps them in increase their cash
flow by collecting such amount which not collected yet.
3. Inventory and manufacturing: Companies with physical inventory can use this report
for making their manufacturing activity more efficiently. This report generally includes
certain terms like as the inventory waste, hourly labour cost or per unit overhead cost. It
helps an organisation to make comparison between different departments and provide
bonus to such unit which performs very well and control the results. This method can
used by the Unilever PLC which helps them so much because they can control their stock

and manufacturing of their goods(Otley & Emmanuel,2013). It enables them to minimise
their resource wastage by consulting their inventory reports.
tIt signifies that the system could not be able to perform their work without reports. Reports are
helpful for draw a valid conclusion for the activities so that work should managed in a
systematic manner. Management accounting reports are helpful in making all the deviations of
the business and they can get control with the help of management accounting system. Both the
terms are work after integrate them with each other other wise not. In the case of lack of
information the reports will not prepared properly. It leads in creating the disturbance in an
organisation. Further more their functions also get affected and it leads in affects the productivity
of the Unilever PLC.
TASK2
P3Prepration of income statement by considering different cost
Cost accounting is a process that measure and analyse the cost which is associated with
the product, its production and projects so that correct amount are to be mentioned in financial
statement. It helps a company in estimates its cost about their goods(Renz, 2016). There are
various type of cost which are taken into account while discussing about the cost concept. Such
costs are:
a) Direct
b) Indirect
c) Fixed
d) Variable
e) Operating
All such costs are helpful in taking the decision which is related with the pricing concept.
An organisation estimates its total price after analysing the cost which is incur on the project.
This helps them in making the price of a project. These cost also helps in making the clear
decision about that the product in which its life can get estimated. There are mainly two type of
cost which are as follow: Marginal costing, Absorption costing.
Both are the different approaches which helps in determine the fixed overhead cost and
whether or not they are included in valuing inventory.

Absorption costing: It is a full costing method which includes direct cost and proportion
of production overheads by means of one or a number of overhead absorption cost(Setthasakko,
2010). It is generally used for the cost control purpose. Absorption costing is anything which is
related with the direct cost in producing a good as the cost base. The another name of the
absorption costing is the full costing because it leads in absorbs all the cost of the product which
further helps in estimating the accurate value of the product. Hence, it helps in making of the
income statement of the company. Following is the income statement of the Unilever PLC:
Income statement as per absorption costing:
Amount
Sales value (35*600) 21000
less:
Cost of Production 9600
Gross Profit 11400
LESS:
Fixed and variable cost:
variable sales overheads (600*1) 600
Admin & selling cost (700+600) 1300
Less: over absorbed fixed production overheads -100 -1800
Net profit 9600
The net profit which is generated with the help of absorption costing is 6700 which
shows that after the variable sales, fixed administration and fixed selling of the product it is get
calculated. All these things are absorbed by the organisation in making their product (ShahMalik
& Malik, 2011). Hence, it helps a company to calculate the overall cost.
Marginal costing: The marginal cost of an item is known as its variable cost which get
changed. The accounting system in which the variable cost are changed to unit and the fixed
cost of the period is written off in full against the aggregate contribution. The word contribution
which is used here is termed as the difference between the marginal cost and sales. Marginal cost
means the cost of marginal or last unit produced.

It is defined as the technique of presenting cost data wherein variable cost and fixed cost
are shown separately for marginal decision making (Simons, 2013). This form of cost helps an
organisation to form the basis of judging the profitability different products or departments.
Marginal costing = Change in consumption/ Change in quantity of the product.
Income statement as per marginal costing
Amount
Sales value (35*600) 21000
less:
Cost of Production (6+5+2) -9100
closing stock (100*13) -1300
variable overheads -7800
Contribution 13200
less:
variable sales overheads (600*1) -600
fixed cost -2000
Admin & selling cost (700+600) -1300
-3900
Total 9300
This process helps the most to the decision making process because ait includes the
several activity which helps in measuring the changes which are occur while taking a specific
decision. Hence, this leads in taking the decision on the basis of changes which are made during
the business. Although it takes the focus of whole management team on the changes which are
taking place due to a decision. After calculating the marginal costing the net profit of the
company is 7500.
Management accounting techniques are used by an organisation through which their
work can done in a proper manner. It helps them most because there are the techniques which are
helpful in taking the decision by the managers of an organisation. Firstly, Unilever PLC have to

prepare the reports and made plan according to such reports (TalhaRaja & Seetharaman, 2010).
After that a budgeting analysis have to get done because with the help of this technique proper
estimation of fund can get completed.
Project decision have been taken on the basis of proper estimation of budget. It helps
them in examine the cost which is related with the project. After the project decision making
performance of the project is to get measure. These techniques are used by the managers in the
management accounting.
Reports are prepared on the basis of week, months etc. And this helps in finding out any
kind of deviation which are related with the project. So, proper decision can be taken to sort out
such differences which are creating barrier in the path of project success.
TASK3
P4Advantages and disadvantages of different planning tools
Budget of an organisation helps them in manage their funds in the long run and short run
business activities(Bogtvan & Helden, 2012). It is an important factor because with the help of
this process proper estimation of total fund is get done. An efficient budget includes all the
expenses which are taking place during an accounting year.
If the budget plan have proper investment activity then it shows that firm is going to done
their activities in a proper manner and this leads in help them in their survival. Each and every
department have their own budget through which they can manage their yearly and daily
activities.
The another advantage of budget formation is that it helps in reducing the organisational
risk along with this also helps them in planning their investment according to company needs. A
budget usually have four control process which are:
1. It helps the managers to coordinate with their resources.
2. It helps to every control system to fulfil their needs.
3. Helps in the clear visualisation of guidelines about organisation resources and
expectations.
4. It helps in facilitates the managers performance and unit.
There are mainly three types of budget which have used by each and every organisation:
1. Financial

2. Operating
3. Non monetary
These three are the basic planning tools which helps in the budgetary control system.
They provide a proper guidelines so that proper estimation of budget get done (VaivioSirén,
2010).They facilitates the service through which cash can be invested.
Unilever PLC have to prepare a proper budget in which they can maintain a separate
column for financial budget in which all finance related activities are included. The advantage of
this budgetary technique is that it helps in the proper estimation of the cash flow of a company so
that their work and investment can get done ion proper manner and tits outcome become more
than the invest.
The another advantage of financial budget is that it helps in the purchasing of new assets
for the company so that their production can get increase and their quality also get improved.
The last one is the balance sheet budget it helps in analyse the performance of an
organisation that their objectives are fulfil or not.
Hence, Unilever PLC have to utilise their financial budget so that they can get best
outcome from that(van der Meer-Kooistra and Vosselman, 2012). But this budgetary approach
have some of the drawbacks. The major limitation of this technique is that sometimes
organisation allot a fixed amount of budget for a particular project but if they are not get done in
such amount reduce the project consistency. It affects its outcome also.
Another disadvantage of this technique is that it is prepared for the whole year and do not
get changed rapidly. This affect the business activities of an organisations and directly or
indirectly affect the daily routine operations of business.
So, Unilever have to prepare themselves and prepare their budgets by considering the
modern budget approach which is most suitable for them.
The another type of budget is operating budget which represents the operational activity
of an organisation during a certain time period. This is very helpful technique which it aid in
providing a line on which the task should have to get completed(Ward, 2012)The major
advantage of this budget is that it helps an organisation to control their expenses along with that
it also enables the managers to control the upcoming expenses so that they an perform better and
control unnecessary disbursal.

Various planning tool are identify which support an entity in their growth as well as in
development. Unilever PLC have to identify some of them and then utilise few of them to gain
strength and overcome the weakness as well. Thus, various types of planning tool for reference
business entity are as follow:
 Cash budget
 Capital expenditure
 Market led pricing
 Target Cost pricing
Thus, all of these have several benefits and limitations which have to know by the
management in relation to take beneficial decision by adopting best one. Advantages and
disadvantages of various cash budget and market led pricing are as follow:
Advantages Disadvantages
Cash budget Enable in control all the
expenditure which are against
or more than cash.
Assume everything in advance
which is one of a major
drawback.
Support in doing all the things
in an adequate manner by
cutting down unnecessary
expenses.
Extinct everyone to use
allotted cash properly. Thus, in
case of emergency they are not
going to allocate more cash for
a project.
Market led pricing A major advantage by using
this approach is to gain
competitive advantage than
others.
Might be organisation products
selling get decline as many
people have a thinking that
low price products are not
appropriate in quality.
Enable in measuring current
market position and then offer
products and services
according to that.