Search

Management Accounting

Introduction

Management accounting is a process of recording, monitoring, controlling and analysing information of business performance and operations. The recorded data is presented in front of internal stakeholders of the company to in order to gain their trust and to represent that organisation is performing well or not (Bourne, and et. al., 2014). There are two major elements of management accounting that are implemented in business to analyse the actual position. These elements are budgeting and cost volume analysis. Both of them are essential for a company to analyse its actual performance. In this project report examination of organisation's performance has been evaluated with the help of budgeting techniques and cost volume analysis.

TASK 1

1. Spread sheet to analyse organisational performance

Particular

Amount

Total BEP In units

3.91

Total margin of safety

16.09

Total profits

11433

Net profit

9466

Closing cash balance at the end of 6th month

76803

Required bank loan

15000

Estimated sales

15600

From the above table it can be analysed that organisation can get a success in the market as estimated sales for each month is 15600, profits are 11433 and closing profits are 76803 which is estimation based of estimated information and figures.

TASK 2

1. Calculation of BEP, margin of safety and budgeted net income

Calculation of BEP:

Particular

High end gamer PC (2 units)£

Professional work PC (6 units)£

Mid range home PC (12units)£

Fixed cost

1042.5

1042.5

1042.5

Contribution per unit

1442

946

500

BEP In units

0.72

1.10

2.09

Calculation of margin of safety:

Particular

High end gamer PC (2 units)£

Professional work PC (6 units)£

Mid range home PC (12)£

Actual sales

2

6

12

BEP In units

0.72

1.1

2.09

Margin of safety

1.28

4.9

9.91

Budget net income at the targeted level of sales:

Particular

High end gamer PC (2 units)£

Professional work PC (6 units)£

Mid range home PC (12)£

Sales

3000

6000

6600

Less: Variable cost

-116

-324

-600

Contribution

2884

5676

6000

Less: Fixed cost

-1042.5

-1042.5

-1042.5

Profit

1841.5

4633.5

4957.5

As analysed form above tables that total BEP in units for Scott is 0.72, 1.10 and 2.09 for all the three types of computers. Margin of safety for all those three computers are 1.28, 4.9 and 9.91. Total profits for all the computers are 1841.5, 4633.5 and 4957.5 (Burkert and Lueg,  2013).

2. Requirement of funds

It has been analysed that total fund requirement to start the business is 6000 pound while starting the business. As the use of ban account for personal use will be considered as drawings than Scott have to pay interest on 1000 pound and the interest rate for the same is 24%.

Total interest= 1000*24/100*1/12

= 20 pounds per month in the situation of overdraft

3. Budgeted cash flow

It is assumed that Scott is willing to take a loan of 20000 pounds. If he takes loan outside of the organisation than he have to pay interest on the loan the assumed interest rate for the loan is 18%. this loan has been taken for 12 months (Johnson, 2013). The instalment will be the combination of principle amount and interest. In the situation of loan estimated cash flow is as follows:

Particular

Amount

Profits

11433

Less: expenses

 

Instalment per month

1667

interest per month

300

Total cash remaining

9466

From this can flow statement it can be determined that Scott is able to take a bank loan as all the installments and interest can be paid by him on time.

4. Cash Budget

Particular

January

February

March

April

May

June

Opening cash

 

25432

35864

46296

56465

66634

Bank overdraft

-1000

-1000

 

-1000

-1000

-1000

Receipts:

           

Estimated Sales

15600

15600

15600

15600

15600

15600

Loan received

15000

         

Total A

29600

40032

50464

60896

71065

81234

Payments

           

Fixed expenses

3128

3128

3128

3128

3128

3128

Variable expenses

1040

1040

1040

1040

1040

1040

Installment

 

 

 

263

263

263

Total B

4168

4168

4168

4431

4431

4431

Closing balance A-B

25432

35864

46296

56465

66634

76803

From the above cash flow it has been analysed that at the end of sixth month organisation is going to have a estimated profit of 76803 pounds. The estimated sales for each month is 15600 pounds which is because Scott has estimated that he will sale at least 20 computers. Total amount of the loan has been taken form the example which is shown in the question (Sisaye and Birnberg, 2012).

Conclusion

From the above project report it has been summarised that management accounting is the process of analysing the business performance. Information gathered from various sources like BEP, margin of safety, cash budget can help the stakeholders to analyse that organisation is performing well or not.

References

  • Bourne, M. and et. al., 2014. Emerging issues in performance measurement. Management Accounting Research. 25(2). pp.117-118.
  • Burkert, M. and Lueg, R., 2013. Differences in the sophistication of Value-based Management–The role of top executives. Management Accounting Research. 24(1). pp.3-22.
  • Johnson, H. T., 2013. A New Approach to Management Accounting History (RLE Accounting). Routledge.
  • Sisaye, S. and Birnberg, J. G. eds., 2012. An organizational learning approach to process innovations: the extent and scope of diffusion and adoption in management accounting systems. Emerald Group Publishing Limited.
Download Full Sample
Cite This Work To export references to this Sample, select the desired referencing style below:
Copy to Clipboard copy icon
Copy to Clipboard copy icon
Copy to Clipboard copy icon
Copy to Clipboard copy icon
Assignment Prime. [Internet]. Assignment Prime.(2024), Retrieved from: https://www.assignmentprime.com/free-samples/management-accounting/management-accountings
Copy to Clipboard copy icon
Boost Grades & Leave Stress

Share Your Requirements Now for Customized Solutions.

Lowest Price
USD 8.58

Delivered on-time or your money back

100+ Qualified Writers

For Best Management Accounting Assignment Help

View All Writers
FREE Tools

To Make Your Work Original

  • tools Paraphrasing Tool

    Check your work against paraphrasing & get a free Plagiarism report!

    Check Paraphrasing
  • tools Plagiarism Checker

    Check your work against plagiarism & get a free Plagiarism report!

    Check Plagiarism
  • tools Reference Generator

    Get citations & references in your document in the desired style!

    Generate References
  • tools Grammar Checker Tool

    Make your content free of errors in just a few clicks for free!

    Grammar Checker
  • tools Essay Typer

    Generate plagiarism-free essays as per your topic’s requirement!

    Essay Typer
app
Download App

Avail the Best Assignment Writing Services in Just One Tap!

Add "5% extra off on app"

iphone android
QRcode

 
AP whatsapp

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. Know more

IT'S OK