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The overall aim of this unit is to introduce the fundamentals of management accounting which apply to the
wider business environment and the organisations which operate within that environment. Students will
explore how management accounting uses financial data to aid planning decisions, and the monitoring and
control of finance within organisations.
On successful completion of this unit students will be in a position to present financial statements in a
workplace context and be able to assist senior colleagues with financial business planning. In addition,
students will have the fundamental knowledge and skills to progress onto a higher level of study.
Learning Outcomes
By the end of this unit a student will be able to:
1. Demonstrate an understanding of management accounting systems.
2. Apply a range of management accounting techniques.
3. Explain the use of planning tools used in management accounting.
4. Compare ways in which organisations could use management accounting to respond to financial
problems.
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Unit 5| Management Accounting
Microeconomic techniques:
What is meant by cost? Different costs and cost analysis.
Cost-volume profit, flexible budgeting and cost variances.
Applying absorption and marginal costing.
Product costings:
Fixed and variable costs, cost allocation.
Normal and standard costing, activity-based costing and the role of costing in setting price.
Cost of inventory:
Definition and meaning of inventory costs and different types of inventory costs.
The benefits of reducing inventory costs to an organisation.
Valuation methods.
Cost variances.
Overhead costs.
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Unit 5| Management Accounting
Microeconomic techniques:
What is meant by cost? Different costs and cost analysis.
Cost-volume profit, flexible budgeting and cost variances.
Applying absorption and marginal costing.
Product costings:
Fixed and variable costs, cost allocation.
Normal and standard costing, activity-based costing and the role of costing in setting price.
Cost of inventory:
Definition and meaning of inventory costs and different types of inventory costs.
The benefits of reducing inventory costs to an organisation.
Valuation methods.
Cost variances.
Overhead costs.
Pricing:
Pricing strategies.
How do competitors determine their prices?
Supply and demand considerations.
Strategic planning:
Applying PEST, SWOT, balance scorecard or Porters Five Forces analysis to the financial position of
an organisation.
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Unit 5| Management Accounting
LO4 Compare ways in which organisations could use management accounting to respond
to financial problems
Financial governance:
Definitions of financial governance, and how this can be used to pre-empt or prevent financial
problems.
Using financial governance to monitor strategy.
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Unit 5| Management Accounting
The company has 3 outlets in prime locations of London besides having a head office to control all the
affairs. The close competitor is Premier Sportswear and they are having 5 outlets, 3 of them are very close
to the existing outlets of General Sportswear.
The company has its manufacturing set up near Manchester where they produce a number of sportswear
which they sell under their brand name, as mentioned above. This manufacturing set up was started in
June 2010 with a small manufacturing plant but over the years the production has increased many fold.
There is no proper management accounting system. Mr. Alex Burton is the manufacturing manager, who is
a relative to the director, is the in charge of the accounting set up of the manufacturing unit, who does not
have any background of management accounting. He prepares all management accounting reports on
excel sheet. The reports which are being prepared do not reflect a true cost of the product being
manufactured since it varies significantly every month. The variation ranges from 10% to 20%, which is
beyond understanding for the manufacturing manager.
All the shares are owned by the family members. In the recent board meeting, directors decided to recruit
a junior management accountant to streamline these calculation and correct their reporting. You have
been selected as Junior Management Accountant (on Probation) for General Sportswear.
In the first meeting with your Mr. Alex Burton, you have been given some reports for the year ended Sep
2016.
General Sports Wear
Statement of Profit & Loss
for the year ended 30th Sep 2016
in "000 "
Sales 25,600
Cost of Sales 12,500
Gross Profit 13,100
Expenses:
Rent & Rates 1,100
Salaries 2,100
Advertisement 500
Administration Expense 600
Selling Expense 300
Depreciation 2,000
Total Admin & Selling Expenses 6,600
Profit before Interest & Taxes 6,500
Interest Expense 250
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Unit 5| Management Accounting
In the year ended Sep 2015 & Sep 2016, the detail of production is as under: Figures are in 000
Note: All the goods in process and closing stock are part of the cost of sales.
You have also extracted the following data from the available records.
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Unit 5| Management Accounting
TASK
1 Task 1 covers Learning Outcome 1 & 2.
As a first task, Mr. Alex Burton, manufacturing manager, has asked you to prepare a report explaining
the role and function of the management accounts department, covering the management accounting
systems operating in the organisation as well as the range of techniques used.
Being a Junior Management Accountant (on probation), you need to submit a formal report to board
of directors which should consists of all elements of a formal report like title page, table of contents,
executive summary, context & background, main report with proper headings & subheadings,
conclusion and recommendations, if any. The recommended word limit is 2,0002,500 words,
although you will not be penalized for exceeding the total word limit. (Further details under
assignment notes below.)
A. An explanation of the principles of management accounting and give the essential requirements of
different types of management accounting systems in context of General Sportswear. (P1)
(For Merit)
What benefits can be achieved through effective implementation of management accounting in
General sportswear and evaluate these benefits. (M1)
(For Distinction)
In your presentation, you need to critically evaluate the integration of management accounting
systems and management accounting reporting in organisational process of General sportswear.
(D1)
B. In second part of your presentation, you have to identify and explain different methods used for
management accounting reporting which can be used in General sportswear with their
implications. (P2)
C. In third part, using marginal and absorption cost techniques, prepare an income statement for
General sportswear. (P3)
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Unit 5| Management Accounting
(For Merit)
With the help of available data, accurately apply a range of management accounting techniques
and produce appropriate financial reporting documents for both the financial year and compare
them. (M2)
(For Distinction)
Produce financial reports that accurately apply and interpret data for a range of business activities.
You need to work out variances in all three major cost for all the three products and evaluate them
with correct conclusion. Advise the management about the individual profitability of all three
products and what are the impact of revising the price of the products and profitability? (D2)
Grading Criteria
Pass Merit Distinction
L.O. 1: Demonstrate an understanding of management accounting
systems.
P1: Explain management accounting M1: Evaluate the benefits of D1: Critically evaluate how
and give the essential requirements of management accounting management accounting
different types of management systems and their application systems and management
accounting systems. within an organisational context. accounting reporting is
integrated within
organisational processes.
P2: Explain different methods used
for management accounting
reporting.
P3: Calculate costs using appropriate M2: Accurately apply a range of D2: Produce financial reports
techniques of cost analysis to prepare management accounting that accurately apply and
an income statement using marginal techniques and produce interpret data for a range of
and absorption costs. appropriate financial reporting business activities.
documents.
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Unit 5| Management Accounting
TASK
Task 2 covers Learning Outcome 3 & 4
2
Your formal report in the task 1 above was much appreciated by the directors and you have been
recruited on permanent footing in General sportswear as Junior Management Accountant. Mr
David Hamilton, who is a director in General Sportswear and looks after accounting and finance
matters of the organisation, asked you that he is interested in understanding that how different
planning tools will help the organisations in achieving its goals and objectives. Further, how
management accounting systems help to respond to different financial problems within General
Sportswear.
You need to prepare a power point presentation of at least 12 slides covering the following tasks.
These tasks should be linked to the given scenario of General Sportswear. This is an individual
submission and the learner need to present it in the form of a 10-minute individual PowerPoint
presentation and 5 minutes allocated for questions, panel of assessors and students can ask
questions.
The speaker notes will also be part of the task and it will submitted with presentation. The tasks
should be logically divided into different power point slides with appropriate main and sub-
headings. You also need to submit a bibliography using the Harvard referencing system. The
recommended word limit is 1,5002,000 words, including speaker notes, although you will not be
penalised for exceeding the total word limit.
A. What are the three most important planning tools for budgetary control you will recommend to
be used in General sportswear with their advantages and disadvantages. (P4)
(For Merit)
Analyse the use of your recommended planning tools in task A above and their application for
preparing and forecasting budgets. (M3)
B. You need to compare any other organisation with General sportswear and explain how
organisations are adapting management accounting systems to respond to financial problems.
(P5)
(For Merit)
As a next step, you need to analyse how General sportswear after adapting management
accounting system improving its profitability and could gain a sustainable success over the
period of time. You can use the financial data given in task 1 above (M4)
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Unit 5| Management Accounting
(For Distinction)
You have to evaluate how planning tools for accounting as discussed in above task respond
appropriately to solving financial problems to lead organisations to sustainable success.
Your answer should be in context of General Sportswear. (D3)
Grading Criteria
Pass Merit Distinction
L.O. 3: Explain the use of planning tools used in management LO3 & 4
accounting. D3: Evaluate how planning
tools for accounting respond
appropriately to solving
P4: Explain the advantages and M3: Analyse the use of different
financial problems to lead
disadvantages of different types of planning tools and their
organisations to sustainable
planning tools used for budgetary application for preparing and
success.
control. forecasting budgets.
L. O. 4: Compare ways in which organisations could use management
accounting to respond to financial problems.
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Unit 5| Management Accounting
Submission Guideline
Students must observe the following submission guideline:
Hardcopy of the assignment should be submitted at the college reception on or before at 5.00 pm
on the date specified.
There is stipulated length for the work is given in each task. However, there is no penalty for
increase in word limit.
All work must be delivered in both hardcopy and softcopy versions. The softcopy should be
uploaded on to the MOODLE.
For security purposes, learners should keep both copies with them.
Sources should be acknowledged fully by referenced books, journals used and URL visited using
Harvard reference style. A good guidance is available on college MOODLE. You can also learn it in
your study skill sessions.
Assignment Notes
Learners are requested to comply with the following instructions on handing in their assignment work:
Work should be comprehensively referenced using Harvard style.
Sources must be acknowledged fully by reference books, journals used and URL visited along with
dates of visitation.
Use the Harvard Referencing System (see attached details).
All work should be word processed, font size of 12 and font style of Times New Roman/Arial.
Subtitles of the assignment should be in the font size of 14 and main title in font size 16.
Pages should be numbered in footer.
Spell check the document and read thoroughly for grammatical errors.
1.5-line spacing is preferable.
Reference at the end of the assignment.
All paragraphs containing text should be aligned in justified mode.
In this context the definition and scope of plagiarism are presented below:
Using the work of others without acknowledging the source of information or inspiration. Even if
the words are changed or sentences are put in a different order, the result is still plagiarism
(Cortell 2003).
Collusion is described as the submission of work produced as a result of the collaboration between
two or more parties. Additionally, collaboration entails the sharing of one persons work with
others who submit either all or part of their coursework as their own.
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Unit 5| Management Accounting
Recommended Resources
DRURY, C. (2015) Management and Cost Accounting. 9th Ed. Cengage Learning.
EDMONDS, T. and OLDS, P. (2013) Fundamental Managerial Accounting Concepts. 7th Ed.
Maidenhead: McGraw-Hill.
HORNGREN, C., SUNDEN, G., STRATTON, W., BURGSTALHER, D. and SCHATZBERG, J. (2013)
Introduction to Management Accounting. Global Ed. Harlow: Pearson. (This text is available
electronically and is supported by access to an online course)
SEAL, W. et al (2014) Management Accounting. 5th Ed. Maidenhead: McGraw-Hill.
Websites
www.cimaglobal.com
www.accaglobal.com
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Unit 5| Management Accounting
In this the author's surname and year of publication are cited in the text, e.g. (Bond, 2004).
Reference List:
A reference list (of these citations) is included at the end of the assignment, in alphabetical order by
author. The reference list also includes additional details such as the title and publisher. A bibliography
lists relevant items that you have used in the preparation of the assignment but not cited in your text. A
bibliography should also be in the Harvard style and the inclusion of such a list shows that you have read
widely beyond the items you have cited.
1. Books with one author: Redman, P., 2006. Good essay writing: a social sciences guide. 3rd ed.
London: Open University in assoc. with Sage.
The required elements for a reference are: Authors, Initials., Year. Title of book. Edition. Place: Publisher
Kirk, J. & Munday, R.J., 1988. Narrative analysis. 3rd ed. Bloomington: Indiana University Press.
For books where there are more than four authors, use the first author only with surname and initials
followed by et al.
The required elements for a reference are: Author, Initials., Year. Title of book. Edition. (only include this if
not the first edition) Place: Publisher
Grace, B. et al., 1988. A history of the world. Princeton, NJ: Princeton University Press.
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Unit 5| Management Accounting
4. E-books
For e-books the required elements for a reference are: Author, Year, title of book. [type of medium] Place
of publication: Publisher
Fishman, R., 2005. The rise and fall of suburbia. [e-book]. Chester: Castle Press.
If available at website:
Fishman, R., 2005. The rise and fall of suburbia. [e-book]. Chester: Castle Press.
5. Journal articles
Author, Initials., Year. Title of article. Full Title of Journal, Volume number (Issue/Part number), Page
numbers.
Perry, C., 2001. What health care assistants know about clean hands. Nursing Times, 97(22), p.63-
64.
6. Newspaper articles
Author, Initials., Year. Title of article. Full Title of Newspaper Day and month before page numbers of
article.
Slapper, G., 2005. Corporate manslaughter: new issues for lawyers. The Times, 3 Sep. p.4-5.
Boughton, J.M., 2002. The Bretton Woods proposal: an in depth look. Political Science Quarterly,
[online]. 42 (6), Available at: http://www.pol.upenn/articles (Blackwell Science Synergy) [accessed
12 June 2016].
8. Internet
National electronic Library for Health. 2003. Can walking make you slimmer and healthier? (Hitting
the headlines article) [Online]. (Updated 16 Jan 2016) Available at: http://www.nhs.uk.hth.walking
[accessed 10 April 2005]. The title of a web page is normally the main heading on the page.
Marks & Spencer, 2014. Annual report 2013-2014. [Online]. Available at: http://www-marks-and-
spencer.co.uk/corporate/annual2013/ [accessed 4 June 2016].
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