Role of Management Accounting in Forecasting Budget


  • Unit No: 5
  • Level: High school
  • Pages: 4 / Words 920
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 848
Brief :
Organization Selected : Sainsbury and Tesco plc.


In current business environment, the field of management accounting assumes a significant role in the company. You are basically applying for the role of Trainee Management Accountant in a medium sized manufacturing organisation called as Alpha Ltd. With the 50 members of staff and modest turnover of €500, 000 per annum. They are offering pizzas in wide range and it starts off as a small pizza company in 2001. you are also allowed to use your workplace or any of the company of your choice.

Task 1:{LO1}

Your report should include the following:

  1. Define the management accounting and give the essential needs of various type of management accounting systems.
  2. Define various methods which are used for management accounting reporting

Scenario 2

Your report in context to Scenario 1 has been well gained and has won accolades. The firms have now hired you as a Trainee management accountant. Having been satisfied with the theoretical knowledge, your line manager now wishes to assess your ability for applying a number of management accounting techniques.

Task 2{LO2}

You will be required to demonstrate your skills of numeracy by way of offering solutions to problems involving the application of management accounting techniques. Calculate costs using appropriate techniques of cost analysis to prepare an income statement using marginal and absorption context.

Task 3{LO3 & LO4}

Using the existing scenario, continue with the report to your line manager addressing other key issues in order to make the management accounting functions in the chosen business.

  1. Explain the benefits and drawbacks of various types of tools which is used in planning and budgetary control and analyse the use of planning tools in the given company or company of your choice.
  2. Compare how the company are adapting management accounting systems to responds to financial problems and analyse how they are responding to financial problems, management accounting can lead organisation to sustainable success.
  3. Evaluate how planning tools for accounting respond appropriately to solve financial problems to lead organisations for the sustainable success.
  4. Compare how the company are adapting management accounting systems to responds to financial problems.


In order to carry out a comparison, you may first have to select any two companies of your choice that includes the Tesco and Sainsbury's and analyse the financial problems and how they are applying accounting systems.

Problem 1. Alpha Ltd wants to cost one of its new pizza formulation which it plans to introduce in the market in summer 2020. they also offering you with the following cost and production information:




Unit selling price


Unit variable price


Fixed manufacturing cost per period

150, 000

Non-manufacturing cost per period

50, 000

Furthermore, the budgeted activity is 75, 000 units to be produced in each period. There were no opening inventories. The schedule of sales and production of each period is given below:

PERIOD Apr'19 May'19 June'19 July'19 Aug'19 Sept'19
SALES('000) 75 60 90 75 90 80
PRODUCTION('000) 75 75 75 75 85 70
    • by using the information given in table-1, calculate unit products cost and prepare income statement given:
    • Variable costing system
    • Absorption costing system
    • Make the schedule to reconcile the net operating income in the variable and absorption costing system.
    • Company has now diversified its operations and started manufacturing a new health product. They have been suffered a loss of €18, 000. Income statement is given below:
    Sales(13,500units* £40) 540,000
    Variable Cost(13500* £28) 378,000
    Contribution 162,000
    Less Fixed Expenses 180,000
    Net Operating Loss 18,000


    Using the given information calculate:

    a. BEP in units and in GBP(Revenue)

    b. Contribution Margin Ratio

    2b. Alpha Ltd is planning to purchase a new machine. Such installation of new machine will enhance the fixed costs by 236000 and minimise unit variable expenses by 50%.

    2c. Company expects a sale of 20, 000 units for next months.

    Prepare financial statement under two scenarios and give the interpretation.

    Section1. Assuming that the machine is not installed

    Scenario 2. Assuming that it is installed

    2d. should the company install new machine? Give recommendations

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