Assignment Sample on Implementation of Management Accounting Systems

Implementation of the management accounting systems and the various tools and techniques within the Glencore organization

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Management Accounting Assignment Sample

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Scenario 1

P1. Explanation of management accounting and the various essential requirements of different kinds of management accounting systems

As per the chatted Institute of Management Accounting (CIMA), Management Accounting is a tool used for identified problems and accumulated information which can be measured and interpreted through ages analysis for providing effective management reports on which management can plan evaluate and control the process of the company. Management Accounting includes all tools and techniques required for analyzing the financial problem and provide a better assessment of that financial problem to the management which can be a reliable source of information for better decision making to improve the financial performance of the company (Atkinson et. Al. 2012). Furthermore, management Accounting is used for the orientation of management identified as specific investigation results for better decision making to improve the operational and financial performance of the company.

There are measure scopes are available for accounting systems around the world. Management Accounting and financial accounting are interlinked with tools and techniques for each theory and principles for both accounting systems (Banerjee, B., 2012). There are similarities along with the differences between both the accounting systems which are evaluated and discussed below in a tabular form for a better understanding of management accounting and financial accounting systems.

Reason of Difference

Management Accounting

Financial Accounting


Management accounting provides reports and information which is specifically used by Internal users of the company.

External Users like Shareholders, Financial institutions, Market competitors, etc. used reports generated through financial accounting for their references.


Management accounting provides reports and analyzed data that reflects future-oriented processes for management so the Approach of management accounting is Future-oriented.

Financial accounting analyzed past financial data so they provide analyzed information based on the past financial information of the company so financial accounting is more focused on the historical approach for their analysis.

Statutory obligation

Management accounting is not inbounded with any kind of statuary limitations of IFRS or GAAP for preparation and analysis of financial information for management perspective.

Financial Accounting is governed or prepared financial reports under rules and regulations of IFRS and GAAP for financial reports.

Role of Management Accounting System and Management Accounting

  • Inventory Control: Inventory control includes various tools and techniques which help management better control the operational flow of inventory throughout the process of production areas. Inventory control also assists management to take strategic decisions to improve the efficiency and effectiveness of inventory and ensure a regular supply of stock for each production point which helps in the Operational performance of the company. Furthermore, inventory control also investigated the loopholes in inventory management and identify the key issues for the valuation of inventory for the business activity.
  • Price Determination Policies: Price determination policies are helping the management of Glencore to identify the demands of products in the market and also assist in better evolution and settlement of price for the product so that IT company can earn maximum profit from their operational activities. The key objective of price determination policy is to provide or assist management in setting up optimum prices for the product to achieve the desired profit of their business activity for a specific fiscal year.
  • Cost accounting system: A cost accounting system is a tool that helps management in better allocation for their cost and cost centers so that management can fully utilize their resources and minimize their total cost incurred for the production of goods. Furthermore, the Cost accounting system also assists management in better understanding of absorption of cost for the service center and production Centre which helps management in better assessment of the total cost of production and per-unit cost of production which directly impacts the sale price of products under price determination policies.
  • Job costing system: Job costing is a method that includes tools and techniques which can be helpful for management to assess the overall cost for a specific job in the business activities of Glencore so that management can take a corrective strategic decision to overcome the cost of production for the company. Job costing also provides assessment information related to the different jobs so that management can stop and start a specific job that is beneficial for the company and the interest of society.

P2. Various methods utilized for management accounting reporting

  • Budgetary Control: Budgetary control includes tools and techniques which help management in better planning and forecasting of financial information for their future perspective. For the management of Glencore budgetary control can help full in identify the income and expenses which company is required to achieve for a desirable profit shortly full stop furthermore management of Glencore can analyze the performance of the company throughout the year based on the prepared budgets for the previous financial performance of company throughout the year which can help take better decision to resolve the variance for a specific expense or the job.
  • Unit Costing: Unit costing is a method which helpful for the management to identify per unit cost of business so that they can determine the price of the product and sold their products in the market. As per the management Accounting, These reports are valuable as the price determination is based on the reports provided to unit costing method and also this method provides individual costing of various cost Centre or other cost factors throughout the year hence this information is very useful for management to take study at shall overcome the cost of for per unit of product.
  • Inventory Control: Inventory control is a method that is used by management Accounting reporting to provide information related to the inventory hold by the company and the flow of inventory throughout the air during the production activities of the company. Management of Glencore can use the list of Stocks prepared by FIFO and LIFO method under inventory control so that they can rely on reports and calculated the net realizable value of assets and compare that value from the market value of the company for inventories holds by the company
  • Process Costing: Process costing can be a useful tool for reporting the purpose of the overall cost for a specific process or the job or batch for production activities of the company. Process costing helps management to identified overall cost consumption during a process or job in the production areas so that company can take corrective actions to overcome cost on standard process and minimize the losses which occur during the process.

M1. Evaluation of advantages of management accounting systems along with their application within the company

  • Effective decision making: Management accounting provides the reports and process data which are helpful in identified key issues so that management can take a corrective decision. For the management of Glencore, Management accounting helps provide information that can be used for effective decision-making to improve the performance of the company.
  • Planning: Management Accounting includes budgetary control tools and techniques which can help prepare budgets and control the performance of the company which provides better planning to their business activities to achieve their sustainable future goals (Kaplan et. Al., 2015). Companies like the then court can use that kind of budget which can be helpful in better assessment of their business process and control over the cost incurred during the production activities.
  • Cost controlling: Cost is the key factor for each and every business organization and this can be a crucial factor that decides the pricing of the product of the company. Management Accounting can be Help companies to control their cost and also assist them with the tools and techniques which can be used for identified variance between different cost Centre and give appropriate places to take a strategic decision to overcome the cost on the cost Centre.
  • Performance measurement: Management Accounting provide various reports which analyze the performance of the company also evaluate the efficiency of their production processes (Cull et. Al. 2014). As per the report prepared by management Accounting, Management can measure the performance of the company and take corrective actions to improve their performance which helps them to achieve the sustainable goal in the near future

D1. Critical evaluation showing how the integration of management accounting reporting and management accounting systems is achieved within organizational processes

  • Job costing reports: job costing reports are the key financial reports which help management to integrate their business decision with the process or production activities so that they can improve the overall efficiency of job costing and overcome the cost incurred during the process of job on production areas or service Centres (Hilton et. Al., 2013). The cost and price are interlinked with each other which can be helpful in the achievement of profitable all favorable scenarios to company so that they can excel in the market and achieve adequate market share.
  • Inventory manufacturing reports: Inventory control can be a useful tool for management to better monitor and analyze the flow of inventory which provides butter command on outflow inflow of inventories during the process of productions. The integration of this report can be e used for the management of Glencore to make a good estimate of their overall productions or inventory cost which can help in identifying the store gas and oil in the storage areas for a specific fiscal year.
  • Budget reports: Companies like Glencore budgets are more important as they are very much engaged in the production activity and budgets are helping them to monitor and identify the key expenses which have major various so that they can overcome that region and achieve the sustainable goals for the company (Alviniussen, and Jankensgard, 2015). All the budgets also help the management of the company to determine the price of the product so that they can be sold out their products in the market with achievable margins throughout the year.

P3&M2. Calculation of costs using absorption and marginal costing techniques

Marginal Costing & Absorption Costing technique

Marginal costing and absorption costing are two different costing methods that can be used by the various companies to determine the profits from their production activities so that they can identify their break-even point and margin of safety which is required to achieve in yourself near future for their desirable profit. Furthermore, these two methods are working on costing factors for business activities as marginal cost mostly depends on the variable costing factors and absorption costing depend on the absorption of cost for their production Centre's and cost Centre's throughout the process so so there is a slight difference between both of the methods for profit generation as the basis of calculation is different from each other (Noreen e. al., 2014). Here both the method are discussed and evaluated through a practical example so that management of Glencore can understand the importance and the usefulness of the work method which can be helpful to identify the most suitable method for valuation of costing and identified the profit of the company.

Marginal Costing

Marginal costing is a method used to analyze the production of all the desirable profits on the change of level of output or revenue generation capacity of the company. Marginal costing helps business to relate their fixed cost and variable cost so that companies can identify the break-even point and margin of safety for their business activities. In this process, variable costs are chargeable on the sales volume of the products and fixed costs are chargeable on a fixed basis so the company needs to wear the fixed course if they have nothing to sell. The three terms used in marginal costing are mentioned and discussed below for better understanding;-

  • Variable Cost - Variable costing is a part of which has a variable element that can be changed while the change in the sales or output of the product for the company.
  • Fixed Cost - Fixed cost is the part of the cost which is fixed in the nature so that company needs to be here those kinds of cost on the output of zero or if the company has nothing to sell although they need to be the fixed cost for the production activities.
  • Contribution - Contribution can be identified as the overall profit earned by the business by substitution of variable cost from the total sales revenue generated through business activities of the company.

Profit as per Marginal Costing:



 Sales ( 75000 Kgs X $20)


 $ 1,500,000.00

 Less Variable Cost 


 Opening inventory

 $ 96,000.00


 Variable Cost


 Manufacturing Overhead

 $ 640,000.00


 Marketing and Administrative Overhead

 $ 150,000.00


 Closing inventory

 $ (136,000.00)

 $ 750,000.00




 $ 750,000.00


 Less: Fixed cost


 Manufacturing Overhead

 $ 320,000.00


 Marketing and Administrative Overhead

 $ 300,000.00

 $ 620,000.00




 $ 130,000.00

As per the calculation, the company sold 75000 units on which they can earn profit or margin of $130,000.00 for the year. This indicates that the company is generating a profit of $1.73 per Unit from its business activities for the year.

Absorption Costing

Absorption costing is a costing method that helps management or organization to understand the overall ghost observer by a specific production Centre or Cost Centre for their production activities. Adjust absorption costing is also called full costing as this method is used to capture all the costs associated with the manufacturing of a product in the production process of the company (Otley et. Al., 2013). In General, absorption costing is requested or required by generally accepted accounting principles for their external reporting purposes so that external stakeholders can understand the overall cost observe fall per unit of production of the business product. Here is the financial analysis is conducted on the assumptive data for a better understanding of absorption costing to the management of Glencore corporation.

Profit as per Absorption costing:



 Sales ( 75000 Kgs X $20)


 $ 1,500,000.00

 Less Cost of sales: 


 Opening inventory

 $ 144,000.00


 Add:- Cost of Good Sold avaiable for Sales

 $ 960,000.00


 $ 1,104,000.00


 Closing inventory

 $ (204,000.00)

 $ 900,000.00

 Gross Profit 


 $ 600,000.00


 Less: - Marketing and Admin Expenses


 Variable Marketing and admin Expenses

 $ 150,000.00


 Fixed Marketing and admin Expenses

 $ 300,000.00

 $ 450,000.00




 $ 150,000.00

Reconciliation of Cost under absorption costing and Marginal Costing

Cost Reconciliation




 Profit as per Marginal Cost 

 $ 130,000.00




 Under/Over absorption overhead

 $ 20,000.00


 Profit as per Absorption Costing 

 $ 150,000.00

Working Note

Under/Over absorption Costing



 A. Manufacturing Fixed Overhead

 $ 320,000.00

 Total Units Produced 

 $ 80,000.00

 Per Unit Fixed Manufacturing Cost 

 $ 4.00

 Total Units Sold 

 $ 75,000.00

 B. Allocated Fixed Cost

 $ 300,000.00


 Under Absorption Cost 

 $ 20,000.00

Scenario 2

Introduction of future-oriented planning at Glencore Organisation

Planning is future-oriented, it relates to deciding what needs to be done in the future and it is the blueprint for action. Planning involves determining the availability of resources and allocating responsibilities to employees according to their potential. Thus good planning is a core to an organization like Glencore to achieve its vision, mission goals, and objectives. A good plan is itself key to the success of an organization.

Planning Tools

Planning tools are instruments that help organizations for overall development in business events. Planning tools are like initiatives that may include

  1. Organizational timelines
  2. Action item checklists
  3. Meeting the agendas

P4. Explain the use of planning tools used in management accounting


  1. Analysis of Profitability: The planning tools in getting detailed information relating to various businesses carried out by the organization. Henceforth these helps to differentiate between the business units which are making profits and which are making losses in an organization like Glencore.
  2. Deploying Limited Organisational Resource in Best Manner: Planning tools will assist proper allocation of limited financial resources of the organization in the best possible manner on a preferential basis that day-to-day operations of the organization work efficiently.
  3. Recognition of Suitable visions: The planning tools like forecasting, benchmarking helps to determine the best suitable vision for an organization like Glencore which guides to achieve vision, mission, goals, and objectives that the organization wants to fulfill within an estimated period.


  1. Stringent: The planning tools like fixed budget and benchmark are not changeable easily as per changing requirements due to trends. Then these planning tools start less suitable for the organizations like Glencore which will not cope up with changing conditions.
  2. Time Taking: Organisations needs to spend a lot of time to form planning tools like budget and benchmarking which are perfectly suitable for an organization like Glencore, complete details have to be assessed in forming the budgets to make these more efficient and effective and best suitable to the organization even for future and even in changing environment.
  3. More Importance to Financial Attributes: Various Planning tools targets financial attributes and less considers the qualitative elements such as consumer satisfaction their review, quality of product, and services.

M3. Analyze the use of different planning tools and their application for preparing budgets and forecasts.

  1. Cash flow Budget: Cash Budget is the main planning tool that has to be used by the management of the Glencore organization. Cash budget helps formation and estimation of the need for cash through inflow and outflow of cash during the particular operating cycle. It may be yearly, quarterly, or monthly as per the requirements of the organization.
  2. Master Budget: It is the overall budget of an organization that comprises data related to the funds allocation to different business functions and operations. It assists in evaluating the cost pivoted around different functions and operations. The mast budget comprises elements such as operating capital, turnover, income sources, and overall expenditure. It would help managers of Glencore to work in line with the goals and objectives of the company.
  3. Operation Budget: The planning tool helps to evaluate and assess the company’s operating budget that comprises all costs related to the functions of the organisation. These include working capital, labor cost, manufacturing cost, overhead cost, production cost, administrative cost, etc. The income flow comprises the overall sales of the company. Point to note here is that the operation budget can be made of weeks, months, quarter, or years.
  4. Financial Budget: Planning tools assists organizational need for short term requirement and long term requirement of funds in the organization and helps in needed funds are available as to when there is the requirement of amount. This budget aims at managing the flow of finance to the entity and from the entity. The flow of finance from the organization through expenses and flow of finance to the entity in the form of sales. In short Financial Budget ensures the financial strength of the organization.

P5. Compare ways in which organizations could use management accounting to respond to financial problems


It is the best technique of management accounting which is necessary for comparison ability of a company's goods and services or process flow with those of other organizations considered as best in the industry, "best in class." For example, Rio Tinto and the Glencore organization are working in a similar industry i.e. oil and natural gas extraction and transportation. The benchmarking is to find opportunities with the organization for overall development. To give the best response to financial problems, Financial Benchmark is necessary for assessing costs with other companies of the industry. Which helps you to implement changes that will yield significant improvements.

Key Performance Indicators

The key performance indicators are measures of value that helps to disclose the effectiveness of fulfilling the main goals and objectives of the organization. Organizations will utilize the KPIs at various levels to analyses their success at accomplishing their predetermined goals. There are both financial and non-financial KPIs. Financial KPIs are needed to give proper responses to the financial issues. Glencore can use Financial KPIs such as margin of profit, changes in the percentage of turnover and purchase, Ratio analysis, etc. If there are very high fluctuations in these financial KPIs there is the possibility of the existence of financial problems. Therefore proper actions should be undertaken by Glencore to resolve the financial problems considering the KPIs. Even non-financial KPIs like customer review and customer satisfaction is also cause to effect the reduction in KPIs related to sales.

Balance Score Card

The balanced scorecard is the tool of management accounting that helps for strategic planning and helps in correcting the various financial and non-financial difficulties in the organization. The balanced scorecard tool highly concentrates on important perspectives like Customers review, availability of finance, the strength of the organization, and the process of the organization. Glencore can give high importance to the availability of finance to overcome various financial difficulties of the business. Therefore the financial information is collected in relation to aspects such as operating income, return on equity and investments, and protection of the interest of owners of the organization. The balanced scorecard method is better as compare to ratio analysis as it requires less complex interpretation and can assess the financial problems and find better corrective actions based on the financial information of the organization.

Activity-Based Costing

Activity-based costing is a method That is commonly used in an organization to conquer the financial problems which are arising because of the inadequate and uneven allocation of indirect expenses like administration fees and the expenses incurred in office. The activity-based costing method helps Glencore to take responsive actions against the financial problems. This involves developing activity center’s that assist inappropriate allocation of product cost to the units produced in activity consumption ratio by every single unit produced by the company. Thus, appropriate allocation of the indirect expenses will help to overcome the financial issues which are arising because of inappropriate allocation of costs. This method is more reasonable as compared to the absorption cost because absorption cost will consider the full product cost that is direct and also indirect but the activity-based costing method is only concerned with the indirect expense.

Financial Administration

Financial administration is the most significant tool that management should consider to overcome financial problems. As it considers the framework and mechanism which will help the manager of Glencore organization to combine the financial information which will be utilized in controlling and monitoring the operations of the organization effectively and efficiently. Different rules and regulations with reporting capacities help the manager for submitting the reports in a specific period and review financial information. By considering all these managers will be able to take a correct decision which helps for the overall betterment of the financial position of the business. And adopting a proper internal control system in Glencore is a more relevant technique to overcome financial issues.

D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organizations to sustainable success

The most effective and efficient planning tool that organizations like Glencore consider is Budget, which will be helpful concerning overcome from financial issues and achieving sustainable success within the organization. The Planning tool of Budgets is considered as most essential for resolving the financial barriers of the companies like Glencore. Because they are essential in upcoming planning and forecasting. So with the bits of help of these planning tools such as cash budget, master budget, operating budget, etc are most important to the organization for smooth running day-to-day operations. For example planning tool like cash, budget is most relevant concerning the equitable allocation of cash to various departments, operations and activities of the organization as per their requirements. Based on the availability of the amount in the organization different transactions can be taken as per the need. Further sustainable success can be achieved over the long-term period by conducting various operations as per the planning tools and techniques. The excess cash resources are invested in the investments which are safest and give more returns to the organization.

M4. Analyze how, in responding to financial problems, management accounting can lead organizations to sustainable success.

The proper utilization of management accounting by the manager of Glencore for presenting their different financial issues and to attain the long-term vision of the organization. This is achievable when management adopts various tools and reporting of management accounting through which managers disclose the major financial problems as early as possible. Different types of management reports can be used to attain this objective. For example, budget reports and cost reports give detailed information about different factors such as scarcity of resources and cash which causes to increase in production process timing and leads to a lack of financial resources to achieve the development needs of the organization. Like that Marginal costing tool also helps the manager to make appropriate decisions concerning cost, profit, and elements of sales. And the efficiency of workers and employees can be measured by going through the performance reports. It helps to decrease the expense incurred for underrating various tasks in the organization. So with all these tools and techniques Gencore organization recognizes its financial issues and finds ways to overcome these financial issues and can obtain sustainable success.


The above report is used in assessing the importance of the implementation of the management accounting systems and the various tools and techniques within the Glencore organization which guides it to effectively face and overcome various financial issues. Moreover, the report also helps in developing an understanding concerning the planning tool of accounting and how they will help Glencore in preparing suitable forecasts and budgets for the future period.


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