GBM5MGA Management Accounting Assignment Sample

Introduction to GBM5MGA Management Accounting Assignment Sample

Management accounting refers to understanding the crucial business that mainly provides the internal decision-making for the decision makers through the delivery of financial information. This report takes the initiative of understanding the importance of management accounting in organizations and evaluating the accounting techniques such as cost analysis, budgeting, and forecasting. The provided scenario is mainly based on the Metro Manufacturing (MM), and in task 1, evaluating and sorting all the costs. Apart from that, task 2, is mainly evaluates the break-even point for Metro Manufacturing, and in that part, also discusses the report on behalf of the CFO for the instructions of the CEO. This report also disclosed unavoidable cost changes and, margins of safety of the company. In task 3, it mainly presents the budgeting and identifies the problems and provides a strategy for controlling the budgeting system. Moreover, considering the part of marketing that provides the differentiation, market intelligence, and retention with customers, and the efficiency of customers for the Metro manufacturing is the pivotal part.

This Management Accounting Assignment Sample examines cost classification, break-even analysis, budgeting, and financial forecasting for Metro Manufacturing. An Assignment writing helper can support students in understanding cost control, margin of safety, budgeting strategies, and financial decision-making to improve business performance.

Task 1-Costing

A) Metro “New Product” Cost Information Table

Categorization of cost classification

In the below consideration, categorizations of the cost classification for Metro Manufacturing are revealed in the below. All the cost classifications for the new product have been allocated in every segment.

In the table, fixed cost, variable cost, prime cost, conversion cost, period cost, and factory overhead cost are the key insights. Fixed costs mainly include all the various types of costs, such as depreciation of buildings, supervisory salaries, rental of machinery, and marketing costs. Those costs all cost mainly remains at a constant value regardless of the production levels. Direct material, utilities, and indirect materials are directly linked to the output of volume portions and are all considered as fixed costs and variable costs. The consideration of adding the value of direct material and direct labour discloses the value of prime cost, and that cost directly lies in production segments. Moreover, conversion costs are mainly found in the direct labour to add to the factory overhead, and expenses are mainly related to the transformation of raw materials into finished goods. Marketing costs, rent, and overall tenant interest are considered as the expenses for the financial period, which are mainly incurred and unrelated to the production.

Strategic considerations for metro manufacturing

• Metro is considering opting for renting machinery and storage space and reducing the upfront cost to mitigate the financial risk.
• In this aspect, liquidity management is mainly considered short-term investments that mainly provide the working capital and overall cost of the investment returns.
• For this reason, bank financing companies in metro consist of the self-financing rather than seeking loans, which mainly signals confidence in long-term profitability.

Understanding the overall cost classifications for the Metro manufacturing on the new product launch

Fixed cost is categorized as the expenses that remain unchanged regardless of the level of production, for sales variable costs such as those that directly fluctuate with the 4introduction, and those which are mainly incurred in a consistent way.

Examples of the fixed costs of manufacturing for Metro

• Building depreciation value is £15000 annually, which does not vary with the production units.
• Machinery rental is £5500 monthly, and this amount is paid by the company for the equipment usage.
• Supervisor salary is considered a value of £40000 annually, and it also remains unchanged for management usage.
• The marketing value is £40000, and the storage facility rent value is £600. The rent is considered as the promotional cost and warehouse cost, and these costs do not depend on the number of goods stored.
• Interest on investments is mainly valued is £2800, and its financial cost remains the same.

Graphical presentations on the behaviour of the fixed cost production levels

In the above graph, this is illustrated that the fixed cost for Metro manufacturing and its disclosure remain constant regardless of the production levels. Fixed cost diagram presenting the X axis for the production quantity units and the Y axis for the fixed cost, and the overall constant fixed cost is £103900.

Background of the report

Metro manufacturing company, which is eager to continue the expansion and to understand the overall cost structure, is a pivotal part of the strategic decision-making. This report section mainly analyses and aims to evaluate the Metro Break-even point, which directly affects the planned investment. This section also includes the new equipment figure and overall marketing expenditures. In addition, recommendations have been provided based on the financial stability, which mainly focuses on ensuring long-term sustainability and profitability.

Question 1: Evaluating Metro's current break-even analysis

1. Computations for the breakeven analysis for Metro Manufacturing
Particulars	Value portions £	Computation
Total sales revenue	42000000	Presenting on the given data
Total fixed cost	15450000	Fixed over all COGS + Fixed marketing + Fixed administration
Total Variable Cost	15300000	Presenting on the given data
Contribution margin	26700000	(Sales revenue - Variable cost)
Contribution margin ratio	0.64	Contribution margin/Sales revenue
Break-even sales Revenue	24303371	Fixed cost/Contribution margin ratio

Table 2: Breakeven analysis

(Source: Ms-Excel)

In the above table, this has been noted that Metro's overall revenue from operations is £42000000. Total fixed cost portions are £15450000, and total variable cost portions are £15300000. The contribution margin of the company is £26700000, and the Contribution margin ratio is 0.64. Metro is generating an overall break-even sales revenue is £24303371.

Question 2: Evaluating the break-even point for Metro manufacturing after the investment amount of 1.3 billion

Metros expect an overall 10% increase in the level of the fixed cost and an overall reduction of 5% in variable cost per unit due to the reason of new equipment for the investment.

2. Evaluating the breakeven point for Metro manufacturing after the investment of 1.3 billion
Particulars	Value portions £	Computation
Revenue from the sales operation	42000000	Presenting on the given data
Fixed cost for the previous times	15450000	Fixed over all COGS + Fixed marketing + Fixed administration
Increasing the portion of Fixed cost	1545000	(15450000*10%)
New Fixed cost portions	16995000	(15450000+1545000)
Variable cost for the previous times	15300000	Presented on the dataset
Reductions in the level of variable cost	765000	(15300000*5%)
New variable cost portions	14535000	15300000-765000
New level of the contribution margin (£)	27465000	Revenue of the sales, the new level of the variable cost
New contribution margin ratio	0.65	Contribution margin/Sales revenue
New level of the break-even sales revenue	25989077	New fixed cost/New contribution margin ratio

Table 2: Presenting the break-even analysis after the investment in equipment

(Source: Self-developed)

The above table depicts that the increasing portions of the fixed cost value are £1545000, and the overall new fixed cost portion is £16995000. Variable cost for the previous time value is 15300000. Reductions of the variable cost portions are £14535000. Overall contribution margin ratio is 0.65. A new level of the contribution margin is 2746500. The new level of the break-even sales revenue is £25989077.

Question 3: break-even point and the margin of safety analysis for the metro manufacturing (at the time of post-marketing investment)

3. Evaluating break-even point and the margin of safety analysis for the metro manufacturing (at the time of post-marketing investment
Particulars	Value portions £	Computation
Revenue from the sales operation	42000000	Presenting on the given data
Fixed cost for the previous times	15450000	Presenting on the given data
Increasing the level of fixed cost	700000	It's an addition to the marketing investment
New level of the fixed cost	16150000	(15450000+700000)
Previous level of variable cost	15300000	Presented on the dataset
Contribution margin £	26700000	Revenue of the sales- Variable cost
Contribution margin ratio	0.64	Contribution margin/Sales revenue
New level of the break-even sales revenue	25404494.38	New fixed cost/New contribution margin ratio
projected level of total sales	45360000	£42000000+8% increase in the model of the 301 sales
Margin portions of the safety level £	19955506	Total sales portions -break-even level of sales
Margin of safety	44%	(Margin of safety / total level of sales) *100

Table 3: Margin of safety analysis

(Source: Ms-Excel)

In the above table new level of the fixed cost is £16150000 and the increasing level of the variable cost is £1530000. Contribution margin value is £26700000. Apart from that projected level of the total sales is £45360000. MOS value is £19955506, and overall percentage is 44%

Suggestions for Metro Manufacturing’s efforts to reduce expenses and boost financial stability

Metro Manufacturing must address a key financial switch that will need the company to consider cost structure, breakeven point, and margin of safety. After considering fixed and variable costs, the expenses of getting new equipment and extra marketing, these recommendations are made to cover the company’s financial needs and support its expansion (Guenther et al.,2023)

1. Equipping Options

The new machinery purchased by Metro will help it increase fixed costs by 10%, but also lower variable costs by 5%. By using this strategy, companies can make more profit since their production costs per unit decrease.

Recommended Action:

Carry on with the investment, since it improves the company's long-term finances even if it means paying more in the beginning. Regularly check cash flow and safeguard some money to ensure the bank is stable. Try to negotiate rental rates with suppliers so that the company can handle some of the inflation-driven fixed cost increases.

1. Growing the brand and selling products to new markets

A hike in marketing costs to £700,000 is likely to raise sales of Model 301 by 8% and bring Metro’s breakeven and margin of safety points to 44%.

Recommended Action:

Make sure the company invests your marketing resources in places that boost your sales the most. Review the sales figures for Model 301 to ensure the expected 8% rise is achieved. If it isn’t, cut down on what the company spends on extra promotions. Use techniques to keep current customers to boost the results of their marketing activities.

1. Commission Changes and Sales Problems

Raising the rate of sales commissions from 12% to 15% is meant to keep top account managers, but it also adds costs (Sandvik et al.,2021).

Recommended Action:

Instead of always paying 15%, change the policy to reward successful sales teams through bonuses, so the extra money only goes to their best performers.

1. Holdings balances and liquidity deals

Metro is not at its desired £2.5 million cash on which might create possible dangers.

Recommended Action:

Increase your savings by improving how your business runs and cutting expenses that are not needed. Discover methods such as getting agreement from suppliers to pay afterward, or consider getting cash for a few weeks. Introduce steps to limit expenses and ensure the company’s finances do not change drastically.

Conclusion

There are positive and negative aspects to Metro Manufacturing’s finances. While acquiring new tools helps production, the increase in fixed costs should be considered first. Revenue should increase as expenses do, and this needs to be monitored by looking at marketing and commission changes. Above all, good financial reserves are necessary for staying stable over the years.

Background of the context

Metro Manufacturing is among the largest firms in the manufacturing field. Even though the company has surpassed its sales targets in previous quarters, it has come across financial problems owing to a cash flow crisis. The company has no budget plan, which has caused its financial management issues and led to increased borrowing from banks.

Currently, the head of the company has not set up a Master Budget for Metro Manufacturing. Financial planning is distributed in small businesses, so managers of different areas decide independently on their resources and budgets. Although Kabita, the CFO, oversees dividing funds among departments, the company does not enforce a single budgeting system. This, in turn, makes companies respond too late to money problems even when their earnings are adequate. Natalia, our new team member, believes that her old workplace relied on advanced budgeting plans, which helped them gain control over their finances. Unlike Re-Deema, Metro Manufacturing does not set up essential budgets such as cash budgets, sales budgets, expense budgets, and inventory budgets, so it cannot fully judge its financial condition. CEO Arham Rahman recognizes how important it is to develop a specific system that will reduce the company’s reliance on bank loans and has instructed the group to come up with solutions.

Presenting the budgetary control system and problems

Metro Manufacturing has financial trouble because of unorganized budget controls, which causes the company to be inefficient and rely too much on its bank loans. Here are the main matters that have been outlined:

At the time, no Master Budget

No organization coordinated to handle and balance the departments’ budgets.

Independent management by managers adds inconsistency to the company’s financial planning(Abdolazim et al.2021).

Having trouble managing cash flow

Although the company is selling well, unpredictable bills cause it to face a lack of cash.

At the time spending is not planned, organizations must get loans to keep their business going.

Not having Departmental Budgeting.

Departments do not work with set limits on their finances or responsibility for spending.

There was no tool in place to track expenses or assess the financial consequences for each team. Related to the basics, the enterprise needs to fix inefficient inventory and procurement approaches(Alonso-Albarran et al.,2021).

Not keeping an inventory plan results in spending more on raw materials or finished goods.

Problems with cash flow may arise because of high costs to hold inventory and mismatches with suppliers.

The company does not have a full range of financial forecasting tools.

• Plans to deal with emergencies rather than managing finances in advance.
• There is no clear process for seeing and preventing financial crises.

Ways to Solve Challenges with Budgetary Control

Create a Master Budget System for the company.

• Draw up a budget covering every financial part of the business, such as sales, production, cash flow, and costs.
• Make sure to always monitor financial status and ensure department budgets are brought together in one system (Sentosa et al.,2023).
• Give department heads the task of linking their budget plans to the goals of the company.

Create a Cash Budget to oversee your company’s liquidity.

• Put together a clear budget that lists what money flows in and out, to avoid money shortages.
• Make sure the Company has a certain amount of liquid assets to avoid borrowing from banks on short notice.
• Regularly check the cash position to determine its movement and update your financial arrangements based on the analysis.

Ensure that budgets and accountability are set at a high level in the department.

• Make sure that every department prepares a budget that details the expenses it believes will occur and the funds it will provide.
• Ensure that all spending by departments is approved and in line with what the organization wants to achieve(Muskeg et al.,2023).
• Check the department’s financial situation often to ensure it is meeting the budget guidelines.

Be sure to have the right amount of stock and buy only the items needed

• Develop ways to organize stock levels so that they correspond to the anticipated sales.
• Make sure to prepare a procurement budget for handling contracts with suppliers, pricing considerations, and planning when purchasing items.
• Arrange an automatic tracking tool to manage the stock levels and the process of acquiring more supplies.

Introduce methods to forecast financial stability.

• Examine the history of business and current market behaviours to estimate future monetary requirements.
• Make sure to set up KPIs that help you see if the budget is accurate and, if it isn’t, adjust the plan accordingly.
• Have financial reviews every three months to deal with any financial risks before they become serious.

Suggesting a budget for Metro manufacturing

Since Metro Manufacturing has cash problems despite doing well, the Company should set up a proper budget framework to help deal with financial challenges. This section talks about the main budgets that the company is required to develop, outlines their importance, and specifies which details must be included.

1. Master Budget

Definition:

A master budget brings together sales, production, and cash flow budgets to form a complete plan for the company.

The main significance

Provides a summary of financial activities to make sure there is unity among various departments. Combining all financial aspects to aid better decision-making and cooperation among people (Soni et al.,2022). Aids in avoiding imbalances in cash that can cause a lack of liquidity.

Metro Manufacturing Can Expect to Achieve with the Future Budget:

Because the company’s finances are poorly organized, ihas problems managing its resources. A master budget is set up properly, and it helps avoid problems with cash and keeps the business stable.

The Information Needed & Methods of Acquiring It

• Estimates of likely sales are made using past trends and market information.
• Production costs include what is spent (from records) on raw materials as well as production costs (Sinaga,2024).
• Guests naturally request information from department managers about their operational expenses.
• Amounts are estimated from regular reports in the accounts.
• Targets set by senior managers for an organization’s profit.

1. Cash Budget

Definition:

A cash budget helps keep track of the company’s incoming and outgoing cash, which is important for maintaining liquidity.

The Reason behind It:

• Prevents running out of cash and borrowing from emergency sources.
• Puts you in a position to plan cash flow, so you can meet the payments for suppliers and running expenses (Challoumis,2024).
• The reasons Metro Manufacturing requires this budget are.
• The organization experienced liquidity problems, despite performing at its highest ever level in sales.
• Noting proper cash flow management, it has become necessary to regularly borrow money from banks, a situation that cannot last.

The reason the company needs to provide & obtain it

• Revenue is gathered according to the collection schedule backed up by the payment records (Alhassan and Islam,2021).
• The agreement makes suppliers obliged to pay within the established period.
• Department expenses for operations.
• Ways of repaying loans, seen in the financial statements.
• Changes in cash flow throughout the different seasons based on past results.

In those above circumstances Company needed to achieve nave obtaining some strategies that directly help control the budgetary control system. The company takes strategies such as maintaining the Zero-based budgetary control system, planned-based budgetary system, and using the absorption costing directly helps to maintain the budgetary control system.

Brief conclusion

In this task, mainly identified the various types of budgetary systems and their implications in the business. Evaluating the strategies, such as how to use them in the business, involves evaluating the strategies to control budgetary control systems is also provided

Conclusion

The above discussions are mainly based on the evaluations of the break-even analysis Nd evaluations of the margin of safety. Not only nonlight, evaluating the bureaucratic control system is also a significant part, and disclosing the significant factors of the various types of budgetary control systems. Moreover, Over all strategy is also pointed out in task 4, which helps to identify the problems and apply these strategies.

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References

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