Assignment title Management Accounting Report for Lets Grow Ltd.
Purpose of this assignment:
The overall purpose of this assignment is to assess students’ understanding of the fundamentals of management accounting which apply to organisations the wider business environment. Students will explore how management accounting uses financial data to aid planning decisions, and the monitoring and control of finance within organisations.
Unit Learning Outcomes:
LO1 Demonstrate an understanding of management accounting systems
LO2 Apply a range of management accounting techniques
LO3 Explain the use of planning tools used in management accounting
LO4 Compare ways in which organisations could use managementaccounting to respond to financial problems
Scenario
You have been working as a trainee management accountant at Lets Grow which is a manufacturing business. In the past few months, the business has been experiencing some financial challenges due to recent economic changes. The following forecasted information has been provided for activities in the next six months ending August 2020. Sales (£) Purchases (£) March 150,000 50,000 April 180,000 70,000 May 120,000 80,000 June 140,000 90,000 July 160,000 100,000 August 170,000 120,000
The following additional information is provided: 1. All sales are on credit and 20% of customers are expected to pay in the month of sale and the remainder in the next month 2. All purchases are on one month’s credit from suppliers
3 Issue 1: March 2020 Copyright © – All rights reserved-
3. Additional equipment costing £20,000 will be purchased in May. A loan of £20,000 has been negotiated from the bank from the same date 4. Wages are expected to be £30,000 per month and are paid during the month. 5. Rent of £48,000 per annum is paid quarterly in March, June, September and December 6. Depreciation on fixed assets amount to £24,000 per annum 7. The accountant has aggregated the remaining expenses into fixed and variable overheads Variable overheads amounting to 10% of sales and are payable one month in arrears Fixed overheads of £360,000 per annum are payable one month in arrears 8. The balances on the accounts at 29th February were; Amounts owed by customers £96,000 Amounts owed to suppliers for purchases £50,000 For overheads: Fixed £30,000; Variable£10,000 Balance at Bank £20,000
Your line manager has requested your help in preparing a management accounting report based on the information above. a) Explain the essential requirements and their benefits for management accounting system to function efficiently b) Discuss how management accounting systems and its report help support an organization like Lets Grow Ltd in making decisions c) Prepare a cash budget for the coming six months ending in August 2020.
d) Analyse the use of cash budgets and its application for preparing and forecasting the financial position of an organization like Lets Grow Ltd.
e) Discuss how Lets Grow Ltd can adapt its management accounting system to deal with financial problems f) Provide a critical evaluation of the financial position of Lets Grow Ltd based on the forecasted cas budget prepared by you. (Applicable to LO1= a and b) (Applicable to LO3 and 4= c, d, e, and f)
