Reference no: EM13585751

You are the financial director of a large, ficticious company called Manac plc, which produces and sells a range of standard electrical goods. Production and sales take place across a number of countries. The company uses standard costing and absorption costing (DIE VOLLKOSTENRECHNUNG) as part of its approach to strategic management accounting.

The Board of Directors is concerned that the company is not meeting its budgeted target profits; the managing director takes the simple view that more sales mean more profits and that the products have not been priced to sell in sufficient numbers.

While you are aware that this is a possibility you recognise that the real reason for the lower than expected profits may be more complex. You have therefore decided to conduct a full review of variances (Soll-Wert-Ist-Wert-Vergleich) to identify those areas which have not met budgeted expectations

Assignment Requirements

While this review is underway and to improve the board of directors understanding of the issues involved, you have decided to produce a report to the board of directors which addresses the following 3 topics:

i. The models and concepts affecting the pricing decisions taken by organisations, critically reflecting upon their usefulness (maximum mark 33%).

ii. The role of standard costing and variance analysis in management accounting and a critically discussion of the value and limitations of variance analysis as a means of identifying key areas which have contributed to the overall profit figure (maximum mark 33%).

iii. The advantages and disadvantages of introducing an Activity Based Costing system to replace the current Absorption Costing system (maximum mark 34%).  

The report should include critical evaluation of the models and concepts proposed outlining their merits and limitations. You may incorporate logical assumptions with regard to the company and use numerical examples to illustrate the models and concepts that you propose to adopt

The University policy on cheating collusion and plagiarism will be applied to this piece of work.

Guidance:

Students are encouraged to be inquisitive and innovative in their approach as to what should be included in this report the following may be of some use in providing guidance as to what could possibly be included, although this is in no way meant to be prescriptive.

The aim of the assignment is to help you understand how key areas of strategic management accounting are demonstrated in practice by a large, international company. This will include investigating topics from throughout the course linked to the above issues. Some of the principles, concepts ad models will be more relevant to your chosen approach than others and so it is likely that different students will formulate different approaches to the problems. This is normal, it is not expected that all of the course content will be used in the analysis, concentrate on that which you feel is most important.

As part of your work you might find it helpful to briefly explore the underlying theory behind the key areas of investigation that you identify before applying them to report.

With a total of 3,000 words you do not have a lot of room for long introductions so assume you are writing to a sophisticated audience who has a working knowledge of strategic management accounting and is well versed in business theory. Numerical example for illustrative purposes may be of use but should not be the main thrust of the work. If used they should be to provide evidence to support your findings from your other analysis of position and policies. If other sources are used remember to reference everything!

Please avoid relying too heavily on descriptive sections reproducing information available from course material or the set text. It is your own logical, evaluation of the situation, the interpretation of course material and presentation, with critical analysis, of a coherent strategic plan that will attract high marks.

Knowledge

1. Critically evaluate a range of key strategic management accounting models and concepts.

2. Critically understand of specific analytical skills in key  areas within management accounting at local and international level.

3. Critically understand of the role and limitations of management accounting theory.

Skills

4. Applied the key management accounting concepts and methodologies in order to contribute to successful decision making in an organisation.