Reference no: EM132300549 , Length: word count:2500

Assignment - Case Scenario Based Analysis

LO 1. Demonstrate an understanding of management accounting systems

LO 2. Apply a range of management accounting techniques.

LO 3. Explain the use of planning tools used in management accounting

LO 4. Compare ways in which organizations could use management accounting to respond to financial problems.

Part 1

With a myriad of conventional management accounting systems and the ability to modify or specify alterations, the type and provision of contemporary management accounting systems is an important decision for many firms. The selection of an inappropriate system may result in a detrimental effect on the strategic or operational functioning and positioning of the firm (Burns & Vaivio, 2001; Coad, 1999; Langfield-Smith et al., 2000; Mintzberg, 1990; Mintzberg et al., 1998; MacDonald & Richardson, 2002).

In this part, you will be able to understand:

1. An explanation of the principles of management accounting.

2. The role of management accounting and management accounting systems.

3. The use of techniques and methods used in management accounting by presenting calculations for an income statement using variable costings.

4. Explanation of how management accounting is integrated within an organisation.

5. The benefits of the function to the organisation.

Case Study 1 - Waitrose axes free coffee for shoppers- Unless they buy something first.

Waitrose has told members of its loyalty scheme they will have to make a purchase before collecting a takeaway drink cup at the checkout from 3 April 2017.

The grocer has written to members of its "myWaitrose" scheme advising them that from 3 April they will have to make a purchase before collecting a takeaway drink cup at the checkout. Shoppers had reported big queues at the self-service coffee machines as office workers and students took advantage of the generous deal, which provided a free drink even to those who bought nothing in the shop.

The change is the latest example of belt-tightening by the grocer, which is part of the employee-owned John Lewis Partnership. Earlier this month the company slashed its staff bonus to just 6% of salary, the lowest level since the 1950s, despite a 21% rise in pre-tax profits. The group, which includes the John Lewis departments store chain, said the bonus had been cut to strengthen its balance sheet amid structural changes in the retail sector and rising costs linked to the devaluation of sterling since the Brexit vote.

Waitrose faces tough competition in the UK as discount rivals Lidl and Aldi expand and market leader Tesco fights harder on price. In February Waitrose said it planned to close six stores and remove a level of management in its supermarkets, putting nearly 700 jobs at risk.

It is not the first time Waitrose has tweaked the terms of the free coffee deal. Two years ago, members of the scheme were told that if they wanted to enjoy a free hot drink in one of its cafes, they must also buy a "treat" - such as a sandwich, cake, biscuit or piece of fruit. At that time the supermarket said the move was not a cost-saving exercise, but a reminder of the "etiquette" involved in its offer.

While some "myWaitrose" members criticized the changes on Twitter, others were pleased. "Hooray, no more queuing behind coffee freeloaders," tweeted Beverley de Valmency.

"You are a Junior Management Accountant in the Waitrose Company, in an effort to promote understanding between different departments in the organization, you and your colleagues have been asked by your line manager to write a report first and then deliver a presentation on the role and functions of the management accounts department, covering the management accounting systems operating in the organization as well as the range of techniques used."

To make the report, you must answer the following questions as given below.

Based on the above case study, students are required to critically evaluate how management accounting systems and management accounting reporting are integrated within organizational processes, when responding to the following questions:-

1. Explain the term ‘management accounting' and give the essential requirements of different types of ‘management accounting' systems, as well as different methods used for ‘management accounting reporting'.

2. Critically evaluate the benefits of ‘management accounting systems' and ‘management accounting reporting', as well as by assessing how these systems are integrated within the Waitrose organisational processes.

Individual Presentation:

Students need to develop a powerpoint presentation, based on the above case study, to explain the following:-
a) various types of management accounting systems.
b) methods used for reporting when driving decision-making.
c) evaluate the benefits of these management accounting systems in strengthening Waitrose's organizational processes.

Note: The presentation should be conducted for a maximum duration of 10 minutes only, with approx. 6 to 7 slides. Additional 5 minutes will be taken for question-answer session.

LO 2 - Apply a range of management accounting techniques. Case Study 2 - Watirose PLC

As a result of effective management of costs and a focus on efficiency throughout the business at Waitrose, its Operating profit was £232.6m in 2016. Although it was down 0.8% (down 2.0% on a 53-week basis when compared to 2015), but when excluding property profits it was up 3.9% (up 2.5% on a 53-week basis), despite absorbing a greater share of centrally incurred functional costs. This profit improvement came against a backdrop of exceptionally tough market conditions and continuing food price deflation, as a result of improved productivity in its branches, reduced head office costs and operational improvements in its supply chain.

Giving customers additional reasons to visit our shops in an online age is a core part of Waitrose's approach. In order to generate sustainable returns and review its current cost structure, the organization has approach Westford University College for identifying the most appropriate ‘cost accounting method' for helping its customers enjoy quality, inspiration and service they trust.

Absorption costing: Absorption costing principles must be used when preparing financial statements for external purposes. One of the key principles of absorption costing is that inventory and units produced must include a share of all production costs, both fixed and variable, incurred in getting them to their present condition.

Selling price per unit	50.00
Direct materials per unit	8.00
Direct labour per unit	5.00
Variable production overheads per unit	3.00
Details for the months of May and June 2017 are as follows:	May	June
Production of Product A	500.00	380.00
Sales of Product A (units)	300.00	500.00

Fixed production overheads are budgeted at €4,000 per month and are absorbed on a unit basis. The normal level of production is budgeted at 400 units per month.

Other costs
Fixed selling	€4,000 per month
Fixed Administration	€2,000 per month
Variable sales commission	5% of sales revenue

Note: - There was no opening inventory of Product A at the start of May. Prepare an absorption costing income statement.

Marginal Costing -Marginal costing principles are used for internal decision making purposes (short-term). As fixed costs are incurred regardless of the level of activity the purpose of marginal costing is to determine what contribution is been generated (sales less variable costs).

Working 1: Calculate the variable production cost	€
Direct materials	8
Direct labour	5
Variable production o/h's	3
Variable production cost	16

1. Prepare an income statement that depicts the changes in profit values & individual cost lines based on the above scenarios presented for Waitrose Plc by examining absorption costing and marginal costing scenarios. Do you believe that costing plays an important role in managing sales & eventual profitability, if so, use a range of accurate management accounting techniques in producing appropriate financial statements. Provide a range of financial reports that interpret data accurately for a range of business activities in Waitrose Plc.

Note. Your research should be referenced using the Harvard referencing, system. Please also provide a bibliography using the Harvard referencing system. The recommended word limit is 1,000-1,500 words.

Part 2

Case Study 3 - Marks & Spencer pre-tax profits tumble 64 %

The extensive cost of Marks & Spencer's restructuring program weighed heavily on the retailer's full-year results as profits plummeted by 64pc.

The company stomached more than £400m in charges over the last year as Chief Executive Officer - Steve Rowe embarked on "costly but necessary" changes to the business.

M&S also suffered a decline in clothing sales in the fourth quarter, while its financial results were hit by a late Easter falling into next year's profits.

In the year to April 1, 2017 the retailer posted pre-tax profits of £176.4m, down 63.9 % from £488.8m in the previous year.
The drop follows M&S's unveiling of plans to pull out of 10 international markets, begin a store closure program in the UK and shut its defined benefit staff pension scheme to future accrual.

Analysts said M&S has a "strategically weak position" and remains "structurally challenged".

Clothing and home sales dropped by a worse-than-expected 5.9pc on a like-for-like basis in the first three months of 2017, compared to a rise of 2.3pc in the third quarter. But Mr Rowe argued that M&S has seen a growth in its full price market share as it has removed "excessive discounting".

M&S's food division proved more robust than clothing, with total sales up 4.2pc. Although like-for-like sales were down 0.8pc, that decline was also affected by the late Easter.

It was revealed last month that the company will launch "an online grocery shopping service" in the autumn in a bid to capitalize on the strength of its food offering.

Mr Rowe said M&S will begin a "low-cost, very small trial" at a select few hand-picked stores to test how an online system would work. The company has traditionally resisted providing an online food system as its offering is more centred around short-term food shopping than larger, weekly shops.

M&S has recently announced the hiring of Halfords chief executive Jill McDonald to revive its clothes business, while the appointment of former Asda boss Archie Norman as its new chairman was celebrated by investors earlier this month.

Given the above scenario, you will now prepare a ‘formal report' while evaluating how financial accounting tools would appropriately help resolving problems in leading organizations to attain organizational success , while responding to the following questions:-

1. Explain the merits and demerits of different types of planning tools while analyzing their application in preparing and forecasting budgets.

2. Compare and analyze how by adopting management accounting systems, organizations can respond to financial problems that can lead to attainment of sustainable success.

3. Do you agree with Mr. Steve Rowe's strategy of exiting 10 international markets, shutting down defined benefit staff pension scheme & focusing on its food division as part of its long term sustainable strategy? Do you consider this an apt management accounting practice?

4. Finally, evaluate how Jill McDonald, Halford's Chief Executive can revive M&S clothing business, by using appropriate planning tools for accounting, which will help him to solve the financial problems at M&S and guarantee its sustainable success. Please research and respond appropriately.

Requirement:
As a newly-qualified Management Accountant, you have been asked by your line manager to produce a ‘formal report' which analyses the Marks & Spencer's planning tools to ensure financial stability and performance as well as ways in which its management accounting has played a key role in preventing and solving financial problems.

Your Report should contain the basics of a Report format like Introduction, Aim, Objectives, answers to the specific questions asked in the case study, followed by your Recommendations, Conclusion and finally Referencing in the end.

Note: Your research should be referenced using the Harvard referencing, system. Please also provide a bibliography using the Harvard referencing system. The recommended word limit is 1500-2,000 words

Attachment:- Management Accounting Assignment Brief.rar