Facts of the Case Following are the facts of the case: Shirley Banks has recently joined PFA Ltd as factory manager with a motive to increase the turnover and market share. The factory runs for 24 hours with three eight-hour shifts. The shifts are rotated in such a manner that no one team has to consistently work at night. Currently the factory has a high number of temporary staff and the production is behind the targets. The shipment of orders is always done late. The workers are highly discontent due to the frequent impractical actions by the management regarding the factory management. Recent examples are the decisions to change every shift to twelve hours, cancellation of overtime payments and introduction of weekly performance reports. The high unachievable monthly targets have put undue strain on the workers. Moreover, the general office costs are allocated to each shift manager. The overall effect is that the workers are not motivated enough. The logistics manager is running the local election campaign and in doing so he is using the company’s resources. No one has raised the issue so far. Nature of the Problem The basic nature of the problem lies with the incompetent management control process in the company. This has caused several other problems such as late order delivery, highly de-motivated workers, unachieved targets, unexplained allocation of general office costs to each shift manager and high level of temporary workforce. Management Accounting Control Systems Although the management accounting control systems and management control systems are mostly used interchangeably, the management accounting control is only one aspect of the control mechanism exercised by the management. The primary aim of management control systems is to achieve the organization’s objectives by influencing employee behaviours. There are three different types of control approaches i.e. action controls, results control, personnel and cultural controls (Merchant, 1998 cited in Drury, 2007, p.388). The management accounting control system is related to the results control. It is based on two elements, the one is formal planning process and the second is responsibility accounting. The formal planning process encompasses budgeting process and long-term planning process whereas the responsibility accounting involves the establishment of responsibility centres (Drury, 2007, p.395). Responsibility Accounting The responsibility accounting involves creating responsibility centres to make accountable the individuals for financial results and outcomes. The individuals responsible for responsibility centres are made accountable any deviations from budget targets. Overall, the responsibility accounting involves: Identification of Controllability The items, which can be controlled by managers and those which they cannot control and therefore, should not be held accountable for, should be identified. This is based on controllability principle. The principle states that only those costs can be or should be charged to responsibility area that can be influenced by the manager responsible. This principle is applied by
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Management Accounting and Performance Evaluation- PFA Limited Table of Contents Table of Contents 2 Introduction 3 Facts of the Case 3 Nature of the Problem 4 Management Accounting Control Systems 4 Responsibility Accounting 5 Identification of Controllability 5 Determination of difficulty of financial targets 5 Participation of managers in setting the financial targets 7 Contingency Theory 8 Characteristics of an Effective Performance Measurement 8 Use of Accounting Information in Performance Evaluation 9 Recommendations 10 Conclusion 12 References 13 Introduction This project is an analysis of the management control problems faced by Plastics For All Ltd…
The author has rightly presented notable issues that need radical and urgent redress, such as restructuring all the disciplines for it to remain competitive in the manufacturing industry. For instance, it has failed to capitalize and take advantage of the sophisticated technology to stay ahead of their competitors in the market.
Accountability 12 Conclusion 13 Reference 15 Abstract This study represents one of the most important areas of management accounting i.e. desirability and effectiveness of accounting for management control. Accounting is the most effective device used by managers and management for organizational control.
In other words, this concept assists managers to deal with their management and control functions effectively. According to UK’s Certified Institute of Management Accountants (CIMA), “management accounting is an integral part of management concerned with identifying, presenting, and interpreting information used for formulating strategy, planning and controlling activities, decision making, optimising the use of resources, disclosure to shareholders and other external to the entity, disclosure to employees, and safeguarding assets”1.
Performance measurement tools are also used by organizations to compare the desired performances with the actual performances and then actions can be taken to achieve the desired results by eliminating any kind of discrepancies. Performance management tools are very beneficial for organizations as it allows the management to forecast how the organization has performed and how the organization needs to go in future (Chavan, 2009).
"Management accounting produces information for managers within an organization. It is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information that helps managers fulfil organization objectives" (Horngren, Sundem, & Stratton, 2005, p.
The organisations are facing fierce competition in the competitive global business environment and the performance is the major determinant of the survival, success or failure of a firm. Organisations employ various tools to measure the performance. It is possible only in an ideal world that organisations have unlimited resources and they are operating in a risk-free environment and they do not need any performance measurement tool.
32). Since the performance management field is usually complex, researchers have come up with simplified settings to facilitate analysis. Even though, the simplified approach has been so beneficial in the analysis of performance of a business, it poses several disadvantages.
This paper contains an introduction to the topic of discussion, literature review, a research methodology that was used to collect data, a section for analyzing the data, and a last section for conclusion. Table of Contents 1 1.0 Introduction 3 2.0 Literature review 4 2.1 Accounting 4 2.2 Management control/ accounting systems 5 2.3 Management accounting and decision-making 6 3.0 Research methodology 7 4.0 Analysis 8 4.1 Supporting arguments for Johnson and Kaplan’s (1987) argument 8 4.1 Arguments against the criticism issued by Johnson and Kaplan 9 5.0 Conclusion 11 References 12 1.0 Introduction The field of management has witnessed numerous transformations that are mainly attributed to
Management accounting is a branch of accounting which mainly deals with various managerial aspects. This is primarily handled by the managers within the organization, and it is an essential component in taking appropriate decisions. The concept of management accounting comes under the Management accountant who is responsible for the preparation of financial statements, and management accounting report for appropriate decision making.