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Tenn-Tech Plc - Case Study Example

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Tenn-Tech Plc

The situation demands a prompt and a proactive action from the top management. Hence it is vital to bring in a new management accounting approach that is more in consonance with the prevalent developments and circumstances. Resorting to throughput accounting seems to be just the right approach for Tenn-Tech Plc in the existing scenario. However, this is easier said then done. This calls for a total paradigm shift on the part of the key players and the stakeholders at Tenn-Tech Plc.
It is imperative for the top echelons of power at Tenn-Tech Plc to be cognizant of the marked shift in their perception that an adherence to a new management accounting system will call for. Throughput accounting will not be merely an another management accounting system, but will be in fact an entire new way in which the organization under consideration will be required to perceive itself and its role in the global market scenario ("Throughput Accounting" 67). The basic fault with the activity-based costing system that till now was being resorted to by Tenn-Tech Plc is that it believes that the efficiencies yielded by the changes wrought in the localized factors within the company, be it the marketing department, manufacturing or any other section, will automatically lead to enhanced over all efficiencies (Corbett 38). That is why the directors and the top management are wasting their strength, time and efforts in criticizing and finding faults with the individual local sections within the company. While the Financial Director seems to be at loggerheads with the Marketing Director, the Chief Executive Boris Barker has already given way to a serious labour problem with the aid of the Management Accountant Huggenkis, both of them being guided by their obsession for covering the unreasonable overheads. No doubt such moves appear to be narrowly reactionary in their approach, rather then being all inclusive and visionary. The basic fault with the management accounting system at Tenn-Tech Plc is that it is based on the fundamental premise that for an organizational chain to be really strong, it is a must that all the links in it be really sturdy and tough (Corbett 41). This definitely sounds good, but is surely not true in a real life scenario.
Throughput accounting is an alternative approach to management accounting that holds that the eventual strength of an organizational chain is determined by the strength of the weakest link in that chain (Corbett 41). This approach towards management accounting is based on the theory of constraints proposed by E.M. Goldratt in his novel The Goal. This approach will conclusively address the dilemma being faced by Tenn-Tech Plc, which is how to design a more efficient management accounting system. According to throughput accounting, the notion of allocating costs to products, which was till now being adhered to by Tenn-Tech Plc is inherently faulty and invariably leads to wrong decisions. As interpreted and suggested by the theory of constraints, Tenn-Tech needs to be viewed as a system that consists of several individual and interdependent elements. Thus the primary task before Tenn-Tech is to be conversant with the constraints existing within this system. According ...Show more

Summary

So far the Tenn-Tech Plc seems to be adhering to activity based costing. The deficiencies of this approach are self evident by the fact that the company is facing a plethora of problems in all the sections, which are obviously proving detrimental to the achievement of the ultimate goal of the company, which is the augmentation of its net profits…
Author : bradtkecayla
Tenn-Tech Plc essay example
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