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Academic Year 2019/20
Module Code:
BFM283
Module Name:
Strategic Management Accounting
Module Leader:
Richard Kenyon
Coursework Title:
A critical evaluation of Strategic Management Accounting tools and their application
in decision making and communication.
This will involve:
1. Reference to recent Research
2. Reference to specific case studies
3. An engagement element
Task Details/Description:
1. Portfolio (90%)
You will be required to complete 4 tasks which are spread across the course. You
are recommended to start the tasks at the appropriate point as you go through the
course to be able to benefit from formative feedback received as you progress
through the course. The task is detailed below and the related case study or
background information is included in the Appendices below. Each task is worth 25
marks, with the total 100 marks weighted at 90% of the overall module mark. An
indicative word count of 625 – 750 words should be applied.
Task 1 linked to Units 1&2 – SMA and economic advantage (See Appendix 1) (25
marks)
A) Use Roslender’s 2003 broad definition of Strategic Management Accounting
(SMA). Critically assess whether SMA may give an economic advantage by
supporting Strategic Management for firms operating globally. (25 marks)
Your answer needs to be concise. You should choose three aspects of SMA
that you consider important regarding the impact of Strategic Management
Accounting on economic advantage.
Ensure you take an international
approach and make reference to what occurs in practice as well as what
could occur in theory. Reference up, using the Harvard Referencing system,
including any additional research material beyond the documents referred to
in Appendix 1 that you consider to be relevant.
Task 2 linked to Unit 3 – A Strategic Cost Management tool in action (Case Study at
Appendix 2) (25 marks)
A) Utilising the information provided in Appendix 2 calculate:
?
?
The full absorption cost of the book (8 marks),
The target cost and the cost gap that needs to be closed (4 marks).
B) Clarify the meaning of value engineering and make suggestions for closing
the cost gap (include relevant justifications and calculations). (7 marks)
C) Consider the implications of the suggestions in B) and any criticisms that
might be levelled at this Target Costing process. (6 marks)
Task 3 linked to Unit 4 – Transfer Pricing and SMA (Case Study at Appendix 3)
(25 marks)
Case Study: “PlayHub” & Cortex Group
A) Explain why the Financial Controller is suggesting that the use of the current “Full Cost
Plus” transfer price could be causing dysfunctional behaviour (5 marks);
B) Prepare a Briefing Paper which demonstrates the impact on the Group’s financial
performance (after Tax) and considers the potential reaction of the Divisional
Managers, if the proposal to change to a “marginal cost plus a lump sum” transfer
pricing approach, is implemented (15 marks);
C) Suggest an appropriate transfer price for Goggles to be used in the future if the South
Korean Division receives an order from a customer from outside the Group for 1000
units at a special price of £175 per unit (5 marks).
Note: the Group’s functional currency is GB Sterling, therefore ignore the impact of foreign
currency exchange.
Task 4 linked to Unit 6 – Balanced Score Card in SMA (Case Study at Appendix 4)
(25 marks)
Case Study: Sandcastle Dairies Ltd
A) Prepare a Report for Gianna Farina which outlines the following (8 marks):
i. The concept of a multi-dimensional performance measurement model, such as,
but not limited to, the Balanced Scorecard, as a Strategic Management tool;
ii. An explanation of the benefits and problems, for Sandcastle Diaries Ltd
specifically, of adopting a Balanced Scorecard and conclude whether it would
be appropriate, or not, in their case with their current strategic goals.
B) As an Appendix to your Part A Report (17 marks):
i.
Draft a Balanced Scorecard from the scenario information and the ERP Report
provided, which you feel will most appropriately help the family to meet their
strategic goals. As a guide, each perspective should have between two and four
KPIs, either, extracted directly from the ERP Report or with ratios and metrics
derived from it. Briefly justify the inclusion of each KPI you include.
ii. In addition, for each of the Balance Scorecard perspectives, suggest and justify
at least one new KPI. This new KPI should be one that you feel would be a
useful addition to the KPIs you have already selected in B(i) above, but is not
already included in the ERP Report.
2. Engagement (10%)
This is an element requiring students to take 6 formative tests, each comprising 5
multiple choice questions which can be attempted an unlimited number of times.
Module Learning Outcomes Assessed:
1. Apply strategic management accounting tools to a range of organisational
contexts.
2. Communicate accounting information in an appropriate manner to aid
management decision making.
3. Critically evaluate the usefulness of Strategic Management Accounting Tools
4. Examine the wider economic context of strategic management accounting
from an international context.
Presentation Requirements:
Word Count: 2500 – 3000 words
Font Size: 12
Line Spacing: 1 or 1.5
Submission Date & Time:
27th April 2020 12:00 noon
Assessment Weighting for the Module:
Percentage: 100%, which breaks down as follows:
Portfolio: 90% (100 available marks to be weighted to be the equivalent of 90%):
Task 1: 25 marks
Task 2: 25 marks
Task 3: 25 marks
Task 4: 25 marks
Engagement: 10%
Total: 100%
Assessment Criteria
Detailed Assessment criteria are provided in a separate document detailing
expectations for each portfolio task.
Generally it is expected that:
?
?
?
Tasks will be properly presented
Narrative tasks will address the issues identified for the case company and
also use general academic research to provide a rounded answer useful to
management
Calculative tasks will be well laid out and have clarity in the answers provided
and be useful to management
Ethical Requirements
No primary data will be required for this report. All data will be secondary, obtained
from information freely available in the public domain.
Appendices
Appendix 1
Your discussion will, as a minimum, reference texts and papers such as:
Langfield-Smith, K. (2008) “Strategic management accounting: how far have we come in 25
years?”, Accounting, Auditing & Accountability Journal, Vol. 21 Issue: 2, pp.204-228, https://
doi.org/10.1108/09513570810854400
Pitcher, G. S. (2015) Management Accounting in support of the Strategic Management
Process. London: CIMA
https://www.cimaglobal.com/Research–Insight/Management-accounting-in-support-of-thestrategic-management-process/
Chapter 7 – “Strategic Management Accounting” in Issues in Management Accounting (3 rd
ed) edited by Hopper, T. et al.(2007)
Appendix 2
Case Study: Sameday Press Ltd
Sameday Press (SP) has a portfolio of titles that it publishes and it also has a printing
division. The functional divisions are Finance, Marketing, Operations and HR. The Printing
Division is within the Operations area but its finance and HR are handled centrally.
SP is a traditional company in terms of costings. All products (books and related items) are
costed using a full cost absorption basis. The cost standards are re-set at least every year
and, where a raw material or other input’s cost is changing rapidly, more often.
The production department produces a traditional bound product and its books are generally
regarded as collectible rather than throw away paperbacks.
The costs for the latest book can be assessed from the following standard costing data.
Silk Paper (per 100 sheets)
150 gsm Paper (per 50 sheets)
Binding and cutting labour (per hour)
Binding materials per book (sewed)
Binding materials per book (glued)
Embossing (per book)
Any colour edge colouring (per book)
Covers (6 colours), per book
Covers (3 colours), per book
Print process operation labour (per hour)
Variable overheads (per hour of print process operation)
Fixed overheads (per hour of print process operation)
£
3.50
1.50
15.00
2.32
1.02
0.50
0.25
0.23
0.15
12.00
11.00
6.50
The proposed book: ‘Dogs forever’ is planned to be made as follows:
120 sheets of Silk Paper
Sewed binding
Red edge colouring
6 colours on the covers
It requires:
20 minutes binding and cutting labour time
No embossing
10 minutes of print process operation
Consumer research indicates that the book would command a premium price of £20.
The publisher expects to generate a sales margin of 20% for the book to be regarded as a
feasible project. Royalties are included in variable overheads, promotion and advertising
overheads are included in fixed overheads.
Appendix 3
Case Study: “PlayHub” and Cortex Inc
“PlayHub” is the brand name for a virtual reality computer games system manufactured by
Cortex Group, a global computer hardware manufacturer and software developer, based in
the UK but with manufacturing divisions in South Korea and Australia.
“PlayHub” is rapidly building a reputation for immersive Virtual Reality (“VR”) experiences
installed in pubs and night clubs, a trend begun in the UK but rapidly expanding to new
markets overseas, especially in the countries that Cortex Inc already operate in. Cortex Inc is
seeing double digit growth in the number of outlets taking the “PlayHub”. The “PlayHub” VR
Goggles which have historically been sold with the Base Unit are also starting to be used by
other VR manufacturers in the market such is their high quality, robustness and technical
specification.
Cortex Group includes the following three divisions:
UK Division: Head Office with the main sales function and final assembly of the “PlayHub”
(assembly of the Australian Base Unit with a pair of Korean Goggles and the loading of all
software);
South Korean Division: the manufacturing facility for the VR Goggles;
Australian Division: the manufacturing facility for the Base Unit;
All Divisional Managers’ performance is appraised on the basis of Return on Capital
Employed.
Corporate Tax rates in each country are as follows:
UK: 19%
South Korea: 25%
Australia: 30%
Cortex has historically used a transfer price of total cost plus 50% for products sold from one
division to another. However, the Financial Controller has approached the Managing Director
claiming that the current transfer pricing arrangement is likely to be having a detrimental
effect on Group performance in two ways:
? Causing dysfunctional behaviour on the part of the Divisional Managers, and
? Being inefficient from a tax perspective.
The Financial Controller has put forward the following proposal:
? The transfer prices for both Base Unit and Goggle Divisions be altered to marginal cost
plus a lump sum to cover fixed costs at a level agreed at the start of each year.
The Financial Controller has also informed the Managing Director that she is aware of an
enquiry made to the South Korean Division for 1,000 Goggles. With the South Korean factory
already at full capacity, she anticipates that the transfer price may require adjustment should
the enquiry become a firm order.
The Financial Controller has now gone on annual leave and the Managing Director would like
you to prepare a briefing paper, including calculations and explanations, clarifying the likely
impact of the Financial Controller’s proposal and a suggested transfer price adjustment if the
enquiry for Goggles received by the South Korean Division progresses into an order.
Please see table on next page.
Appendix: Cortex Group Divisional Report (Extract):
Location
Prime Function
Capital Employed
£’000
Annual Units
Produced & Sold
UK
Full Unit
Assembly and
Sales
2,500
3,000
Maximum Capacity
5,000
Operational Activity
= Base Unit
Assembly
including
software and
inclusion of a
pair of VR
Goggles plus
sales to Global
Market
Typical Market
Price
£1,100
per complete
Unit + one pair
of VR Goggles
Costs per Unit:
Variable Costs
Fixed Costs
Internal Costs:
Goggles
Base Unit
Total Costs
£350
£125
£150
£300
£925
Current Transfer Price:
Full Cost plus 50%
Full Cost plus 50%
Profit Before Tax
Per Unit
£175
Appendix 4
Case Study: Sandcastle Dairies Ltd
Sandcastle Dairies Ltd is a privately owned business that has been making ice cream
based products for over fifty years. The financial year end is 31 st December each year.
The company was founded by Ludovico Farina when he arrived in Birmingham after leaving
Italy in the mid-1950’s looking for work. He bought with him knowledge of gelato (Italian ice
cream) gained from working in his Uncle’s family business as a youth and adapted the
recipes to the British palate.
The business was quickly successful, providing a taste of Italy for a population still recovering
from food rationing. Ludovico expanded into a larger factory in the 1970’s when he was joined
by his son Francesco. Renamed “Sandcastle Dairies” (previously “Farina’s Ices”) the
company began to win contracts for the supply of tubs of ice cream to the new “supermarket
chains” which were becoming popular amongst shoppers at that time. The company has
always had an onsite shop which sells direct to the public.
The company has remained under family control ever since. Francesco is about to retire and
be succeeded by his daughters Rosa and Gianna. Rosa has long taken an interest in the
manufacturing side of the business and is the Production Director, Gianna has taken
responsibility for the finances and is the Finance Director. You are a member of Gianna’s
small finance team.
Allowing for statutory holidays, the company manufacture for 330 days a year. Production
staff are paid on average £20,000 per annum. Their turnover is currently split 80% to
Retailers, 20% direct to the Public via permanent outlets at the factory and local Garden
Centres, supplemented by stalls at local tourist attractions during the summer months. They
sell their fifty flavours of ice cream in three tub sizes: 125ml, 500ml, 1 litre. In the summer the
tourist stalls also sell ice cream in cones. They have won prestigious trade industry awards in
four out of the past five years.
To move the business forward the sisters have set themselves four strategic objectives:
? To increase turnover by 50% in five years whilst maintaining ROCE at current levels
? To maintain the award-winning high quality of the product
? To reduce the company’s environmental impact, including its carbon footprint
? To establish themselves as a significant provider of “special dietary needs” ice cream
(e.g. Gluten free) within the marketplace.
A year ago, Sandcastle Diaries installed a new Enterprise Resource Planning (“ERP”)
Software system which provides information never previously available to them and which
they would like to start exploiting more. A data transfer was performed from the old system
supplemented by some input from manual records to provide the new system with four full
years of historic data.
As an assistant to Gianna, you receive the following email:
“Good morning,
Please find attached (see Appendix 4) the latest Report generated by the ERP system which
quite frankly feels like information overload to me!
I can’t help thinking that we should be using this data more efficiently and more effectively to
help manage the business and guide us in a more strategic way. I have heard of something
called a ‘Balanced Scorecard’ and would appreciate your help in streamlining these Reports
to include the most useful KPIs. Could you please draft something I can discuss with Rosa
and my father at our next Board meeting please?”
Please see table on next page.
Appendix: Sandcastle Diaries Ltd Monthly KPI Report
Sandcastle Diaries Limited – Data Report
(all annual figures unless otherwise stated)
Turnover
Gross Profit
Distribution Costs
Administrative Expenses
Profit Before Interest & Tax
Interest payable
Interest receivable
Taxation
Profit after Taxation
Dividends
Retained Profit for the Year
Non-current Assets
Inventory
Receivables
Bank & Cash
Payables
Other Creditors
Short term loans
Long term Loans
Share Capital
Retained Reserves
ROCE
Production Capacity (litres)
Produced Year to December (litres)
Produced December only (litres)
Production Days
Number of production employees
Employee attendance
Wastage (litres)
Customer Returns (litres)
Customer refunds (£’000)
2019
£’000
2018
£’000
2017
£’000
2016
£’000
1,260
341
-140
-169
32
-3
0
1,072
284
-131
-131
22
-3
0
1,150
332
-122
-163
47
-3
0
837
248
-86
-115
47
-4
1
-11
18
-4
14
135
142
129
12
-145
-120
0
-21
10
122
10.7%
250,000
190,000
-4
15
-2
13
122
94
95
17
-89
-96
0
-24
10
109
9.5%
200,000
165,000
-11
33
-2
31
114
92
91
12
-88
-88
0
-27
10
96
21.3%
200,000
180,000
-9
35
-2
33
87
45
82
15
-58
-66
0
-30
10
65
28.8%
150,000
120,000
9,500
315
9
85%
29,000
260
6
8,250
325
7
78%
22,000
250
4
7,200
327
7
93%
19,500
125
2
5,200
315
6
87%
13,200
85
1

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