Ethics in Cost Control 1. Collapse Subdiscussion Brandy Havens Brandy Havens XXXXXXXXXX:48am Mar 27 at 9:48am Hi Marcus. You did a good job on your analysis! It seems quite relevant that we are told...

Brandy Havens

Hi Marcus. You did a good job on your analysis! It seems quite relevant that we are told that the company has a current policy of rotating managers. Executive management may want to rethink this policy as it seems to create an obvious conflict of interest. While the business as a whole will be more successful when each store performs at a high level long-term, individual managers have the incentive to promote short-term results over long-term growth.

Here’s another fun topic that we can explore…

Strategic Management in Small Businesses

Class, when we think of strategic management, we may immediately think of large corporations such as Apple, Walmart, or Coca-Cola. However, strategic management is important for small businesses as well. Below is an article from the Small Business website sharing some examples of strategic management accounting.

http://smallbusiness.chron.com/examples-strategic-management-accounting-18149.html(Links to an external site.)Links to an external site.

Select one of these examples and explain why you feel that approach might be helpful for your current employer.

2.

Kessann Scott

The management decisions of the manager of store 9, as highlighted in the scenario, does create a cause for concern. Even though the manager has been recognized for the profitability of several other stores, it is questionable whether or not the strategies he had implemented are sustainable as seen with store 6 where an increase in operating expenses resulted in a significant decrease in profit. One should anticipate variations in the profits of individual stores that mirror the managerial approach of each manager, as each manager is moved annually. As highlighted by Schneider (2017), managers have the ability to influence some cost which is referred to as controllable cost. The manager of store 9 opted to decrease spending on community events, offered no personnel training and mismanaged the use of the advertising budget. In light of the manager’s income being directly related to the direct contribution margin, the manager of store 9 is more focused on the short-term profits that can be achieved in one year, rather than the overall long-term gains for the company. There are certain fixed costs, such as rent, that the manager cannot manipulate, so instead he focused on the controllable costs i.e. community events and personnel training to maximize profits, thereby increasing his own income.

The regional manager may now be faced with considering whether moving managers annually is in the best interest of the company. Even though the manager of store 9 has made several stores profitable, he should not be considered an exceptional manager because the stores’ profits were as a result of the manager wanting to ensure he increased his own income. Therefore, he was focused on his self-serving interests. In failing to put the company’s interest ahead of his own personal interest and in delaying reporting of lack of community events and changes in advertising expenditure, the manager has breached both ethical principles of integrity and credibility. The regional manager now has the responsibility to do good for the company and intercept the promotion of the manager of store 9, as his managerial approach will continue to negatively impact the long-term goals and profits of the company.

Reference

Schneider, A. (2017). Managerial Accounting: Decision making for the service and manufacturing sectors(2nd ed.) [Electronic version]. Retrieved from https://content.ashford.edu/