You are a consultant management accountant who has been engaged by amedium to large, fast growing...

Question

You are a consultant management accountant who has been engaged by amedium to large, fast growing company Jessup ltd. The company isinvolved inadvertising and public relations and isrun by four directors who are all advertising experts. While the company is doing very well they feel it has reached a stage wherethey need better management of the accounting function. Generally, they areunsure of the strategic benefits a senior management accountant would bring and particularly theyhave concerns with which costs are most relevant to decision making and of any methods by which they can accurately cost their activities.

You are required to produceareport to the directors which addresses the following three questions:

Question 1: What are the key roles which a strategic management accountant would undertake in an organisation such as Jessup?

Question 2: What is meant by the terms relevant and irrelevant costs and revenues in Strategic Management Accounting decision making? Include several small numerical examples in your answer. .

Question 3:What are the benefits and problems of introducing activity based costing into an organisation such as Jessup?

Guidance:

Students are encouraged to be inquisitive and innovative in their approach as to what should be included in this report the following may be of some use in providing guidance as to what could possibly be included,although this is in no way meant to be prescriptive.

The aim of the assignment is to help you understand how key areas of strategic management accounting are demonstrated in practice by a medium to large organisation. This will include investigating topics from throughout the course linked to the above issues. Some of the principles, concepts ad models will be more relevant to your chosen approach than others and so it is likely that different students will formulate different approaches to the problems. This is normal, it is not expected that all of the course content will be used in the analysis, concentrate on that which you feel is most important.

As part of your work you might find it helpful to briefly explore the underlying theory behind the key areas of investigation that you identify before applying them to report.

With a total of 3,000 words you do not have a lot of room for long introductions so assume you are writing to a sophisticated audience who has some working knowledge of strategic management accounting and is well versed in business theory. Numerical example for illustrative purposes may be of usebut should not be the main thrust of the work. If used theyshould be to provide evidence to support your findings from your other analysis of position and policies. If other sources are used remember toreference everything!

Please avoid relying too heavily on descriptive sections reproducing information available from course material or the set text. It is your own logical, evaluation of the situation, the interpretation of course material and presentation, with critical analysis, of a coherent strategic plan that will attract high marks.

Marking Guide

The learning outcomes for this module assessed by this piece of work are

Knowledge

1.Critically evaluate a range of key strategic management accounting models and concepts.

2.Critically understand of specific analytical skills in keyareas within management accounting at local and international level

3.Critically understand of the role and limitations of management accounting theory.

Skills

4.Applied the key management accounting concepts and methodologies in order to contribute to successful decision making in an organisation.

In light of this the assessment criteria in the grid below will be used when assessing your work.

* Please note of the key points and requirements for answering each questions from the attached files. Thank you very much!

005_pglx9jk-ycoqo321.doc 005_imlx9jk-wfgeqexw.doc 005_92lx9jk-uydvca2b.pdf

David · Accepted Answer

1 
 
Jessup ltd.  
Report of strategic management accounting 
Executive summary: 
In today‟s economic environment, Management accounting is very important area of concern for 
every organization. Management accounting serves many purposes of an organization which 
includes setting up prices to beat the competitors and earn required return on the funds invested, 
managing and utilizing resources efficiently and effectively, to establish appropriate standards 
for managers and employees, providing supply chain management system etc. 
Role of a senior management accountant is very crucial for the success of an organization; senior 
management accountant helps an organization in taking strategic decisions. Among four 
directors of Jessup ltd no one possesses skill‟s that management accountants have, therefore they 
are planning to hire a management accountant who would help them in making strategic 
decisions. 
In order to take strategic decisions an organization has to segregate its relevant and irrelevant 
revenue and expenses. In order to determine whether a particular item is relevant or irrelevant 
management accountant uses its knowledge of the basic concepts of management accounting. 
Only relevant items shall be considered while taking any decision. 
Jessup ltd is a growing organization in the field of advertising and public relation. In order to 
sustain its pace of growing company has to adopt new techniques of management accounting 
such as activity based costing. Activity based costing helps organization to trace the expenses by 
the activities being performed. Use of activity based costing would help Jessup ltd to segregate 
the expenses between two different services i.e. advertising and public relation. Segregation of 
expenses would help Jessup to make better decisions and this will provide competitive advantage 
over its investors.
2 
 
Table of Contents 
Executive summary: ...................................................................................................................................... 1 
Introduction:- ................................................................................................................................................ 3 
Key role of strategic management accountant in an organization:- ............................................ 3 
Strategic management accounting involves various steps and management accountant plays 
important role in each step, the steps are as follows:- ................................................................. 3 
Tools of management accounting:- ............................................................................................. 4 
Role of management accountant in strategy formulation and execution:- .................................. 4 
Relevant and Irrelevant costs and revenues in Strategic Management Accounting decision making:- ....... 5 
Relevant costs and revenues:- ..................................................................................................... 5 
Sunk Cost and irrelevant cost:- ................................................................................................... 6 
Difference between sunk cost and irrelevant cost:- .................................................................... 6 
Opportunity cost:- ....................................................................................................................... 6 
Management accountant is responsible for the following type of decisions:- ............................ 7 
Following is an example to explain the concept of relevant cost and revenues .......................... 7 
Benefits and problems of introducing activity based costing into an organization such as Jessup:- ......... 11 
About activity based costing:- ................................................................................................... 11 
Let us Take an example to show how Activity based costing works:- ..................................... 12 
Advantages of Activity based costing are as follows:- ............................................................. 15 
Disadvantages of Activity based costing are as follows:- ......................................................... 15 
Steps for implementation of ABC system in organization:- ..................................................... 15 
Difficulties faced in implementation of ABC system in an organization:- ............................... 16 
Conclusion:- ................................................................................................................................................ 16 
Reference list:- ............................................................................................................................................ 18
3 

Introduction:- 
In this report, we will address the following issues to the management of Jessup ltd:- 
a)  What are the key roles which a strategic management accountant would 
undertake in an organization such as Jessup? 
b)  What is meant by the terms relevant and irrelevant costs and revenues in 
Strategic Management Accounting decision making? 
c)  What are the benefits and problems of introducing activity based costing into an 
organization such as Jessup? 
Key role of strategic management accountant in an organization:- 
Strategic management accountant plays vital role in an organization and helps it to grow and 
sustain itself in the industry. When a company is growing at a fast pace it needs management 
accountant to help in sustaining the growth by taking effective strategic decisions. Advent of 
technology and introduction of new management tools has made it more important for an 
organization to hire management account. Integration of information technology and 
management accounting tools has become a useful weapon for an organization to sustain its 
growth. 
Strategic management accounting involves various steps and management 
accountant plays important role in each step, the steps are as follows:- 
1. Formulating strategies. 
2. Communicating strategies throughout the company. 
3. Developing and carrying out tactics to implement the strategies. 
4. Developing and implementing controls. 
 Formulating strategies – Management accountant can help in formulation of 
strategies by using advanced analysis tools. Directors are also involved in formulation of 
the strategies, mixed efforts of both management accountant and directors will help the 
company in formulation of efficient and effective strategies. 
4 
 
Tools of management accounting:- 
Various tools which a management accountant can use to help the organization in taking better 
decisions are budgetary controls, Variance analysis, Inventory management system, working 
capital management system etc.

Y ou are a consultant management accountant who has been engaged by a medium to large, fast growing company Jessup ltd . The company is involved in advertising and public relations and is run by four...

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