Paper, Order, or Assignment Requirements

Costing methods, budgeting and responsibility centres

Management accountants’ ability to understand the wider contextual issues affecting organisations is an important component of strategic management accounting (Drury, 2012). Management accountants should be able to apply their knowledge, skills and professional judgement in assessing and evaluating strategic management accounting techniques such as budgeting and costing methods. They should also be able to understand the role of responsibility centres in performance management.

Accuracy Ltd

Accuracy Ltd is an online retailer that sells high quality expensive watches. Product design, marketing and general management are carried out from the UK; but, manufacturing is carried out in China. Although the products are sold online, the Company has warehouses in the USA, the UK, Germany and Dubai to facilitate timely distribution of the products to customers. The Finance Director, John Brown is, however, concerned that the traditional method of costing and budgeting currently employed by the Company are not suited to the changing business environment where the focus is on marketing, customer service and quality. You have recently been hired as the Senior Management Accountant of Accuracy Ltd. At the end of your first month on the job, Mr. Brown called you into his office to solicit your expert opinion on a number of issues as detailed below.

Required

a) Mr Brown would like you to critically evaluate how three major alternative costing methods could be employed to both reduce costs and provide information on product range profitability.

b) As a result of increasing overhead costs, Mr. Brown requires that you critically evaluate three alternatives to traditional budgeting including the ‘beyond budgeting’ approach

c) To support increased accountability, Mr. Brown also needs guidance on potential responsibility centres that may be created within Accuracy Ltd and suitable transfer pricing policy recommendations for intergroup transfers.

Remember to keep your discussion in the context of the case set. While Accuracy Ltd may be a fictional company, the online retailing market is real and your discussion should reflect and acknowledge the issues that may be faced by companies working in that particular industry.

Each of the sections a) to c) is of equal weighting. The overall word limit is 3,000 words (see comments on ‘Word Count’ below). This module is assessed 100% by this assignment.

This assignment does not require a formal report format and can be produced as an essay in 3 parts. You must however follow the conventions of academic writing as described below.