Module: Strategic Management Accounting
You are required to produce a report which answers the following TWO questions:
Organisations need to know the cost of products or services they provide for a variety of decision making situations. Critically evaluate the following three approaches to costing products or services:
1. Marginal or variable costing;
2. Full or absorption costing;
3. Activity Based costing (ABC).
For each approach, identify two managerial decision making situations where that approach is more appropriate than the other two and justify why you have chosen that approach over the other two approaches in a particular decision making situation.
If you want to use numerical examples to support your answers please include these as an appendix.
It is important that students critically evaluate the three approaches rather than merely describe them. It is also important that students provide two managerial decision making situations for each approach and include the justification as to why one is better than the other two.
(Guidelines: You should answer this question in an essay format)
i) Brief explanation of each costing method
ii) Discuss the pros and cons of each method (e.g. marginal costing is easy to calculate)
(you are recommended to perform some external research and don’t just rely on points in lecture notes)
iii) Use 2 management situations / decisions for each method to illustrate that approach is better than the other two
(e.g. in a certain situation, marginal costing is better than full costing, and WHY; and in another situation, marginal costing is better than ABC, and WHY. Same for Absorption costing and ABC costing)
Strategic management accounting is concerned with providing information that will support the strategic plans and decisions made within a business: you are required to critically review this statement.
In doing so you should consider the following areas of strategic planning:
a) Establishing mission, vision and objectives
b) Undertaking a position analysis such as SWOT
c) Identifying and assessing strategic options
d) Selection of strategic options and formulation of long- and short-term plans
e) Performance review and control
It is important that students critically evaluate both traditional approaches to budgeting and where appropriate alternative approaches to budgeting rather than merely describe them. It is also important that students justify and reach a conclusion as to which approaches are recommended for each of the two types of businesses.
(Guidelines: You should answer this question in an essay format) I) The major difference of strategic management accounting from traditional management accounting
II) What SMA tools are useful in each steps a-e, e.g. Life-cycle Costing (i.e. not only consider the production cost to determine a product’s costing, but also the R&D costs in development stage, and also the after-sales service cost in the after-sales stage.)
Please note while you need to mention all steps in strategic planning process as above, but you are not expected to discuss all the strategic management accounting tools in details, you are free to choose the tools you would like to focus on.
Please also make reference to some suitable academic references.)
III) Based on the discussion in part II, express clearly what’s your opinion on the statement in the question.