Management Accounting

This study material covers topics such as value chain analysis, cost drivers, competitive advantages, and the Porter's Five Forces model in the context of management accounting.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the student:
Name of the university:
Author Note:

MANAGEMENT ACCOUNTING 1
Table of Contents
Answer to Question 1:................................................................................................................2
Answer to Question 2.................................................................................................................5
Answer to Question 3.................................................................................................................5
Answer to Question 4.................................................................................................................7

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Answer to Question 1:
A) The value chain analysis is also referred to as the porters value chain is a management
concept by Michael Porter. Value creation particularly adds the competitive
advantage to the elements embedded in the value chain techniques (Kieso, Weygandt
and Warfield 2016).
The above diagrams consists the elements of the porters value chain models and it is
formulated based on the case study of the western cabinets. The value creating process has
been segregated under two forms which are the primary and the secondary factors as per the
activities of the western cabinets.
 Inbound Logistics: The western cabinets are manufactured and delivered to the
customers. The installation in this case in done by the Westerns’ 25 where the prices
of the delivery and the installation are embedded in the cabinet price. When the
customers receive the ultimate cabinet then they are satisfied if all the stages while
preparing the cabinet are met.

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 Operations: Western cabinets use the level of automations that are utilized by the
large manufacturers. In terms of producing the ultimate products, the cost and the
spaces used while producing the products plays significant role in this case. The cost
incurred for the woods and the paints are about 60%. The remaining 40% of the costs
is incurred in the labour and overheads which are the fixed costs.
 Outbound Logistics: After the ultimate products are finished production the n they
are sold out to the consumers in the market. The inventory management system of the
Western cabinets is effective which further makes the supply of the goods and the
services at an appropriate time.
 Marketing and sales: The marketing and the sales strategy of the western cabinets
are also effective due to the fact that sakes are made to the homeowners or through the
contractors those are renovating or building new homes. The revenue of the Western
Cabinets has increased up to the amount of $60 millions where it had more than 300
employees.
 Services: After sales service plays significant role in case of the follow up with the
customers and the warranty. The western cabinets uses the three FTE’s further
ensures that the job is completed when they reaches the customers satisfaction. It
understands the problems of the customers and tries to resolve it as early as possible
(Loughran and McDonald 2016).

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B) The cost drivers refers to the direct cost or the total cost which is incurred for the
producing the products by the company. The elements of te cost drivers are the
standard cost accounting, activity based costing, resource consumption accounting,
throughput accounting, cots volume profit analysis and economic value added. The
above discussed are the types of the cost drivers of the company (Kaplan and
Atkinson 2015).
The competitive advantages of the western cabinets are as follows:
 Western cabinets offer the degree of customization by the process of the
hands on craftsmanship where in this case they also have the access towards
the raw materials.
 They have the ability to produce the micro cabinets which are customized
and also have the supply of more cabinets through the internet (Maas,
Schaltegger and Crutzen 2016).
 Due to the technological advancements of the company, western cabinets
have the rights to produce variety of customized products in the market.
 When the economy hits at its potential, the micro cabinets also increase in
that way as well as the operation of the industry also flourishes.
 As western cabinets are one of the largest firms in the industry which makes
the customization at a lower cost compared to its competitors in the markets.
 The core value drivers of the western cabinet’s customer’s services, lead time
of the cabinets, service warranty, quality and the operational efficiency of the
company (Libby 2017).

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Answer to Question 2
Operating Income of DubbleDore for the year 2015 and 2016 have been computed
under the following table along with the growth of the revenue and cost relationship.
From the above computation it is quite clear that the company is adopting the
technique of the cost leadership. The company has been able to achieve the lower cost or
have the ability to capability to reduce the costs and produce the goods accordingly. The
company has cut down the cut and maintained the quality of the products at the same time.
From the variance, the cost leadership strategy has been identified and been depicted from the
above computation (Hoyle, Schaefer and Doupnik 2015).
Answer to Question 3
A) The porters five force model have been depicted in case of the high end car
manufacturing which are as follows:
 Threat of New Entrance: The automobiles typically depends on the taste and
preferences of the consumers where in case of the high end cars competition are

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always high which demands the utilization of the upgraded technology in cars. It will
always be tough for the existing manufacturers of cars in terms of the price base
completion. The new entrants will try to minimize the costs and attrat the potential
customers in the market.
 Powers of Buyers: The bargaining powers of the car manufacturers are low and in that
case the manufacturer’s tries to adjunct the price as the consumers are price sensitive.
 Powers of suppliers: the suppliers are always aware regarding the production of the
cars where the life span of the automobiles is significant. In this case the suppliers
take care of the parts of the cars (Hoque 2018).
 Power of Substitute: The substitute of the cars is the bus, train, airplanes. In case of
the high end cars, the pricing of the cars must be sensitive where the customers might
not avail the necessary substitute. The price of the gasoline also puts huge impact on
the decision of the customers regarding affording a vehicle.
 Internal Rivalry: Here in case of the high end manufacturing of the cars there is huge
internal rivalry where the competition is always high. For example the Mercedes,
McLaren, ford, and many more. These high end cars have constant internal rivalry in
terms of specification, prices and other similar parameters (Duska, Duska and Kury
2018).

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B)
Competitive
Force
Strength
1= weak
2= moderately weak
3=moderate
4=moderately strong
5=strong
Suggestions to Help Mitigate Force
Threat of New Entrants 3 Provide sensitive price for the customers
Power of Buyers 2 Adjust cost, upgrading and time in an effective
manner
Power of Suppliers 4 Optimization in the utilization of resource and cost
Power of Substitutes 5 Gasoline price must be considered
Internal Rivalry 4 Constant upgrading to eliminate such competition
Answer to Question 4
A) The Woodgardens are trying to provide safe, clean, friendly family environments at
reasonable prices. The competitive strategy the company is adopting is to provide the
high quality family entertainment in an attractive manner and well creative manner in
order to stay far ahead among the other competitors in the lineups (Smith 2017).
B) Balance scorecard of Woodgardens:

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 Financial: Maximum level of entertainment can be gained at a minimum cost.
 Customers: Provide all sorts of services as per their tastes and preferences
 Internal Operation: The managements are aware of the new recruiter which is the
part of the current project which is effective operation within the system.
 Growth: Accomplishing the needs of the customers and providing environmental
sustainability will take this company to the top notch.

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References:
Duska, R.F., Duska, B.S. and Kury, K.W., 2018. Accounting ethics. Wiley-Blackwell.
Hoque, Z., 2018. Methodological issues in accounting research. Spiramus Press Ltd.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2016. Intermediate Accounting, Binder
Ready Version. John Wiley & Sons.
Li, K.K. and Sloan, R.G., 2017. Has goodwill accounting gone bad?. Review of Accounting
Studies, 22(2), pp.964-1003.
Libby, R., 2017. Accounting and human information processing. In The Routledge
Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
Loughran, T. and McDonald, B., 2016. Textual analysis in accounting and finance: A survey.
Journal of Accounting Research, 54(4), pp.1187-1230.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability
assessment, management accounting, control, and reporting. Journal of Cleaner Production,
136, pp.237-248.
Smith, M., 2017. Research methods in accounting. Sage.

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