Management Accounting Paper 2022

Management
Accounting

ACCOUNTING 1
Part 1
Introduction
Management Accounting is the provision of financial data in order to improve themselves
before the facing the challenges. It is the process of internal system that the company use to
measure and determine its process of management. It is the appropriate way for the company to
improve its financial situation as the management plays the important role in it. It is required for
the company to improve the management in order to improve the efficiency of work and
financial situation of the company to attain the success (Robinson, 2020). In this paper, the
discussion is made on the topic of “management accounting and the strategies of the company”.
The main aim of this report is to understand the concept of management accounting. In this
paper, the case study of Divine Denim has been taken into consideration to analyze the
management accounting system.
Question 1
Business Background
Divine Denim is a growing company which develops the designer, denim jeans and
jackets. The company uses the organic yarn dyed cotton denim of different weights according to
design and patter of garments. The company starts operating the business at the global level by
using the self-measuring system. Helen Croker is the owner of the company as she designs the
clothes with the self-measuring approach. The company also operates the business online and
satisfies the demand of consumers. It has well organized structure such as the patter of clothes
and design has been sent to cutting department and then cutting department sent the material to

ACCOUNTING 2
machine department. Helen decided to expand the business due to which she decided to sell the
Ready to Wear clothes in Australia and also with the online process at the cheaper price. Due to
expanding the business of RTW, she expanded the machinist and staff for more quantity and
quality. It increases the cost of production of the company that is the reason she decided to
implement the cost control procedures for controlling the expenses.
Porters Five Forces Framework
Porters five forces framework is the process of analyzing competition of business. There
are five forces of the company that helps to determine the capacity of the company to compete
with the competitors and also helps to evaluate the attractiveness of industry (Lasserre, 2017).
There are five forces of yhis framework those are implemented on Denim Divine industry such
as threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of
competitors and the threat of competitors and these are:
The threat of new entrants: It has been found that the threat level of new entrants is high as the
clothing industry is growing with the rapid rate. It is a profitable industry due to which the new
entrants getting attracted towards it to gain the advantage and earns the high profit. There are
many students open their own stores after getting the degree of fashion designing. This industry
Bargaining power of buyers: Bargaining power of buyers is high as there are many companies
in the market that provided the fashion services to consumers. The existing brands have high
brand value in the industry such as Forever 21, Zara and H&M and many others. There are also
big and small organizations that provides the clothes as per the targeted consumers. The
companies supplies the goods in different price due to which the consumers have many options
to buy the product from different companies with the different price rate. The consumers can

ACCOUNTING 3
purchase the product as per their capacity and demands that is why; it can be said that the
bartering power of buyers is high.
Bargaining power of suppliers: Negotiation power of suppliers is low as there are many
suppliers in the market that provides the raw material to the companies. The brands have high
value due to which the suppliers are happy to serve the services to the existing brands so that
they can also earn the high profit. However, it is not easy for the company to shift one supplier to
other as the trust is required while providing the quality of services to consumers. But due to
large number of suppliers, the company can shift from one to other supplier as the switching cost
is less even sometimes; it is beneficial for the companies to shift one to other supplier. The
negotiation power of suppliers is increases.
The threat of competitors: The degree of threat of competitors is high as there are many
companies in the industry that provides the similar services to consumers. Zara, H&M, Forever
21 and many others are the main competitors of the company that increases the threat of
competitors in the industry. Apart from it, there are many companies that operate the business in
big and large scale in order to grasp the market share in the market. The companies provide the
services in the different prices and also with the different discount rate due to which the threat of
competitors has been increases.
The threat of substitute: The degree of threat of substitute is moderate as the clothes is the
necessity for an individual. It is not possible to replace the demand of clothing with the other
things which states the low level of threat of substitute. Apart from it, it has been found that the
companies provide the clothes with the high prices in different designs due to which the
consumers has the options to replace the fashion clothes to simple clothes just for survival. It