Strategic Management Accounting Case Study 2022

Running head: FLYME INC.
Strategic Management Accounting
FLYME INC.
Name of the Student
Name of the University
Author Note

FLYME INC.1
Table of Contents
Introduction......................................................................................................................................2
a) Critically compare three costing methods that may aid Flyme Plc to both understand and
reduce their direct cost.....................................................................................................................2
Absorption costing.......................................................................................................................2
Variable costing method..............................................................................................................4
Marginal costing..........................................................................................................................5
b) Critically compare two budgeting methods with the current method used at Flyme Plc that will
aid a reduction in overheads............................................................................................................5
c) Critically evaluate how Flyme Plc can use the Balanced Scorecard in order to improve
company performance.....................................................................................................................8
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

FLYME INC.2
Introduction
The study is based on the case of the Flyme organization. In this case study, the present
condition of the Flyme organization can be described essentially based on which the concept of
accounting can be well understood. At present the Flyme has been suffering considerable issues
in regard to the reduced net sales and related costing aspects. It is for this reason that this study is
aimed at outlining the various costing methods which can benefit the enterprise. In association
with this, the second part of the study will discuss the budgeting methods which can be used by
the enterprise and lastly, it will recommend the use of the Balanced score card using which the
company performance can be essentially improved.
a) Critically compare three costing methods that may aid Flyme Plc to both understand
and reduce their direct cost
The costs can be essentially demarcated as the resources which are generally connected
with a procurement or any other similar occupational operation or an activity. The diverse trades
often tend to adopt various ways of arriving at costs of the different products depending on the
nature of the production or the nature of the services of the enterprise. However, the enterprise
would be basically obligated to see to it that it is successfully being able to arrive at a costing
method which will be useful for them and would assist them in ensuring that, the different costs
can be identified appropriately and the association will be able to report considerable profits in
the long run (Akkermans & Van Oorschot, 2018). Hence, in this essay, some costing methods
will be recommended in regard to which, the Flyme PLC will be able to improve its costing
system and be able to solve the different problems which it tends to face. The three types of
costing methods which will be compared are the absorption costing, the variable costing and the
marginal costing.

FLYME INC.3
Absorption costing
The absorption costing can be essentially described as the costing method whereby the
costs are allocated to the production or the services. In consideration to this, it becomes essential
to consider that the absorption costing refers to the costing methods whereby the company`s
entire costs are absorbed by the company offerings. In consideration of this, while using this
method of costing, the enterprise would be required to ensure that while using this type of
costing, the firm can go for variable costing for its internal purposes, however, for the taxes and
other official reports, the absorption costing has to be adopted (Akkermans & Van Oorschot,
2018).
The absorption costing is known as one of the most accepted forms of costing because it
is helps in complying with the generally accepted accounting principles and in association with
this, it recognizes all the costs present at once and undertakes the calculation of the profits in an
accurate and organized manner. According to Ansoff et al. (2018), the absorption costing takes
into consideration all fixed costs which are present such as the direct costs and the fixed costs.
This simply means that, the various costs involved such as the salaries, rental facilities, utility
bills and other such costs are also covered accordingly. In addition to this, the absorption cost is
successfully able to cover the profits in an appropriate manner. This means that, the firm by
using this costing mean will be able to gain an accurate picture of profitability and is able to
balance well even when the products are not sold in the current accounting period.
However, even though it is easy to use, the absorption accounting method has certain
disadvantages as well. These disadvantages comprise of aspects such as the profit level being
better than the given accounting period (Cannavacciuolo et al., 2015,pg.60). The main reason