ACCT3001 Module 2: Accounting Behavior and Control Portfolio

This assignment solution addresses key concepts in accounting behavior and control, focusing on strategic positioning, responsibility accounting, and budgeting. The solution analyzes a case study involving two sewing machine companies, Poppy and Iris, examining their strategic approaches and the factors influencing consumer choices. It explores the transition of a maintenance department from a cost center to a profit center, evaluating the implications and required skills for maintenance managers. The assignment also delves into the disadvantages of budgetary slack from the perspectives of both business unit managers and corporate management, highlighting the impact on decision-making, information asymmetry, and performance evaluation. The solution provides a comprehensive understanding of management accounting principles, including strategic, tactical, and operational information, and their role in achieving organizational goals. The document also provides insight into the different types of information needed and the different levels of management, and the effect of budgetary slack.

Running head: ACCOUNTING BEHAVIOR AND CONTROL
ACCOUNTING BEHAVIOR AND CONTROL
Name of the Student
Name of the University
Author Note

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ACCOUNTING BEHAVIOR AND CONTROL
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................4
Answer to Question 3.................................................................................................................6
References..................................................................................................................................8

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ACCOUNTING BEHAVIOR AND CONTROL
Answer to Question 1
1. The strategic position that can be seen from the case study is that both the organizations
i.e. Poppy and Iris sell sewing machines, which do have same features in their products.
As the price of machineries which are sold in the market, is almost same, but there are
some differences in their operating and maintaining cost1. The cost of operating and
maintenance cost has been estimated of $400 for Poppy and Iris do have a higher
operating and maintenance cost which amounts to $650. The strategy that the
organization does implement is that it does have the Poppy does focus on the product
with have been emphases on the lower operating and maintenance cost which is. On the
other hand, in case of Iris, it can be seen that the strategic implementation that has been
implemented is that they do have a better service reputation of the product that they sell
and it has a fast delivery time that the competitor2. The organizations do want to maintain
a lower amount of cost and does have differentiation at the same amount of time.
2. As per the statement, which Adam has stated is, “I think that Iris offers more value than
Poppy”. The possible sources for which Adam approached to buy Iris is that, the
organization does have a service reputation and there is much faster delivery compared to
the Poppy3. From the case study, Adam has chosen to buy the product of Iris, though they
do have the high operating and maintenance cost which is $ 250 more than the Poppy, as
the Iris do have a better serviced reputation of the product and does have a faster delivery
1Puspitawati, Lilis, and Azhar Susanto. "The Influence of Business Strategy Through the Management
Accounting Information System to the Quality of Management Accounting Information-Evidence in Indonesia."
In International Conference on Business, Economic, Social Science and Humanities (ICOBEST 2018). Atlantis
Press, 2018.
2Mirzaey, Mehdi, Mohammad Behdad Jamshidi, and Yousef Hojatpour. "Applications of artificial neural
networks in information system of management accounting." International Journal of Mechatronics, Electrical
and Computer Technology 7 (2017): 3523-3530.
3Uyar, Ali, Ali Haydar Gungormus, and Cemil Kuzey. "Impact of the accounting information system on
corporate governance: Evidence from Turkish non-listed companies." Australasian Accounting, Business and
Finance Journal 11, no. 1 (2017): 9-27.

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ACCOUNTING BEHAVIOR AND CONTROL
time4. Though the costs are more, the consumers will get attracted to it because of the
goodwill and do have a faster delivery. There are several factors that consumers like
Adam do focuses on as it is seen that the Iris product that are purchased does deliver
earlier than one week if compared to Poppy.
3. With the help of the management accounting system, various techniques, which are
implemented do help the organization to collect, process, manage, and report all the
activities in retrieving the financial data in assisting the managers5. It also helps in
assisting the managers of organization that help in the decision-making. In case of Poppy,
for the betterment of sales, the management does decide that there should be
improvement on the delivery performance that will be through the improvement of the
internal processes. Furthermore, the management will do this with the help of improving
the internal process in the management. This implication, which has been done by the
Poppy, is because of giving a strong competition against the competitor’s like Iris that do
have a good reputation within the consumers and do have a faster delivery time.
With the help of implications for the management accounting information system,
it does help in the forecasting, financial ratios, forecasts, variance analysis and budgeting
decisions. It also helps in the profitability and business expansion that further benefits in
the effective business decision. There is involvement of managers in the different levels
of management, that involves different amount of time and the functions does include
planning, organizing, leading, and controlling. If the managers do have a perfect leading,
then the amount of planning, controlling and organizing, it will decrease the hierarchy
management. In running an organization, it does require some management ability to take
a good business decisions as Poppy is doing, so that it can able to beat the competitors
4Napitupulu, Ilham Hidayah. "Organizational culture in management accounting information system: Survey on
state-owned enterprises (SOEs) Indonesia." Global Business Review 19, no. 3 (2018): 556-571.
5Erwin, Keulana. "Relationship Management Accounting and development of information technology." In IOP
Conference Series: Materials Science and Engineering, vol. 648, no. 1, p. 012033. IOP Publishing, 2019.

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ACCOUNTING BEHAVIOR AND CONTROL
and give the best to the consumers. If the consumers like Adam do find that the Poppy
machineries do deliver the product in the less amount of time, he will buy the product
form Poppy only as they are fulfilling the criteria, which the buyers want. There are three
types of information that is needed to be collected, which are strategic information,
tactical information and operational information6. In the strategic information, the
information that is been employed helps in identify and assist the leaders in choosing the
alternate options that are available in initiating new programs and new course of actions
which are necessary for the organization7. The strategic information is being predictive in
nature and does rely on the external sources of data that are provided. In the tactical
information, it does help the middle level manager’s in deciding the allocation of
resources, use of the limiting factors in the short run etching the operational information,
it does helps in the day-to-day operation in the enterprise that will be beneficial for the
regulating operations and will be repetitive in nature.
Answer to Question 2
1. The manager of the maintenance division, does established a task force that will help in
reviewing the maintenance division operation. Thus, the task force has been
recommended to the maintenance division that will be converted from the cost center to
the profit center8. Moreover, the use of charge back system is required for the
maintenance services which does includes the users to be billed for the services that are
performed.
6Gamayuni, Rindu Rika. "The Effect of Management Accounting Information System Application on
Information Quality and Its Implication on Good Government Governance." INTERNATIONAL JOURNAL
OF SCIENTIFIC & TECHNOLOGY RESEARCH 8, no. 8 (2019): 1247-1254.
7Phuong, Nguyen Thi Thanh. "The roles of information systems in linking management accounting and
financial accounting: Empirical evidence from Vietnam." Accounting and Finance Research 6, no. 4 (2017).
8Sayed, Naqi, Naureen Mushfique, and Camillo Lento. "Successful Conversion of a Cost Center to a Profit
Center: A Case Study of a United Arab Emirates Company's Experience." Middle East Journal of Business 55,
no. 3034 (2016): 1-11.

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ACCOUNTING BEHAVIOR AND CONTROL
2. A. If the organization does switches the maintenance department from the cost center to
the profit center, then the services which is been given by the organization will become
much costlier, especially upon the on-site requests. The organizations will have to over-
allocate the field resources, which will be for compensating the poor planning9. If the
organizations do have their schedule preventive maintenance, which is, been
recommended, it can sometimes detect and can solve the future problems, which will
become more serious and costly in future. The businesses should enable the task force
that will help them in finding the upcoming maintenance appointments which does need
repair and installation work orders10. Thus, the organization does have the ability to be
more proactive and efficient upon its on-site planning. Therefore, it is important to have a
schedule optimization with the help of route optimization, which enables the organization
to get the most value out of the filed resources. The transformation that is been done from
the cost center to the profit center, will start in enabling the location based service for the
technicians. This does need to able in building and optimizing the routes, which will be
easily identifiable in the nearby accounts and will further add to the routes. Thus, the
changes have to be driven by the management upon the advantage location based service
that will help in assigning the technicians through the proximity of the consumers and in
optimizing the territory coverage.
B. In evaluating the manager of the maintenance division, there are certain skills which
the maintenance manager should possess, that are discussed here. A maintenance
manager should have the technical knowledge that does make it challenging the
position11. With the help of the continuous advancement of technology also with the
9Schawel, Christian, and Fabian Billing. "Profit, Service und Cost Center." In Top 100 Management Tools, pp.
279-281. Springer Gabler, Wiesbaden, 2018.
10Jackowski, Mick, Scott Sherwood, and April Schofield. "Developing a Department Profit Center while
Enhancing the Student Learning Experience: Building a Professional Sales Center." Journal of Higher Education
Theory and Practice 18, no. 4 (2018).
11Baltin, C. T., M. Bludau, F. Kron, T. Zander, M. Hallek, A. H. Hölscher, and W. Schröder. "Profit-Center-
Analyse der Ösophagektomie." Der Chirurg 89, no. 3 (2018): 229-236.

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ACCOUNTING BEHAVIOR AND CONTROL
human factor, which is getting more relevant in the organizations, they do have the
characteristics as the organizations leader, which is expected to find in the maintenance
managers.
Answer to Question 3
A. There are several disadvantages upon the budgetary slack upon the point of view of the
business unit managers in achieving the budget are discussed here.
 Uncertainty on results expected: The manager of the organization does have to face a lot
of uncertainty, over the results that will be expected in the future period12. If the managers
do lack the actual data, then it may happen that there are results, which are expected. The
budgetary slack does help in occurring the managers in underestimating the expected
revenues in remaining the range, which is easy in achieving the success in the new
product line.
 Information asymmetry: It does occur when the one party does possess more information
related to the subject compared to others. The departmental level managers will be able to
access the private information related to the things like resource requirements, employee
productivity, and expenditures. The lower level managers do have some advantage upon
the information asymmetry, which is in advance to the self-interest without having the
knowledge of the top management. They will set an easy target, which can be achieved so
that the management will focus on their performance and will outperform the result of
previous year.
 Rewards dependent on budget attainment: In every organization, the employee awards
and the payoffs are usually dependent upon the budget attainment. The lower level
12Daumoser, Christian, Bernhard Hirsch, and Matthias Sohn. "Honesty in budgeting: a review of morality and
control aspects in the budgetary slack literature." Journal of Management Control 29, no. 2 (2018): 115-159.

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ACCOUNTING BEHAVIOR AND CONTROL
managers thus create a budget slack, so that it is easier to make the target and to achieve
it13. Sometimes, the managers are under pressure from the top management that happens
in ensuring the goals can be achieved, in which the process can be influenced to work in
their favor. The managers can able to perform the supervisory roles, as they do have the
knowledge, which will be achievable for them14. In presenting, a high budget for the
expenses and the low-balling does have the expected revenue target at the level, which is
easy to attend. It will be much easier to achieve the targets and enjoy the rewards, which
includes salary hikes, job promotions, etc.
B. The three disadvantages of budgetary slack from the point of view of the Corporate
Management is stated under:
 There can be decrease in the ability in highlighting the weakness and in taking the timely
corrective actions upon the problem areas, which are faced by the organizations.
 The overall effectiveness also decreases upon the corporate planning. There are
unnecessary changes that are done which includes the pricing changes or there is and
reduction of the promotional spending that can be taken from the perceived which is
needed further in improving the earning, and in eliminating the budgetary slack it can
establish the objective which is same without the changes in the market place15.
 It also limits the objective evaluation upon the managers of department and there are
performances upon the subordinates thathave been done upon using the budgetary
information.
13Fanani, Zaenal, and Georgina Elizabeth K. Saudale. "Influence of Information Asymmetry and Self-Efficacy
on Budgetary Slack: An Experimental Study." Jurnal Akuntansi dan Keuangan 20, no. 2 (2018): 62-72.
14Fehrenbacher, Dennis, and Vincent Castro. "Contract frame and participation: mitigating disadvantages of
penalty contracts." (2017).
15Robey, Shawn L., and Mark A. McKnight. "Spending surges: Considerations towards a proposed model for
explaining budgetary slack in expiring budgets." International Journal of Accounting and Financial Reporting 8,
no. 2 (2018): 118-125.

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ACCOUNTING BEHAVIOR AND CONTROL
References
Baltin, C. T., M. Bludau, F. Kron, T. Zander, M. Hallek, A. H. Hölscher, and W.
Schröder. "Profit-Center-Analyse der Ösophagektomie." Der Chirurg 89, no. 3
(2018): 229-236.
Daumoser, Christian, Bernhard Hirsch, and Matthias Sohn. "Honesty in budgeting: a
review of morality and control aspects in the budgetary slack literature." Journal
of Management Control 29, no. 2 (2018): 115-159.
Erwin, Keulana. "Relationship Management Accounting and development of information
technology." In IOP Conference Series: Materials Science and Engineering, vol.
648, no. 1, p. 012033. IOP Publishing, 2019.
Fanani, Zaenal, and Georgina Elizabeth K. Saudale. "Influence of Information
Asymmetry and Self-Efficacy on Budgetary Slack: An Experimental
Study." Jurnal Akuntansi dan Keuangan 20, no. 2 (2018): 62-72.
Fehrenbacher, Dennis, and Vincent Castro. "Contract frame and participation: mitigating
disadvantages of penalty contracts." (2017).
Gamayuni, Rindu Rika. "The Effect of Management Accounting Information System
Application on Information Quality and Its Implication on Good Government
Governance." INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY
RESEARCH 8, no. 8 (2019): 1247-1254.
Jackowski, Mick, Scott Sherwood, and April Schofield. "Developing a Department Profit
Center while Enhancing the Student Learning Experience: Building a Professional
Sales Center." Journal of Higher Education Theory and Practice 18, no. 4 (2018).

9
ACCOUNTING BEHAVIOR AND CONTROL
Mirzaey, Mehdi, Mohammad Behdad Jamshidi, and Yousef Hojatpour. "Applications of
artificial neural networks in information system of management
accounting." International Journal of Mechatronics, Electrical and Computer
Technology 7 (2017): 3523-3530.
Napitupulu, Ilham Hidayah. "Organizational culture in management accounting
information system: Survey on state-owned enterprises (SOEs) Indonesia." Global
Business Review 19, no. 3 (2018): 556-571.
Phuong, Nguyen Thi Thanh. "The roles of information systems in linking management
accounting and financial accounting: Empirical evidence from
Vietnam." Accounting and Finance Research 6, no. 4 (2017).
Puspitawati, Lilis, and Azhar Susanto. "The Influence of Business Strategy Through the
Management Accounting Information System to the Quality of Management
Accounting Information-Evidence in Indonesia." In International Conference on
Business, Economic, Social Science and Humanities (ICOBEST 2018). Atlantis
Press, 2018.
Robey, Shawn L., and Mark A. McKnight. "Spending surges: Considerations towards a
proposed model for explaining budgetary slack in expiring budgets." International
Journal of Accounting and Financial Reporting 8, no. 2 (2018): 118-125.
Sayed, Naqi, Naureen Mushfique, and Camillo Lento. "Successful Conversion of a Cost
Center to a Profit Center: A Case Study of a United Arab Emirates Company's
Experience." Middle East Journal of Business 55, no. 3034 (2016): 1-11.
Schawel, Christian, and Fabian Billing. "Profit, Service und Cost Center." In Top 100
Management Tools, pp. 279-281. Springer Gabler, Wiesbaden, 2018.

10
ACCOUNTING BEHAVIOR AND CONTROL
Uyar, Ali, Ali Haydar Gungormus, and Cemil Kuzey. "Impact of the accounting
information system on corporate governance: Evidence from Turkish non-listed
companies." Australasian Accounting, Business and Finance Journal 11, no. 1
(2017): 9-27.