Management Accounting Report: Analysis of Monoclean Limited Case Study

This report provides an analysis of a case study on Monoclean Limited, a company that manufactures and markets household cleaners. The assignment identifies several issues raised by business unit managers following a restructuring, including obsolete inventory, inventory shipping and transportation, transfer pricing, and capital expenditure. The report explores each issue in detail, offering potential solutions and recommendations for Monoclean Limited. The analysis emphasizes the importance of inventory optimization, supply chain management, appropriate transfer pricing techniques, and understanding capital expenditure decisions within the context of profit center responsibility. The conclusion suggests the company sought help from management consultants and highlights the importance of effective performance measurement and incentive systems.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author Note:

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Executive Summary
The main aim of the assignment is to analyze a case study on Monoclean Limited. In this
particular case study, proper emphasis has been given to identify issues that have been raised by
business unit managers about some of the decisions that have been made after restructuring
activities. The issue is related to obsolete inventory, inventory shipping and transportation,
transfer pricing, capital expenditure. Each of the issue is mentioned separately with proper
suggestion and to what steps should Monoclean Limited undertake to solve the issue as far as
possible.
Table of Content

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s
Introduction......................................................................................................................................3
Analysis...........................................................................................................................................3
Issue.............................................................................................................................................3
Solution........................................................................................................................................4
Issue.............................................................................................................................................4
Solution........................................................................................................................................4
Issue.............................................................................................................................................5
Solution........................................................................................................................................5
Issue.............................................................................................................................................5
Solution........................................................................................................................................6
Conclusion.......................................................................................................................................6
Reference List..................................................................................................................................7

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Introduction
This case study deals with a company named as Monoclean Limited that manufacturers
as well as markets household cleaners in a batch process-manufacturing and Activity-based
costing as it is used for allocating overhead to production (Williams 2014). The company had
come out with new structure where the monthly declaration is arranged for each business unit.
Furthermore, manufacturing profit report is organized for the region as well as total-company
profit statement is prepared. Addition to that, the transfer price for goods transferred between
manufacturing as well as marketing areas within the same trade in at regular manufacturing cost.
The current segment properly identifies each issue and provide with recommendations that will
help Monoclean Limited (Fullerton, Kennedy and Widener 2013). Therefore, the present
segment properly put emphasis upon how management of Monoclean Limited take assistance
from management consulting team for solving the issue as far as possible.
Analysis
Issue
There are several issues that are identified by business unit managers. The issue is related
to obsolete inventory. The first issue is related to obsolete inventory and this had directly
affected the manufacturing profit statement (Suomala, Lyly-Yrjänäinen and Lukka 2014).
Furthermore, there is little encouragement for the marketing human resources that are
responsible for selling off or managing slow or old stock as they actually purchase goods at
standard cost from the manufacturing as and when needed.

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Solution
The above issue can be solved by considering inventory optimization tools that have been
gaining around as Monoclean Limited seek to assess their intact network as well as formative the
best inventory policies for each of the product in their supply chain (Fullerton, Kennedy and
Widener 2013). The software tools should be used by Monoclean Limited that uses data from
WMS as well as ERP systems. Monoclean Limited should utilize business solutions that make
use of real-time analytics under one major stage. It will help the company to have real-time
inventory within one form as well as follow it properly who owns that inventory and it is still in
the same inventory model (Renz 2016).
Issue
The issue in this case is related to inventory shipping as well as transportation where it is
properly managed by manufacturing staff members (Suomala, Lyly-Yrjänäinen and Lukka
2014). The cost for this need to be shown in the manufacturing profit
Solution
The above problem can be solved by presenting realistic advice on how top
administration can distinguish the extent of its own supply weakness as well as treat it with a all-
inclusive approach for managing the level of supply activities (Otley and Emmanuel 2013). In
order to guarantee long-term accessibility of vital materials as well as components at a
competitive cost, the manufacturing staff members are responsible to look after the risks and the
complexity of global sourcing activities. In that way, other staff members at Monoclean Limited
already sources on a global basis that actually come up with uncertainties as well as supply or
price disruptions on annual unprecedented scale. It is important to monitor the current

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developments where the management needs to learn matters relating to supply chain activities. It
actually calls for a solution that is a total change of viewpoint that starts from purchasing or
working functions to supply management or a tactical function in the most appropriate way
(Suomala, Lyly-Yrjänäinen and Lukka 2014).
Issue
The issue here is about change in product or raw material sourcing where the trade units
takes into consideration manufacturing areas that attract manufacturing variances from standard
cost (be it favorable or unfavorable). It mainly outcome to an adjusted with the standard costs in
ensuing periods as well as affect the profit of the marketing units (Messner 2016).
Solution
The above issue can be solved by using transfer pricing techniques as it will help in
improving the level of profitability at Monoclean Limited. It is advisable to use these transfer
pricing techniques as it will improve profitability at both business as well as corporate level. This
technique has advantages but any of the incorrect transfer pricing can cause substantial
dysfunctional purchasing behavior as well as undergo profitability component on corporate-wide
level (Fullerton, Kennedy and Widener 2014). Market pricing help in aspects such as
profitability enhancement, performance review as well as simple applicability
Issue
The issue of concern is with the role of the business unit MD who is involved in the
capital expenditure approval process. In that case, capital expenditure decisions mostly affect the
business unit profits throughout the cash flow timing as well as depreciation of assets and
maintenance cost (Suomala, Lyly-Yrjänäinen and Lukka 2014).

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Solution
The above issue can be solved by understanding the importance of capital expenditures
and how it helps at the time of undertaking decisions (Ax and Greve 2017). Capital expenditure
is used by business enterprise for acquiring or upgrading physical assets like property, industrial
buildings or in that case equipment. It is used for undertaking new projects or investments by the
business enterprise. It will help in tracking the capital expenditures on a trend line and comparing
capital expenditures to sales. It actually matches capital expenditures to business units (Suomala,
Lyly-Yrjänäinen and Lukka 2014).
On analysis, it is noted that Monoclean Limited should use profit centre responsibility
where executive are accountable to look after both revenue as well as costs. Here, the
accountability of the manager is to undertake decisions that affect cost as well as revenues or
profits for each of the department. Therefore, the main purpose of the profit centres is to earn
profit for Monoclean Limited. It is the accountability of the profit centre executive to look after
production as well as advertising of a product (Fullerton, Kennedy and Widener 2013).
Conclusion
At the end of the study, it is concluded that Monoclean Limited had taken assistance from
management consultant team so that they can prepare a report by outlining the issue that may be
working against efficient performance dimension as well as incentive systems in the trade units.
The above analysis properly explain underlying problems as well as recommend with a solution
that considers suitable responsibility centre type, transfer pricing policy as well as performance
assessment scheme and administration compensation package.

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Reference List
Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational
culture compatibility and perceived outcomes. Management Accounting Research, 34, pp.59-74.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control
practices in a lean manufacturing environment. Accounting, Organizations and Society, 38(1),
pp.50-71.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices. Journal of
Operations Management, 32(7), pp.414-428.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research, 31, pp.103-111.
Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Suomala, P., Lyly-Yrjänäinen, J. and Lukka, K., 2014. Battlefield around interventions: A
reflective analysis of conducting interventionist research in management
accounting. Management Accounting Research, 25(4), pp.304-314.
Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.

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