Management Accounting and Control Systems at EyeOn Pharmaceuticals

This case study analyzes EyeOn Pharmaceuticals, a company focused on ophthalmology, examining its business strategy, critical success factors, and management accounting and control systems within its research and development (R&D) section. The company's success hinges on innovation, product development, and effective resource management. The assignment delves into the company's full absorption cost accounting process, cost reporting methods, and the strengths and weaknesses of its management control systems. It highlights the importance of a strong control system in mitigating risks and ensuring the achievement of organizational objectives while also acknowledging the limitations of the system, particularly in quantifying human behavior and external factors. The analysis considers the impact of these systems on measuring R&D productivity and overall performance. The case study also includes an overview of the company's business strategy and critical success factors, including decisions and actions important for achieving success.

MANAGEMENT
ACCOUNTING

EyeOn
Introduction
EyeOn pharmaceuticals stress upon the segment of ophthalmology and develop, manufacture
and sell a variety of products. The variety of project is mainly linked to the diagnosis and
treatment of defects that are linked to eyes. The company markets both prescription, as well
as nonprescription drugs that can be used in ophthalmic surgery. The company utilizes a
traditional system of the product line (Brebbia, 2013). Over the years it has attained
commendable results and the strong management helps the company to build and strengthen
the position.
Answer 1
Research and development is the major element in the business of EyeOn’s. Since EyeOn is
mainly engaged in the pharmacy sector it is imperative that the company can expand when it
comes up with new products of pharma. The success factors lie in the fact that the company
needs to come up with new and varied products that have immense utility (Merchant &
Vander, 2011). The results even depend on the research, the utilization of resources and the
budget set aside for the work. Moreover, the control of resources is an important
consideration that will lead to the future of the products at EyeOn’s pharmaceuticals. It is
important to understand the concept that the companies that have launches that outperform
every time are able to get accustomed to the market with ease and flexibility (Kehoe & Ruhl,
2013). Moreover, post-launch data and services can enhance the services and ensure solidity
when it comes to competition.
The strategy for the success of EyeOn is owing to a well-settled management system that
helps to manage the R&D effort. It is one of the key factors that have helped the organization
in attaining a favorable position. The setting up of plan together with project objectives
enables the R&D to set up a budget in an effective manner. (Simon & Hillson, 2012) The
EyeOn directors constantly interact with the team that helps to have a proper understanding
of the market and its trends. The team helps in eliminating any gaps present in the pipeline
and hence, able to enhance the effectiveness of the launch.
Answer 2
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EyeOn
When it comes to EyeOn Pharmaceuticals, the accounting process was done through the
process of full absorption cost. Direct expenses that are both labor and material are charged
to programs of specific nature and projects. Labor is chargeable on the basis of time sheets
that are completed on a weekly basis by R&D personnel. Costs are not specifically
identifiable with a concerned project or program. The allocation was done on the basis of
direct labor hours.
EyeOn ensured the production of an extensive set of cost reports. The reports were mainly in
the form of project, program or medical specialty form. They projected the cost by line items
in comparison to the budget. The reports are prepared and available on a monthly basis.
Another report prepared by the organization reflected the expenses that are accumulated by
the cost center. The department of R&D was segregated into 75 cost centers. The cost reports
were described by way of medical specialty and other types of programs. The project cost
accounting system briefs the information vital to assess the flow of resources to specialty
areas of medicine that is research vs development and long terms versus short term. Further,
the management ascertained that the cost reports were of immense utility as it measures the
input to the processes of R&D but they were not useful for the measurement of the
productivity of the R&D activity as they do not project any output (Schegel et. al, 2016).
It is important to have a good control system in practice because it ensures that an unpleasant
situation can be negated. A strong control even denotes that the poor performance does not
come in the way of the companies. Perfect control ensures that all physical control system is
properly established and all individuals on whom the organization relies act in the best way.
This ensures that the organization is working to attain the desired set of objectives. Moreover,
control is an important pre-requisite for an effective, as well as effective implementation of
the desired plans and actions. (Chand, 2018) It helps in the determination of the variations
and pinpoints the ‘factors that are responsible for taking remedial action.
However, there are flaws in the management control system. Management control system
loses the effectiveness when the performance standard cannot be defined in quantitative terms
and it is not easy to set the quantitative standard for human behavior, the satisfaction of job,
morale, etc. In such a scenario, the judgment rests upon the manager’s discretion.
Furthermore, the enterprise does not have any control over the factors that are external in
nature like government policy, changes in technology and competitor policy, etc.
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EyeOn
References
Brebbia, C. (2014) Risk Analysis (9th ed). Southampton: wit press.
Chand, S. (2018) 7 Advantages of Managerial Control for an Organization. Available from:
http://www.yourarticlelibrary.com/organization/7-advantages-of-managerial-control-
for-an-organization/25753 [Accessed 11 April 2019]
Kehoe, T. J., & Ruhl, K. J. (2013). How important is the new goods margin in international
trade?. Journal of Political Economy, 121(2), 358-392. Available from
https://experts.umn.edu/en/publications/how-important-is-the-new-goods-margin-in-
international-trade [Accessed 11 April 2019]
Merchant, K and Van der, S. (2011) Management Control Systems: Performance
Measurement, Evaluation and Incentives (4th ed). Pearson
Schegel, C., Retterath, M. and Eliades, G. (2017) How to Make Your Drug Launch a Success.
Available from: https://www.bain.com/insights/how-to-make-your-drug-launch-a-
success/ [Accessed 11 April 2019]
Simon, P & Hillson, D. (2012) Practical Risk Management: The ATOM Methodology.(2nd
ed). Management Concepts, Vienna
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