Analyzing Management Accounting and Control Systems at Handy Homes

This report provides a comprehensive analysis of the management control systems currently in place at Handy Homes, a family-owned residential care company. It identifies the presence of a power culture within the organization and discusses the inherent issues, such as overstated staff hours and scheduling inefficiencies. The report proposes several changes to improve cost management, including maintaining error-free schedules, breaking down costs, optimizing staffing, implementing cross-training, and using a time clock system. It also addresses the challenges faced by small companies like Handy Homes when expanding their business, focusing on cultural, strategic, and financial issues. Furthermore, the report examines different control types and the tightness of controls necessary for effective management. Finally, the report includes a profitability statement for a new Handy Homes facility, outlining key assumptions related to revenue, funding, and payroll costs, offering a detailed financial projection for the company's expansion efforts. Desklib is a platform where students can find similar solved assignments and study resources.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Answer to Question 1:
Management control systems currently in place in Handy Homes:
Management control systems help in accumulating and using information associated with
organisations for analysing the ways the organisations are performing and using their varied
resources such as financial and human structure for developing competitive edge among the
customers (Bedford 2015). These systems are applied widely by majority of the business
organisations in the form of a conceptual framework, which assist them in enhancing personnel
decision-making and actions in compliance with the desired goals of the organisation. This
section would focus on analysing the ways through which Handy Homes is managing its control
system for enhancing the overall performance. In this regard, it is noteworthy to mention that in
an existing complicated business environment, in which the activities are varying continually in
relation to governmental influence and external influential dynamics, the organisations need
implementation of strategies for assuring long-term business sustainability (Rieckhof, Bergmann
and Guenther 2015).
Based on the provided information, it could be observed that the current system is
dependent on the staffs sending in the hours worked to Harriet Handy looking after the
administration of the organisation. In addition, Charlotte Handy is at the centre of the
organisation, as all the family members seek permission of the mentioned individual before
undertaking any decisions. This implies the presence of power culture within Handy Homes. In
case of power culture organisation, the significant element is control, as the decisions are
undertaken by a single or small number of individuals (Luft 2016). This type of culture is usually
identified within small organisations like Handy Homes. Thus, in Handy Homes, decisions are

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undertaken quickly due to the absence of any consultation or little consultation. However, it
needs to be borne in mind when there is absence or lack of consultation; it is not possible for any
organisation to obtain benefits of the experience and skills of the workforce, the employees
might not feel motivated and this might lead to staff turnover (Lee et al. 2014). Hence, the
success of a power culture organisation would rely on the strengths of the decisions undertaken
by the decision makers.
Changes needed by Handy Homes:
Since power culture is evident in Handy Homes, certain issues are inherent within the
organisation. One such issue is that the late arrival of new resident results in overtime fees for the
employees and they make delays in sending their timesheets owing to delayed transportation
from the hospital. This poses problems for Harriet in reconciling the hours worked to the
budgeted hours. For dealing with this issue, Harriet has to make phone calls to the homes for
checking the numbers along with checking whether the provided data are accurate. In most
occasions, it has been found that the budgeted hours are overstated and the staffs are claiming
more hours than they have worked. This is because of the absence of lack of supervision and
they believe that they would earn some additional overtime regardless of whether they actually
worked or not. This is not an issue for the home having the family members; however, for other
homes, the issue is deemed to be severe.
Labour costs normally account for the highest percent of money, which are incurred for
running the daily operations of the business (Bedford, Malmi and Sandelin 2016). Therefore, it is
necessary for Handy Homes to manage labour costs when it comes to optimisation of these costs
for ensuring business profitability. For minimising the overstatement of staff hours, Handy
Holmes needs to undertake the following measures:

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Maintaining error-free schedules:
As the weekly working schedules of Handy Homes are not free from errors and
imprecise, this is the primary reason that the organisation is losing huge amount of money at the
time of adding up labour costs. The improper scheduling habits of the organisation like
scheduling additional staffs for working in a shift could result in losing money over extended
timeframe (Jordao, Souza and Avelar 2014). Therefore, when the management of Handy Homes
develop correct and foolproof schedules, the labour costs could be estimated in a better manner
and the budget could be prepared more effectively. In this context, Lopez-Valeiras, Gonzalez-
Sanchez and Gomez-Conde (2016) mentioned that using pen and paper schedules or Excel
spreadsheets are not the most effective way in order to manage staffs. Handy Homes is required
to use intuitive tool of cloud-based scheduling for adjustments of shifts when required. This
would help in generating accurate and schedules free from conflicts. Therefore, the significance
of correct scheduling could not be overstated at the time of handling labour costs.
Breakdown of costs:
Handy Homes needs to maintain a closer look on the business essentials and effective
records of its expenses for detecting mistakes and correcting them so that the labour costs could
be estimated in a better fashion. Therefore, the labour data need to be pulled up and the same
should be analysed for estimating the potential costs of labour, as they would provide an
effective starting point for planning and optimising labour budget (Chenhall and Moers 2015).
This breakdown would assist the organisation in identifying its frivolous spending and
accordingly the areas could be identified for making cuts and obtaining the maximum potential
from the workforce.

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Optimisation of staffs:
Both understaffing and overstaffing could result in additional drainage of costs for handy
Homes. In case, more staffs are involved in working in a shift than needed, the ratio of labour
costs to revenue would never be optimal. The situation is similar when there is unavailability of
staffs. In case of Handy Homes, the staffs working in its various homes are showing that they
have worked overtime hours, which is actually not the case. This implies that Handy Homes has
to pay its staffs with additional money for basically no work. Hence, the staff optimisation in the
form of a business process results in effective labour management (Booth 2018). With the help
of better estimation of labour costs based on business data acquired and effective staff
scheduling, Handy Homes would place it in a better position for earning more money.
Implementation of cross-training:
Despite the fact that cross-training could not be implemented in all managerial positions
of Handy Homes, it is possible to implement the same in many positions. For instance, the
personnel maintaining the work schedules could be used for observing the hours actually worked
by the staffs. It would be beneficial for both the organisation and its employees. This is because
from the perspective of Handy Homes, more tasks could be completed by employing fewer staffs
and the staffs obtaining this training are learning new stuffs, which would add to their range of
professional skills. Thus, it is a win-win situation for both management and staffs of Handy
Homes.
Using time clock:
The improvement of punctuality in small organisations like Handy Homes makes
difference and finding a way of monitoring staff attendance habits assists in maintaining team

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honesty (Langfield-Smith et al. 2017). In addition, this would assist Handy Homes in conducting
staff reviews as well as audits. When the organisation has clear data of attendance at its disposal,
better planning could be made. In case of Handy Homes, some staffs are observed to be arriving
late and thus, the management should approach them for knowing the reason behind such late
arrivals. As transport is an issue for majority of the staffs, the organisation could switch their
shifts with other staffs not having any issue to arrive within time.
Issues faced by small companies in expanding business:
Small companies like Handy Homes encounter the following issues at times of
expansion:
 With the growth of the organisation, cultural issues might arise and it would be
necessary for Handy Homes in managing the same with the expansion of management
and employee strength.
 Another issue is strategic issue due to change in management strategy, since some old
management practices are eliminated by introduction of new ones (Laudon and Laudon
2015).
 The final issue is related to finances, as managing a small organisation is a different
dynamics; however, for managing a big organisation, some standards should be
implemented for better management of finances from the end of Handy Homes.
Control types and tightness of controls:
Basically, controls are of four types, which include autocratic, aspirant, drifter and
empowered. Autocratic control involves low autonomy and high control, while in case of
aspirant control, it is characterised by high autonomy and high control. Drifter control implies

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low autonomy and low control, while empowered control takes into account high autonomy and
low control (Kaplan and Atkinson 2015).
For a small organisation, autocratic behaviour is deemed to be effective; however, with
the growth of the organisation, there would be expansion of control as well as increase in
autonomy. In this context, it is noteworthy to mention that excessive control limits growth, while
lack of control could result in downfall in quality. In case of Handy Homes, the organisation is
required to shift from the autocratic stage to the aspirant stage, after which it needs to consolidate
in the empowered phase.

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Answer to Question 2:
Profitability statement of a home for Handy Homes:
Assumptions:
For designing the profitability statement of a new home for Handy Homes having the
ability to cater 30 residents, it is assumed that the occupancy level would be 100% in all weeks
throughout the year. The other assumptions made include the following:

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Assumption 1: Revenue computation for the year
As identified from the case information, the weekly rate for long stays would vary
between £620 and £800. In order to arrive at the exact weekly rate, the average of the two figures
is made and accordingly, it is multiplied by 52, which is the number of weeks in a year. In
addition, the three-week rate for respite care varies between £680 and £900. As in the above
case, the average of the two figures is considered for arriving at the exact figure. However, for
obtaining the weekly rate for respite care, the figure is divided by 3 and the result is multiplied
by 52 like long stays. By adding revenue obtained from long stays and respite care, total revenue
is obtained as £54,773.
Assumption 2: Funding obtained for the year
It is assumed that Handy Homes requires funds of £700,000 for initiating the proposed
home. Additional assumptions are made, in which local authority funding would be 30% of the

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entire amount and private funding would be 70% of the total amount. Therefore, funding from
local authority is computed as £210,000, while private funding with local authority is obtained as
£490,000.
Assumption 3: Caretaking payroll for the year
As the new home of Handy Homes would contain only one housekeeper, the individual is
assumed to be paid £9,000 per annum. In addition, there would be four cleaners and their
monthly salary would be £2,000 each per year. As the home would have only one activities
coordinator, the individual would receive payment of £5,000 each year. Finally, two cooks and
four kitchen assistants would be required for the new home; their yearly salaries are assumed to
be £2,500 and £1,500 each respectively.
Assumption 4: Administrative payroll for the year

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According to the provided information, the new home requires three team leaders, four
senior care assistants and nine care assistants in the administrative department. The salary of
each team leader is assumed to be £25,000 per year, while each senior care assistant would
obtain payment of £14,500 per annum and each care assistant is expected to have salary of
£12,000 each year. However, all the above types of personnel have demanded a hike of 50% on
their overtime salary. The overtime rate per hour is assumed to be £10, Moreover, further
assumptions are made, in which it is assumed that the team leaders would work for 100 overtime
hours, senior care assistants would work for 150 overtime hours and care assistants would work
for 200 overtime hours.
Techniques to improve the profitability of homes:
 The management of Handy Homes could minimise staffing costs by using flexible
staffing like hourly or part-time staffs and accordingly, staffing could be adjusted
depending on patient census data (Ward 2016).
 The management of Handy Homes could minimise supply costs by working with the
vendors in improving contracts along with encouraging the leaders and assistants to
undertake fiscally accountable supply decisions.
 Handy Homes could think of benefitting from outsourcing or partnering with other firms
for various kinds of services. For instance, the services might constitute of laundry and
food services and in few cases, clinical services as well (Finkler, Smith and Calabrese
2018).

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Answer to Question 3:
Discussion of whether profit alone is a credible measure of performance:
For growing organisations like Handy Homes, profit could not be considered as a
standalone measure of performance. Instead, balanced scorecard is deemed to be the most
effective performance measurement system for the concerned organisation. The main reasons are
listed briefly as follows:
Correct measurement of goals and performance:
With the help of balanced scorecard, it is possible to obtain a measuring standard by
which it could be ascertained whether the established goals have been accomplished (Bekaert
and Hodrick 2017). The business model would be visualised in strategy maps, which would
compel the managers of Handy Homes in thinking about cause and effect relationships. This
implies that significant future performance enablers and performance results are detected in order
to develop an overall picture of the strategy (Hoque 2014).
Balanced overview of the company performance:
If it is assumed that Handy Homes is performing effectively from the financial
perspective, the customer satisfaction might be low and the actions to be undertaken within the
next months would be to concentrate on the latter. In this way, it becomes easy for the managers
in identifying the areas requiring improvement based on which effective allocation of resources
could be made (Zietlow et al. 2018).
Facilitation of communication throughout the organisation: