Analysis of Management Accounting with Strategic Perspective

This report provides a comprehensive analysis of management accounting with a strategic perspective. It explores the concept of the cost of capacity, its implications, and the importance of capacity management in business operations. The report examines the impact of investments in manufacturing facilities, highlighting the significance of existing capacity utilization. It defines key terms such as practical and theoretical capacity, and identifies common flaws in capacity measurement. Furthermore, it delves into the concept of bottlenecks in production processes and discusses strategies for managing them. The report also outlines the advantages of capacity planning and its role in monitoring costs during business cycles. Finally, the report includes a list of references that support the analysis presented.

Running head: MANAGEMENT ACCOUNTING WITH STAREGIC PERSPECTIVE
Management accounting with strategic perspective
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MANAGEMENT ACCOUNTING WITH STAREGIC PERSPECTIVE
Requirement a:
A cost of capacity is the expense that is incurred on part of organization that is
intended to increase the ability for conducting the operations. Such costs are considered to be
of fixed nature and they help in increasing the production capacity above certain point that
would exceed the network of current distribution.
Requirement b:
The company made investment into additional manufacturing facility for increasing
the sales of products. Consequence of making investment into this new facility was
associated with increasing sales figure by 30%, tripling of fixed costs and profits turning into
losses. Making investment into this new capacity was not viable because the old plant had
already the available capacity (Taleb et al. 2015).
Requirement c:
For developing effective capacity management requires business to have a thorough
understanding of how the business demand would influence its components. It incorporates
sub process of capacity that is component capacity management, business capacity
management and service capacity management (Maas et al. 2016).
Requirement d:
Practical capacity is the level of output that is manufactured at level that is less than
ideal or theoretical capacity. Theoretical capacity on other hand is the level of production by
manufacturers that is attained at level of optimum efficiency (Otley 2016).

MANAGEMENT ACCOUNTING WITH STAREGIC PERSPECTIVE
Requirement e:
The three common flaws that are identified in the capacity measurement are system
error, random error and human errors.
Requirement f:
Bottleneck refers to the phenomenon by which the single component helps in limiting
the performance capacity of entire system. In the production process, bottlenecks limit the
maximum capacities and expansion in such areas involves long term commitment. The
permanent addition to capacity is avoided by some short term solutions such as outsourcing,
extra shifts, over time and temporary help.
Requirement h:
The two advantages attributable from cost of capacity are listed below:
 Organization is capable of maintaining proper level of production during business
cycles by making use of capacity planning.
 Firms are able to monitor the costs during recession and growth period when the level
of capacity is fully planned.

MANAGEMENT ACCOUNTING WITH STAREGIC PERSPECTIVE
References list:
Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk
management: Review, critique, and research directions. Long range planning, 48(4), pp.265-
276.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability
assessment, management accounting, control, and reporting. Journal of Cleaner
Production, 136, pp.237-248.
Oehmichen, J., Schrapp, S. and Wolff, M., 2017. Who needs experts most? Board industry
expertise and strategic change—a contingency perspective. Strategic Management
Journal, 38(3), pp.645-656.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
Taleb, M.A., Gibson, B. and Hovey, M., 2015. Fifty years of Sustainability Accounting: does
accounting for income in business sustainability really exist?. International Journal of
Accounting and Financial Reporting, 5(1), pp.36-47.
Theriou, N.G., 2015. Strategic Management Process and the Importance of Structured
Formality, Financial and Non-Financial Information. European Research Studies, 18(2), p.3.

MANAGEMENT ACCOUNTING WITH STAREGIC PERSPECTIVE