Managerial Accounting Assignment Report: Wesfarmers Analysis

This report delves into the significance and application of management accounting tools within contemporary businesses, focusing on their role in managerial decision-making. It explores various tools, including Value Chain Analysis, Total Quality Management, and the Balanced Scorecard, illustrating their practical use with examples from the Wesfarmers company. The analysis incorporates a comparison of two journal articles, highlighting their findings regarding the relevance and impact of these tools in today's dynamic business environment. The report emphasizes how these accounting systems contribute to cost reduction, performance improvement, and strategic alignment, providing a comprehensive overview of their importance in achieving organizational goals. The report concludes with the findings of the research, relevance and bibliography.

Running head: Managerial Accounting
Managerial Accounting
Name of the Student:
Name of the University:
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Table of Contents
Introduction........................................................................................................................4
Discussion......................................................................................................................4
Types of Management Accounting Tools with Examples..............................................4
Analysis of the Wesfarmers Company...........................................................................6
Two Journal Articles Comparison..................................................................................6
Similarities Findings from the Articles............................................................................7
Relevance of the Management accounting System- Conclusion..................................7
Findings of the Research...............................................................................................8
Conclusion.........................................................................................................................9
Relevance and Bibliography............................................................................................10

ABSTRACT
The current assignment focuses on evaluating and analyzing the significance of the
management accounting tools in the manufacturing companies. The study shows how
management accounting tools are assessed in the organization and helps in decision-
making process. The report analyses two journal articles so as to know the relevance of
these management accounting tools in contemporary business world. The assignment
also compares and finds out the similarities between the results of two journal articles.
In overall the paper would reveal the outcome of the articles with reference to uncertain
business environment and changing global market needs.

Introduction
The current assignment focuses on describing the significance of the use of
management accounting system and the ways in which managers use this tool in
assessing important decisions. In the contemporary business world management has
evolved with various techniques and concepts in order to make pace with the global
business. In order to undertake prompt actions and make appropriate decision in the
organization managers are highly recommended to use managerial accounting tools.
The following study particular focuses on two journal articles which encases the
relevance and significance of the management accounting tools. The report will be
presenting various management accounting tools which are rapidly used in the
organization in order to exhibit proper management in the organization. The assignment
also depicts the ways of assessing the management tool in order to undertake the daily
operation of the business effectively and efficiently. For brief understanding of the study
the same is demonstrated by selecting a company Wesfarmers, a well-known retail
business in Australia. At last for conceptual analysis the study briefly evaluates the
importance of management accounting systems from journal articles.
Discussion
Types of Management Accounting Tools with Examples
In the current contemporary business there is a significant change in the use of
various concepts and techniques of management accounting. The following measures
aids the business to reduce their overall cost of the company and also leverages the
efficiency in all the operation undertaken by the business. Since, the management
accounting tools are diversified therefore, must be undertaken with in specific areas
where there is a need of improvement. This approach is necessary as it has been
observed that using wrong management tool in a particular area could lead to
insignificant failure and loss in the business (Theorin, et al., 2017). The tools are used
by considering the nature and type of the operations of the business which will work
effectively for the process. There are other factors which has also lead to use of the
management tools in the business such as globalization, technological advances and
management processes changes.
The various tools which are used in the organization by the operation mangers are
Value Chain Analysis, Total Quality Management and Balanced Scorecard. This tools
are used for improvement and for a significant purpose of operational systems.
Value Chain Analysis
The Value Chain Analysis has been used significantly since past decades mainly
in the manufacturing companies. The Value Chain Analysis is basically a tool that
evaluates and analyzes all the activities involved in a business. It primarily identifies the
activities that adds value to the refined product, and then certain activities are analyzed
in order to promote differentiation or reduce the cost. The tool aids the company to
understand how value is added to a product and the product can be sold for more than
the cost (Pavlatos and Kostakis, 2015). This is done by the adding value to the product,

and thus generating profit margin. The approach basically evaluates the activities from
the initial that is from raw materials till the final output. The value chain is comprised of
two categories: primary activities and support activities. The value chain analysis aims
at value maximization and maintaining such as reducing and monitoring the cost of the
product or service. The primary activities aims at adding value directly in the production
process, still they are not preferred as the important activity than the support activities.
In order to gain competitive advantage the organization opt for technological advances
and research and development activities referred to as support activities. These support
activities are considered highly important as they help in developing the “generic
strategy” such as differentiation. The primary activities are moreover considered to be
the source of cost advantage, for each and every the cost is identified and hence helps
is proper cost management (Fooladvand, Yarmohammadian and Shahtalebi, 2015).
Apart from many advantages there is one disadvantage of the approach is that the
approach has been criticized by managers. The approach is inefficient is creating link
between each activity in the chain. The managers may sometime lose sight on how the
process connect to each other.
Total Quality Management
The total quality management is defined as well-structured tool which focuses on
increasing the quality of the finished products and services. This is enhanced by
continual improvement practices in the organization (Phan, et al., 2019). The total
quality management particular aims at reducing the defects of the products and thus
enhancing the quality for the same. In this technique the management tries to offer good
quality product and service to the customers and seeks improving the customer
experience. This tool leverages the awareness of quality culture within the organization.
It also offers commitment towards the continuous improvement and helps the
organization to keep a pace in the industry. Total Quality management aids the
organization to maintain its quality in the business and compete with its competitors in
terms of quality of the products.
Balanced Scorecard
Balanced Scorecard is another approach which is basically a performance
metrics tool used in strategic management in organization. The approach aims at
identifying and improving the various function of business and the final outcomes. The
balanced scorecard incorporates measuring four main aspects of business operations
such as learning and growth aspects, customer aspects and internal process aspects.
These aspects analyzes the external and internal operations of the business in order to
achieve the organizational goal and objective. It is observed to be the most used
technique in the organization and it subsequently helps in increasing the overall
performance of the organization (Bhattacharya, et al., 2014). It aids the company to take
strategic decision based upon the result of the balanced scorecard.
All the management accounting tools mentioned above are used subsequently in
the business operation. This is assessed in business in order to increase the
productivity, efficiency and profitability in business. Moreover apart from these
advantages it also enables the companies to attain competitive advantage and tackle
the external circumstances of the company. Apart from the above mentioned

management accounting tools there are other tools such as benchmarking, Key
Performance Indicator, Activity based costing, standard costing, Just in Time and
several more (Pavlatos and Kostakis, 2015). These tools also puts a great impact on
the business operations and thus leveraging the profitability of the company.
Analysis of the Wesfarmers Company
In order understand and identify the relevance of management accounting
standards in organization the selected company is Wesfarmers. Wesfarmers is a well-
known Australian company. The efficiency and productivity of the company is highly
enhanced by these tools such as balanced scorecard and value chain analysis. The
company is one of the most recognized operating business in Australia and hence
focuses on offering quality service and product to its customers. The company aims at
expanding its business in the global world. One such tool used in the business is value
chain analysis (Wesfarmers.com.au 2019). The company is aiming for low-cost and
seeks providing high quality products to the customers. The value chain analysis helps
Wesfarmers Company to reduce the overall cost of the raw materials and add value to
its production activities. Wesfarmers concentrates on product differentiation and value
chain analysis focuses on optimizing the profitability of the business (Kaplan and
Atkinson, 2015). By improvising the process the value chain analysis will help the
organization enhance the product quality and maximize organization efficiency. On the
other hand another tool which is widely used in organization and also assessed by
Wesfarmers is balanced scorecard. The four perspective of balanced scorecard and
allows the organization to align all its work process according to the long-term goals and
short-term objectives (Wesfarmers.com.au 2019). These goals and objectives are set
by the managers of the company according to the results assured by various tools and
process. The balanced scorecard provides aim to the company to proceed in a single
direction so as to achieve the set objective of the company. The balanced scorecard
allow ensures effective communication to its employees and gives a realistic overview
of the company’s operations.
Two Journal Articles Comparison
First article- “The Case of a Newly Implemented Modern Management Accounting
System in a Multinational Manufacturing Company”.
The article contrast about the significance of management accounting system in
the multinational manufacturing companies. The article cover that how this concept has
evolved since the past decades. The main focus of the journal article is that it mainly
emphasizes the key prospects of management accounting tools. In the contemporary
business world the organization use the management utilizes the management tools in
order to leverage the productivity and therefore generate profit from the production of
the business. The article primarily states the evolution that has been taken place in the
concept of (MRS) and its relevance in using the same in the business operations
(Watts, Yapa and Dellaportas, 2014). The study also reveals that inappropriate use of
tools may result detrimental effect on operational functioning and strategic functioning.
The study demonstrates the factors which are highly responsible for dynamic
organization work process such as globalization and dynamics in the industries. It has
been concluded from the article that the company in the study has not utilized the
contemporary accounting tool fully in the management system. There has been

argument reflected in the study that there is certain relevance of the use of
management accounting information in the company, but does not reflect in a strategic
level. The other management accounting tools which has been pointed out in the article
is JIT, TQM, Standard costing, balance scorecard and benchmarking (Watts, Yapa and
Dellaportas, 2014).
Second article
The second articles is based upon a study “The effect of using balanced
scorecard (BSC) on reducing production costs in the Jordanian industrial companies”
(Bataineh, Al-Shwiyat and Alrjoub, 2019). The study is focusing on establishing the
effect of balanced scorecard in Jordanian manufacturing companies. It emphasizes on a
detailed study with limited industrial companies. From the analysis and discussion of the
study it has drawn a broader conclusion that balanced scorecard is extensively used in
Jordanian industrial companies. The balanced scorecard has provided appropriate
information to the management for the distinguished functional unit. The management
takes appropriate decision and draws solution according to the information drawn from
the balanced scorecard. There is subsequently positive effect of using d with its
perspective (internal process aspect, financial aspect, customer aspect and learning
and growth aspect). The balanced scorecard helped the Jordanian industrial companies
in reducing the production cost. The modern management accounting system has
enabled to improve the accuracy in calculating the production cost by using those
accounting tools (Bataineh, Al-Shwiyat and Alrjoub, 2019). This tool has been
considered as one of the most successful and effective tools used in the business. The
prompt application of balanced scorecard tool has helped the organization to gain
employee productivity, customer satisfaction and employee satisfaction as well as
demonstrated in the study.
Similarities Findings from the Articles
It is observed from the two articles that there is huge importance of management
accounting tools in the business operations of the companies. The two articles also
suggests that how the tools helps in upgrading the productivity of the business. Another
similarity which has been observed in the studies that the balanced scorecard is highly
beneficial in maintaining the cost of the company and helps in strategic planning of the
business. The inappropriate or wrong usage of the tool in the operations could lead to
detrimental effect on the business and the management would not be able to take
appropriate decisions. Therefore, it is highly recommended in the studies that
implementation of the management accounting tools must be adhered properly in the
organization in order to get satisfactory results. In both the research papers the
conclusion is drawn that the accounting tools were highly beneficial to the
manufacturing companies in undertaking the business operations.
Relevance of the Management accounting System- Conclusion
It is observed from the level of competition and modern-day business
environment, the companies are required to adapt the management accounting tools.
The management accounting tools are beneficial in order to amend necessary changes
to increase business efficiency. It is imminent as the level of competition and
globalization has put a great impact on the business operation the relevance of

management accounting system is rising. Therefore, it is necessary to assess and
create dynamics in the business structure. It is known that there are various type of
accounting tools but it is important to use the right type o accounting tool in the right
type of operation that is keeping in mind the nature of operation. Apart from all the
benefits and advantages of the business there are still arguments observed in many
research studies. The theoretical concept of the management accounting tools is well-
understood in the companies. But it is shown that the implementation for the same is
difficult and does not perform appropriate result. In many manufacturing companies the
utilization of these tools is thought to be very expensive or else they are quite resistant
to use these kind of tools so as to avoid changes.
With the advancement in the global era of business, the economic changes and
technological changes has led to a conclusion that change is constant. There is a need
to restructure the organizational work environment in order to sustain in the global
market. The primary focus of the manufacturing companies is to reduce the cost and
deliver quality products to the customer at the same time. This objective is particularly
achieved through strategic planning in the operation by applying the management tools.
In order to gain competitive advantage and make optimum level of pace with the
growing industrialization the management accounting tools has found to be critically
beneficial so as to get a comparative analysis of different business in the industry.
There no doubt that the business needs appropriate information, data, reports
and records for assessing future needs and process the present business operations.
The management accounting tools are not concerned only in terms of financial
perspectives but also in terms of overall performance of internal and external
environment of the business. Key performance indicator is also a management
accounting tool which indicates the performance and result of the objectives set by the
business quantitavely. The key objective of the management accounting tools is for
decision-making, it shows how businessman make appropriate decision such as firstly
strategic and tactical and secondly in long-run and short-run process. The accounting
system concept has broaden its field with so many various tools that it enables the
management to choose depending upon the area where improvement is required. It is
often observed that for getting quick results the companies try to utilize multiple
strategic plans and tool, effective implementation has led to great results. But at the
same time there has been implementation issues when used practically. In short it is
identified that the relevance of these management tools is highly crucial in the business
operations.
Findings of the Research
The research paper derives the following findings with reference to the relevance of the
management accosting system in companies:
Article One
The given article demonstrates the significance of the management accounting tools in
the manufacturing industries. It highly focuses how certain tools like value chain
analysis helps to maintain cost of the business and maintain value of the product at the
same time. It also presents that how these helps to structure the business operations
and processes and tackle with the competitive pressure from the other industries.

The research also delivers that how decisions are made by the managers from
assessing the management accounting tools. The tools provides all the relevant and
important information regarding the internal and external business operation. Therefore
the managers get an overview of the business environment and take appropriate
measures to tackle the obstacles.
Article Two
The second article shows the function and effectiveness of balanced scorecard in
Jordanian manufacturing companies. The balanced scorecard helps in formulating and
establishing appropriate scale to identify the improvements assessed in the business
operations. The paper states that the balanced scorecard has a positive impact on
reducing the production cost of the company (Giannopoulos, et al., 2013). The
Jordanian manufacturing companies are following all the perspectives of the balanced
scorecard, it is identified that all the perspectives gives highly level of result, but at the
same time the learning and growth has the least effect on the business operations.
Conclusion
It is concluded from the above discussion that the management accounting does
have a great impact on the modern business world. It is highly used and found to be
beneficial in the manufacturing industries. The two articles reveals the significance and
relevance of tools of management accounting in the business operations. The chosen
company also reveals how value chain analysis and balanced scorecard aids the
company to lower the price and leverage the quality of the product. The analysis of the
articles suggest that managers needs to effectively plan and assess the use of these
tools in order to get the desired result.

Relevance and Bibliography
Bataineh, A., Al-Shwiyat, Z. and Alrjoub, A., 2019. The effect of using balanced
scorecard (BSC) on reducing production costs in the Jordanian industrial
companies. Journal of Business and Retail Management Research, 13(03).
Bhattacharya, A., Mohapatra, P., Kumar, V., Dey, P.K., Brady, M., Tiwari, M.K. and
Nudurupati, S.S., 2014. Green supply chain performance measurement using fuzzy
ANP-based balanced scorecard: a collaborative decision-making approach. Production
Planning & Control, 25(8), pp.698-714.
DRURY, C.M., 2013. Management and cost accounting. Springer.
Fooladvand, M., Yarmohammadian, M.H. and Shahtalebi, S., 2015. The application
strategic planning and balance scorecard modelling in enhance of higher
education. Procedia-Social and Behavioral Sciences, 186, pp.950-954.
Giannopoulos, G., Holt, A., Khansalar, E. and Cleanthous, S., 2013. The use of the
balanced scorecard in small companies. International Journal of Business and
Management, 8(14), pp.1-22.
Helleno, A.L., de Moraes, A.J.I. and Simon, A.T., 2017. Integrating sustainability
indicators and Lean Manufacturing to assess manufacturing processes: Application
case studies in Brazilian industry. Journal of cleaner production, 153, pp.405-416.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI
Learning.

Mehralian, G., Nazari, J.A., Nooriparto, G. and Rasekh, H.R., 2017. TQM and
organizational performance using the balanced scorecard approach. International
Journal of Productivity and Performance Management, 66(1), pp.111-125.
Pavlatos, O. and Kostakis, H., 2015. Management accounting practices before and
during economic crisis: Evidence from Greece. Advances in accounting, 31(1), pp.150-
164.
Phan, A.C., Nguyen, H.T., Nguyen, H.A. and Matsui, Y., 2019. Effect of Total Quality
Management Practices and JIT Production Practices on Flexibility Performance:
Empirical Evidence from International Manufacturing Plants. Sustainability, 11(11),
p.3093.
Sainaghi, R., Phillips, P. and Corti, V., 2013. Measuring hotel performance: Using a
balanced scorecard perspectives’ approach. International Journal of Hospitality
Management, 34, pp.150-159.
Susilawati, A., Tan, J., Bell, D. and Sarwar, M., 2013. Develop a framework of
performance measurement and improvement system for lean manufacturing
activity. International Journal of Lean Thinking, 4(1), pp.51-64.
Theorin, A., Bengtsson, K., Provost, J., Lieder, M., Johnsson, C., Lundholm, T. and
Lennartson, B., 2017. An event-driven manufacturing information system architecture
for Industry 4.0. International Journal of Production Research, 55(5), pp.1297-1311.
Watts, D., Yapa, P.W. and Dellaportas, S., 2014. The case of a newly implemented
modern management accounting system in a multinational manufacturing
company. Australasian Accounting, Business and Finance Journal, 8(2), pp.121-137.

Wesfarmers.com.au (2019). [online] Wesfarmers.com.au. Available at:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-
report.pdf?sfvrsn=0 [Accessed 26 Sep. 2019].