Management Accounting Report: Decision Making for Tottenham Ltd

This report provides a comprehensive analysis of management accounting principles applied to Tottenham Limited, a toy manufacturing company. It begins with an introduction to strategic management accounting and its role in organizational decision-making, followed by an overview of decision-making scenarios faced by Tottenham Limited, including discontinuation decisions, special selling price decisions, product mix analysis, and make-or-buy decisions. The report then evaluates these decisions, discussing the factors that influence them and the importance of data-driven approaches. Furthermore, it explores qualitative factors such as external reputation, labor relations, creditor effects, quality, employee morale, customer considerations, investor perspectives, and community impact. The report also delves into standard costing and variance analysis, offering a critical evaluation of these tools. The report concludes by summarizing the key findings and recommendations for Tottenham Limited's future strategic decisions.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
1.1 Decision Making Scenarios...................................................................................................3
1.2 Evaluation & Discussion to Reach a Decision......................................................................5
1.3 Qualitative Factors which make impact in Decision-Making...............................................6
PART B............................................................................................................................................7
2.1 Standard Costing & Variance analysis..................................................................................7
2.2 Critical Evaluation.................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic Management accounting has always been making difference among the
organization activities and catering the needs of or wants of form as a whole. A Management
accounting is abroad view of firms accounting so it is comprises of cost accounting and financial
accounting as well, which makes the firms make decisions in a positive way towards future
prospects. The present report is taken in order to make necessary decisions on how Tottenham
Limited company, who manufactures toys for children is able to make profit using cost and
income data information(Harrison and van der Laan Smith, 2015).
A analysis will be conducted in order to make judgments on the working of the
organization and what should be the income and cost structure which should be maintained in
order to make decisions on buying and non-buying of the materials. Further the report includes
the discussion on the factors which led to positive and negative situations which further helps to
make decisions for the future state of being.
PART A
1.1 Decision Making Scenarios
To build a brand image and identity in the mind of customers as well as employees
respectively is important for Tottenham thus in order to achieve that position it is important to
make necessary decisions regarding the future of the organization and current activities to.
Further to keep effectiveness and smoothness in the operations certain decisions have to be made
keeping the interest of the stakeholders at priority and it should not be hurt(Ismail and King,
2014). In the present case Tottenham, a toy manufacturing company wants to take certain
decisions regarding their future operations which includes accepting the order from competitors
in order to make the idle capacity used, and also purchasing the raw materials from
subcontractors to accommodate the high demand peak seasons. So in order to lift Tottenham's
performance certain decisions are their which can be taken by them and they are:
1. Discontinuation Decisions: Tottenham company since it is working in three different
divisions which are Alpha, Romeo and Charlie and the first two being the parts maker
and the last one is for the finished products. The main concern for Tottenham is to
manage its idle capacity in non-festive seasons which is decreasing their profit and

making them loose the funds(Lovata, Schoenecker and Costigan, 2016). So as per
following this decision what they can do is they can shut down the factory for half season
when their is less demand of the toys in the market and start making more toys in the
festive season in order to meet the demand which prevails in non-festive season as well
this will enhance the performance and operational efficiency in the particular period and
what it will facilitate is that they will not incur the additional cost they were in practice of
in the past.
2. Special Selling Price Decisions: Special pricing decisions basically will flow from the
major products or unique products they will be making in order to attract a different set of
customers. Since Tottenham company also planning to purchase from subcontractors they
need to make price decisions which in order to be fixed by keeping in mind the budget of
making the toys. If price fixed is some what high then it will be a drastic situation for the
firm, eventually they will have to shut down the whole plant. So if they want to continue
producing the toys in second half also they need to work and fix the price accordingly.
3. Product Mix and Limiting Factor Analysis: Since they are only into making of toys for
children and they are loosing huge funds in non-festive seasons they need to do
something and for that purpose they need to make analysis of the market particularly inn
that period when they are loosing the game. By identifying the factor proportion and
consumer's perception and likes and dislikes Tottenham can come up with the new set of
products which will caters the needs of people in that particular period(Cheng, Green and
Ko, 2014). So Tottenham company can make decisions to come up with a unique set of
product mix which impact their operations in positive manner.
4. Make or Buy decisions: Further the decisions which can be made by the top level
management of Tottenham can also include the make and buy decision which depicts that
in order to increase its revenues for the year and to utilize the idle capacity firm can
outsource its operations for that particular period and then they can have deal with the
outsourcing company to share the revenue on the basis of some percentage factors.
Further the buying decisions from contractors for the raw materials can be taken into
account with different set of pricing decisions on them.

So, overall it depends on Tottenham that whether they want to take which decisions to enhance
their productivity and operations of work(Christ and Burritt, 2017). Further critical evaluation
has been made to reach at the decision.
1.2 Evaluation & Discussion to Reach a Decision
To reach at one of the decisions discussed above, Tottenham company must have to
conduct a deep analysis on the factors which relates to the decision that they are considering in
order to enhance their performance. A proper set of action should be taken in order to make
sound decisions which further will make their capacity related problems to get reduced and also
furnish them with the new contractors to buy some raw material in order to incur less cost. If the
company adopts the first decision that is discussed in part a it will have to discontinue its two
units which are manufacturing the product that is Alpha and Romeo because the are the divisions
which assemble the products part which ultimately have so many toys with them that it does not
get supplied as because of low demand in the non-festive seasons, which can cause a decline in
the financial of company with no single penny profit, applying this decision will help company
in two ways which are: it will not incur additional cost as they are incurring in the past by
producing extra units and also it will help in enhancing the efficiency of production in the
particular festive season.
If company goes on to achieve and implement the second decision which is selling price
decision than it will be easy for company to make toys in order to make it available in the market
at anytime(Bedford, 2015). Since in the present case the company is purchasing from different
vendors outside , they should stop that and can begin to buy from the Alpha and Romeo divisions
and if not them then they should buy from subcontractors at the rate which should not be too
high that said firm can't add their profit margin to it and not too low that it is not of the quality.
Since Tottenham company also planning to purchase from subcontractors they need to make
price decisions which in order to be fixed by keeping in mind the budget of making the toys. If
price fixed is some what high then it will be a drastic situation for the firm, eventually they will
have to shut down the whole plant. Further the decisions which can be made by the top level
management of Tottenham can also include the make and buy decision which depicts that in
order to increase its revenues for the year and to utilize the idle capacity firm can outsource its
operations for that particular period and then they can have deal with the outsourcing company to

share the revenue on the basis of some percentage factors(Varsei and et.al, 2014). The ratio that
should be decided for having the margin should be 30% - 70%.
1.3 Qualitative Factors which make impact in Decision-Making
A decision should be data-driven. Both qualitative and quantitative aspects of information
should be taken into consideration. The goal of management accounting is to provide
information which is appropriate for decision making. There are different qualitative factors
which will make an impact in decision making of the Tottenham company and they are :
External Reputation: In order to make the decision related to any of the circumstances a firm
needs to take care of its reputation among the customers and various stakeholders in order to
make appropriate decisions which facilitate him to make balance between the people who are
interested in the conduct of the business. A manufacturing company like this can consider
outsourcing the assembly of electronic parts overseas((Varsei and et.al, 2014)). Tottenham
company should adopt that decision among the discussed that not harm its goodwill in any case
or it does not make negative impact on any of the interested parties.
Labor Relations: A quantitative analysis does not undertake the importance of healthy relations
with the workforce. Here it is important for Tottenham to keep happy its workforce. Since it is a
manufacturing company and in a manufacturing company chances are more that a firm may
loose its workers due to bad decisions, so Tottenham should acknowledge the needs of its
workers and hen make the decision of further progress.
Creditor Effects: In making a decision for its future profitability and enhancement of operations
sometimes the creditors are not considered and left behind and then company does not have
liquidity to make the payments of them. so proper analysis of how many creditors are there and
who needs to be cleared out should be taken into account in order to make necessary adjustments
in the structure(Hsu and et.al, 2013).
Quality: In making of certain decisions a company should consider that the product then
produced or manufactured should be of utmost quality. As it is the case of manufacturing
company who is wishing to get the raw material form different outsiders for making the toys.
Here, Tottenham company should consider that in order to make different decisions the quality
of the product should not be harmed.

Employee Morale: Employee morale is another factor which is taken into account by the firm in
order to make certain decisions for the firm. Here in employee should be motivated towards the
company operations and this is the key. In order to make a particular decision Tottenham
company have to evaluate that the employee and workers of the company are capable of
adopting the change and can perform like before only after the change happens. Here it is
important for Tottenham to keep happy its workforce(Coronel and Morris, 2016). Since it is a
manufacturing company and in a manufacturing company chances are more that a firm may
loose its workers due to bad decisions
Customers: Customers have always been the important trait for the growing company in order
to get its work right on the track and thus it is said that Tottenham company is making good
profits in festive seasons that means customers are liking the products or toys. But if the change
happens and then customers are not perceived to be good then it will be a drawback for the firm
which in turn will not generate good for the firm in the future.
Investors: Investors are important element in making of organizations and thus they need to be
considered in order to make necessary decisions since they will provide the financial resources
for undertaking the decision and implementing. So these persons should be involved in the
decision making process to have their point of view as well.
Community: Whatever the decision is it should not violate the rule and regulations of the
natural habitat and should not harm the society as a whole by any means. Thus this needs to be
fixed in any concern. So proper analysis of how many society are there and who needs to be
cleared out should be taken into account in order to make necessary adjustments in the structure.
Products: If any decision implemented, than the product which is manufactured should be of
that quality only which the people have liked in the past(Rushton, Croucher and Baker, 2014). It
should not be contrasting and degrading the quality. Products should be prepared by the firm in
such a manner that it caters the need of people and maintain the level of taste and preferences in
order to make necessary decisions.
PART B
2.1 Standard Costing & Variance analysis
Standard costing is nothing but a method of costing which is established for evaluating
cost standards and their periodic analysis is done to determine the variances why they occur and

what is the impact of that variance on the firm. Standard costing helps management in
controlling of the cost through evaluation of standard cost to actual cost. It has a practical
implication in the organization. On the other hand if talked about variance analysis it studies the
difference between actual and standard cost so that it can be identified that how and what are the
factors which have resulted in such deviations and further decision making is carried out for
improvements(Crawford and Lepine, 2013). Thus this analysis is very necessary for Tottenham
firm to make decisions they are hoping to make. For example, at the beginning of a year a
company estimates that labor costs should be $2 per unit. Such standards are established either
by historical trend analysis of the cost or by an estimation by any engineer or management
scientist. After a period, say one month, the company compares the actual cost incurred per unit,
say $2.05 to the standard cost and determines whether it has succeeded in controlling cost or not.
Analysis of variance in planned and actual sales and sales margin is also vital to ensure
profitability and operational efficiency. Thus in order to make necessary judgments it should be
making certain conclusions on the factors that drives the deviations.
This comparison of actual and standard cost is known as variance analysis and this
facilitates in controlling the costs and gives an opportunity to identify the ways which can lead to
enhance the productivity levels of the firm. If actual cost exceeds the standard costs, it is an
unfavorable variance, which is not fruitful for the Tottenham company. On the other hand, if
actual cost is less than the standard cost, it is a favorable variance, which depicts that the costs
incurred is in control and not over burden is achieved(Frias‐Aceituno, Rodríguez‐Ariza and
Garcia‐Sánchez, 2014). Variance analysis is mainly conducted for the price and quantity
variances to be evaluated and in addition for labor variances it is used and O/H costs variances
also it is used.
2.2 Critical Evaluation
Tottenham company since it is working in three different divisions which are Alpha,
Romeo and Charlie and the first two being the parts maker and the last one is for the finished
products. The main concern for Tottenham is to manage its idle capacity in non-festive seasons
which is decreasing their profit and making them loose the funds. In one of the decision what
they can do is they can shut down the factory for half season when their is less demand of the
toys in the market and start making more toys in the festive season in order to meet the demand

which prevails in non-festive season as well this will enhance the performance and operational
efficiency in the particular period(Owen, 2013). Further in another decision it has been discussed
that they can improve their issue or problem by making a move to buy the by-products from sub-
contractors which can help them to achieve the set objectives. Since Tottenham company also
planning to purchase from subcontractors they need to make price decisions which in order to be
fixed by keeping in mind the budget of making the toys. A quantitative analysis does not
undertake the importance of healthy relations with the workforce. If price fixed is some what
high then it will be a drastic situation for the firm, eventually they will have to shut down the
whole plant. So if they want to continue producing the toys in second half also they need to work
and fix the price accordingly(Park and et.al, 2014). A decision should be data-driven. Both
qualitative and quantitative aspects of information should be taken into consideration. The goal
of management accounting is to provide information which is appropriate for decision making.
CONCLUSION
From this report it can be concluded that management accounting is necessary in the firm
because it facilitates three things which are: Cost accounting, Financial accounting and decision-
making. In this report it has been found that a company in order to enhance the operational
efficiency of the firm, needs to take certain decisions which may impact the overall structure of
the company or its manufacturing process. Tottenham company has been evaluated on certain
decision factors that can improve its operations and make necessary adjustments in its three
divisions. Further through the help of factors it has been studied that making as decision requires
different set of analysis and then further adjustments have to be done in order to gain the
advantage.

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