ACC305: Management Accounting-Kalpan University- Research & Analysis Assignment Solution

Research & Analysis Assignment

Management Accounting Assignment

Select a newspaper/magazine article (written in English) which raises management accounting issues. The article must be written recently (after 1 June 2015) and taken from an appropriate source, such as the Australian Financial Review, The Australian, The Wall Street Journal (US), Financial Times (UK) and Economist (UK). Other sources may also be suitable - please consult your lecturer if you are unsure whether a particular source is appropriate.

Your analysis should include:

1. Minutes of at least 3 meetings held by group. These minutes should include the process by which your group chose your article, including consideration of other articles which were not used. See below for details on meetings and minutes. It is suggested that each group member find one article each and then discuss and decide on the most appropriate one to use.
2. A reliable link and detailed reference to the article itself as well as consideration of the management accounting issues raised by the article, including any potential strengths/opportunities as well as any weaknesses/threats identified.
3. Suggested solutions/courses of action you would offer to the management (or other relevant stakeholders if appropriate) as to how to the issues identified can be tackled or how the organisation concerned can improve its performance.
4. A presentation of 5-10 minutes to the class (in weeks 11 or 12) summarising your findings. The presentation is a collaborative effort, but part of the mark will be awarded on an individual basis (see marking guide below).

Management Accounting Issues

Dick Smith Holdings Limited is an Australian based retailer of electronics that has had several management accounting issues in the past few years (Low, 2016). The company for many years has suffered from price erosion and struggles with establishing and maintaining a uniform pricing scheme for its products’ lifecycles. The company has been expanded and, therefore, provides small appliances as well focusing on private label products resulting in its abandonment of its initial ideas. However, in its bid for expansion, it has joined other companies such as JB Hi-Fi and Harvey Norman, but this move affects its product pricing(Low, 2016). This is because its products range is not as high as those of Harvey Norman but not as small as those of JB Hi-FI and it is, therefore, stuck in the middle(Low, 2016). Besides, the company was previously known for its interest in experts who required upgrading and repairing their equipment, but this has changed due to the shifting of the consumer behavior as technology allows people to acquire new products which are replaced with new ones rather than repairing. As a result, Dick Smith has to adjust prices for its products’ lifestyle to fit in the market industry.

Also, from the article, it is evident that the company had poor inventory management. For, example, in October, the company had made a $60 million deterioration against inventory which they did not explain. This is because they did not understand their customer’s wants and desires in the tech sector; they had too many own-brand products, which were not being bought(Low, 2016). The company’s November inventory write-off resulted in a share price trade that was as low as 20?,, which was a fraction of its $2.20 listing price from a couple of years earlier.

Moreover, the company did not recognize the fact that it had a weak balance sheet. As such, the company did not raise its capital when it had a high share price but rather turned to some bankers who were not willing to offer financial support when it had hit its crisis.

On a different note, the company has bad relationships with its suppliers; it has failed to manage its relationship supplies which are essential for all retailers who are trying to get finances for their inventory by the vendors. Its suppliers had taken measures that were constraining the terms given to the company, and, therefore, they had nowhere else to turn to but the banks, who were not responsive(Low, 2016). Moreover, the company lacked retail experience in that its non-executive directors and the board did not have broad knowledge on retail. Additionally, the company’s weakest point is its partnership with Anchorage Capital Partners, which is a private equity operator that took most of its control and only has a motive of selling it(Low, 2016). However, despite the management accounting issues that Dick Smith has, it still has an opportunity in the future if it seeks diversification and redefine its brand.

Dick Smith Company should ensure that inventory management is satisfied by creating a purchasing plan that allows neither too much nor too little purchases as well as keeping a record of the existing inventory and its usage. The company could use the just-in-time method where it could receive products as they are needed and schedule product delivery that is based on the sales forecast. Proper inventory management for Dick Smith Company will be its major asset and, therefore, represent an investment that is held up until the products are sold. Besides, the company should raise capital when its share price is high to allow them to issue fewer shares to the value of the money that they need.

In addition, Dick Smith Company should acknowledge the fact that good supplier relationships result in generous terms, favorable prices, occasional buybacks as well as improved availability. The company should prove to be loyal, considerate and a paying customer and, therefore, tap into its suppliers for any additional financing during a crisis. As such, the financing may be a form of extended terms on recent purchases, investment, a loan or a postponed debt in the company. This would result in the improvement of the company’s cash position.

Moreover, the company should ensure that its Non-Executive Directors is well experienced in retail and perform its role in providing a creative contribution to the Board by ensuring constructive challenge and independent oversight to the executive directors. The board should ensure the presentation of genuine and fair reflection of its financial performance and actions and that the essential internal control systems are monitored rigorously and regularly.

Additionally, the company can deal with pricing issues by drawing on research techniques or marketing testing that range from full-scale or simple surveys conjoint analyses to revisit their pricing structure. From these findings, they will work purposefully to discover how much demand is likely to be generated at particular prices under various support conditions that include merchandising budgets or advertising. The company can also use a price portioning strategy which involves breaking the price of a product into its component charges. For example, customers buying a cable television should be offered access to a package of movie channels and broadband internet connections. As such, the company can have one all-inclusive price or decide to itemize the bill; the amount payable is the same. As a result, the company will be presenting a cost that is a set of smaller mandatory charges and, therefore, invite closer analysis. This increases the chances that the consumer will revise their routine consumption behavior.