Bidco Foods Inc ,is a short, partly-directed, qualitative case that tests students on the

following technique:
 responsibility accounting.

SETTING
This case is set in the context of a large retail grocery store. The corporate office has
imposed sales and operating profit targets on store managers. Store managers, in turn,
have assigned sales and operating profit targets to their department managers, such as
Mark the manager of the bakery department.
Mark was assigned responsibility for bakery sales and profits, but he was not
given the authority to manage costs, nor was he given the information necessary to
manage those costs.

NOTES TO INSTRUCTORS
Although not explicitly stated, the root issue (lack of responsibility accounting) is blatant.
This case can be used early in the development of students’ case-analysis skills and
students should be readily able to identify the root issue. Ideally, this relatively short case
should be used in class, allowing students about 15 minutes to read and perhaps another
15 minutes for them to work through the response in a group setting.
If this case is used for an examination, about 30 minutes should be allowed.

SUGGESTED ANSWER
To: Stella ????
From: Management Accountant
Subject: Operating Statements in Support of the Bonus Program

Please find enclosed the report on my examination of the concerns of Mark , your store’s
bakery manager.

Introduction
The manager of the Uchumi store requested a corporate management accountant
to examine the concerns of the bakery manager in regard to the bonus program.

Root Issue
The root issue is that responsibility accounting is lacking. The bonus program is
premised on financial statement performance. However, the recorded costs do not
accurately reflect the costs incurred.

Analyses
The costs of the bakery department are not under the control of the bakery
manager. There are a number of vivid examples. The store manager schedules employees
for the bakery, without the involvement of the bakery manager. The store manager’s
salary is charged to the bakery department. Other costs are charged to the bakery without
the bakery manager’s approval. In short, the bakery manager is being held responsible for
some costs he is not allowed to control.
 Bakery costs are not budgeted, which prevents them from being appropriately
planned. In addition, the bakery manager does not get a monthly operating statement on
the department’s financial performance. Thus, the bakery manager does not know how
well his department is performing and what he can do to improve performance.

Recommendations
That responsibility accounting be introduced. The bakery manager should be
required to budget for the department’s costs and revenues. Only costs relevant to the
department should be included, and the manager should approve them. Also, the manager
should get monthly operating statements on revenues and expenses.

Conclusion
Responsibility accounting should be introduced immediately into the bakery
department, and into other departments as necessary. This should be done by the store
manager and the department managers, with the help of a management accountant from
the corporate office.

MARKING GUIDE
Case Approach (2 marks) format, spelling, grammar, sentence structure
Root Issues (3)
 no responsibility accounting
Analyses (10)
 no authority to control cost
 no regular information on costs
 no participation in budgeting
 without authority, budget involvement, and regular reports, costs cannot be
controlled
Recommendations (4)
 only Mark approves costs
 introduce participatory budgeting
 provide monthly operating statement
Conclusion (1)