Akeneta Claring Sangeeta Ram 2019004391

Rakshita Raksha 2019002436

ACC602: STRATEGIC MANAGEMENT ACCOUNTING

SEMESTER 1, 2020
Major Assignment 20%

QUESTION 1.

ROI &PERFORMANCE MEASURES & REWARD SYSTEMS (10 MARKS)

1)

ROI = Profit Outboard Automotive Couch

Invested capital = $2400000 = $400000 = $200000
$800000 $8000000 $1600000
= 30% = 55% =12.5%

Based on both profit and ROI, Automotive Division had best performance followed by Outboard
Division and Couch division

2)
1. Bonus = ($2 400 000 + $4 400 000 + $200 000) 1/10

= $700 000

2. % bonus = $700 000

($4 000 000 + $2 800 000 + $1 400 000)

= $700 000
$8 200 000

=8.537%
Akeneta Claring Sangeeta Ram 2019004391
Rakshita Raksha 2019002436

3) Couch’s acquisition by Auto World Ltd of their senior managers' entry into the scheme
could cause some discontentment among the management staff in the other two divisions
because the Couch Division’s profitability is lower than the other two. As a result, the outboard
earned a smaller percent bonus.

4) In previous management, all workers engaged in an equal incentive benefit sharing system for
each employee. Couch's senior managers and the discontinuation of the benefit sharing system
are contradictory to Couch’s culture, and may cause some resentment among those Couch
workers who are not senior managers.

5) Auto World Ltd may make the decision that inclusion of all senior managers in a
performance-related bonus scheme is beneficial, but have distinct percentage bonuses for each
division. This could have the favorable effect of having the bonus for each manager rely solely
only on the effectiveness of their own division. Managers feel that implementing at least some
fraction of the company-wide performance-based bonus for a divisional manager is a great idea,
as this encourages managers to evaluate the implications of judgments on both the division and
the company.
Akeneta Claring Sangeeta Ram 2019004391
Rakshita Raksha 2019002436

Question 2
a) Environmental factors can be explained as identifiable elements within an organization's
cultural, economic, demographic, physical, technological or political environment that
influence an organization's growth, operations, and survival. Environmental factors for
the business can be internal as well as external. Each company, whether big or small, is
not only influenced by internal organizational factors, but also by many external factors.
Businesses have no control on external environmental.
Discussed below are two environment concerns that can affect businesses:

i. Climate Change - Climate change has become a nefarious challenge for businesses, since
its speed could only be comprehended when taken into consideration in the sense of the
year after year after year. Growing up the issue of global warming and severe weather
conditions in recent years , companies and organizations have trouble operating on an
equal basis in all environmental conditions.. Businesses that are entirely dependent on
adequate water supply, e.g., field sports or farming, will be adversely affected if climate
change leads to reduced rainfall. In addition, customers are conscious of this aspect and
are attracted to those brands that save the world or help this cause.

ii. Availability of natural resource - This factor refers to a company's physical environment,
among the external environmental factors. For most companies, natural resources are
very important and many organizations have natural resources as their key raw material.
Lack of natural resources can impede the productive capacity and hence the performance
of an organization

b) Environmental Management Accounting (EMA) could be used as a method for

systematically tracking and accurately reallocating environmental costs to the related
processes and products to allow managers to recognize opportunities for CP
implementation and thus improve their environmental and economic performance. In an
ideal world, organizations in their accounting processes would reflect environmental
factors by identifying the environmental costs associated with products, processes, and
services. Nonetheless, many existing conventional accounting systems are unable to
handle environmental costs adequately and thus simply attribute them to general
overhead accounts. EMA is the development and review of both financial and non-
financial information to help internal processes in the management of the environment. It
Akeneta Claring Sangeeta Ram 2019004391
Rakshita Raksha 2019002436

is complementary to the conventional accounting approach to financial management,

with the aim of developing appropriate mechanisms to help identify and allocate
environmental costs. (Bennett and James (1998a), Frost and Wilmhurst (2000)). It can be
said that most businesses do not realize and continue to underestimate the magnitude of
their environmental costs. This leads to miscalculations of enhancement choices thus
EMA can be used to keep track of cost and accurately allocating them.

Reference
 Bennett, M and James, P Environment-Related Management Accounting Current Practice
and Future Trends, Greener Management International, Spring 97 (No.17, pp32-41, Business
Source Premier, 1997)
 Bennett, M and James, P The Green Bottom line, in: Bennett, M and James, P (Eds) The
Green Bottom line – Environmental Accounting for Management: Current Practice and Future
Trends (Greenleaf Publishing, Sheffield, 1998a)