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Examine a case study and develop your own ideas and recommendations for the effective operation of the organisation. The case study will be proposed by the tutor and students are required to write, and present, an individual essay evaluating the role of operational and financial management in the case organisation.

Students are required to employ a range of analytical techniques, communicate effectively and demonstrate both theoretical and practical understanding of the key issues addressed by the module.

Detailed requirements are as follow:

1.Critically discuss the role of the Management Accounting in the management process and identify the major differences between the management accounting and financial accounting. Employ appropriate techniques to analyse and explain how different models of costing could be used in operational management.

2.Employ capital investment appraisal techniques in selecting projects and critically discuss the techniques in making investment decisions.

3.Critically discuss the role of Business Plan and Budget in operational management of the case organisation. Recommend the areas of improvement and prepare a new report to illustrate this, using the information provided in the case study.

4.Critically discuss the usefulness of Balanced Scorecard Approach and prepare an example of Balance Scorecard for this organisation.

Role of Management Accounting in the Management Process

An organization is a storehouse of various activities which aim to make profits with exchange of the services or the products which they manufacture. A business consists of various departments namely customer management, human resource management, manufacturing, finance and servicing (Schaltegger and Burritt 2017). All these given functions and departments of a business enterprise have various activities under them which have to be reviewed constantly in order to determine the success of the organization. In doing so the organization often faces certain problems. These problems can be overcome by employing various tools and strategies in order to maintain these functions and achieve the goals. The given essay outlines the various essential aspects of a business organization ranging from management accounting and cost models, purpose of business planning and budgeting, employing various capital budgeting techniques and the balanced scorecard approach (Hilton and Platt 2013). The organization is consideration is Cucumber Limited and these discussed concepts will be employed to the case of the organization.

Cucumber Limited is a smart phone company based in Manchester, United Kingdom. The company was established in 2015. The company is relatively a small company with a skilled workforce. Although the global economy is undergoing a huge recession, the company is profitable due to the excellent reputation with respect to customer service and the product range. The company has the given departments-


Customer Support



Research and Development

Human Resource

The primary mission of the firm is to be recognized by the customers and employees as a high quality, progressive and innovative supplier of mobile phones at affordable prices (Dale and Plunkett 2017). 

Management Accounting can be described as the process of preparing the management reports which help the management to prepare timely and financial data which help the firm to make long term and short term decisions (Fullerton et al., 2014).The primary role of management accounting are as follows:

Firstly it helps in forecasting for the future.  Management accounting goes a long way in helping the firm to focus on the future and to forecast for the future. This includes decisions like whether the firm should make a decision to invest in a new market, decision with respect to acquisition and others.

Secondary it helps in make or buys decisions. The given management accounting helps the firm in deciding the firm to take buying or making decisions. The cost and the production availability are the primary deciding factors which enable decision making at all levels of management.

Differences between Management Accounting and Financial Accounting

Thirdly, forecasting the cash flows (Fullerton et al., 2013). The management accounting also goes a long way in taking cash flow decisions as it helps the organization to predict cash flows for a future. . As management accounting involves designing of the budgets and trend charts, managers tend to make use of this information to allocate the resources in response of projected growth.

Next it helps in understanding performance variances. Management accounting also helps in understanding the performance variances between what has been achieved and what has been predicted (Scott 2015).Lastly it goes a long way in analyzing the rate of return. Management accounting also helps to analyze the rate of return of a project.

The primary differences between management accounting and financial accounting are as follows. Firstly, management accounting tends to provide information to the managers in the organization and guides them to take the various decisions in an organization. On the other hand, financial accounting is for the people outside the organization such as shareholders.

Secondly, financial accounting is compulsory by law whereas management accounting is not compulsory by law (Fullerton et al., 2013). No formats and standards are required by the management accounting standards. Management Accounting consists of Sales Forecasting reports, Feasibility studies and Merger and consolidation reports. Lastly, financial Accounting concentrates on various financial reports like profitability, liquidity, solvency and stability reports.

Cost accounting processes help in maintaining the integrity of the data and helps in brining the focus to the opportunities in the organization and take various decisions. Various cost models that can be applied are given as follows:

The first one is the full cost model-absorption model in the given model; this method is applied to measure the lowest price the product can be sold for (Deegan 2013). The indirect fixed costs cannot be distributed logically leading to optimization considerations.

The second one is the contribution model-cost volume profit model. The given method distributes the variable costs to all cost bearers which can then be used for key distribution.

The third one is the activity Based Costing (ABC). This kind of costing technique distributes the direct costs on various cost objects. This method is popularly applied by any companies and distributes the cost according to different actions. 

Cucumber Limited has been facing problems with respect to achieving the targets of the firm and managing the production activities (Drury 2013). Hence, if the company employs these methods stated above, it will be able to successfully perform well and achieve its desired targets.

Models of Costing for Operational Management

Capital Investment Appraisal techniques can be described as budgeting techniques which help the organization in determining the firm`s investments, both long term and short term (Schaltegger and Burritt 2017). This investment is generally concerned with property, equipments, R & D projects, advertising campaigns, inventory and others. In this manner, the company can identify and analyze whether the investment is to be made by the firm, are genuine or not. Various capital investment techniques are as follows.

Profitability Index

Net Present Value

Accounting Rate of Return

Internal Rate of Return

Payback Period

Profitability Index

The net present value is a capital investment technique which measures the cash inflow and analysis whether there is a shortfall or an excess in the given financial commitments. All investments which are generally made by a company have a single objective if driving a positive NPV (Weil, Schipper and Francis 2013). It is a mathematical calculation which measures the net cash flow at a point of time at discount rate.

The Accounting Rate of Return

The Accounting Rate of Return is a capital appraisal technique which compares the profit earning capacity of a particular project with respect to the initial investment which has been made by the company. It is a non discounted capital investment appraisal technique (Burns and Walker 2015).

Internal Rate of Return (IRR)

The internal rate of return is a technique which helps the firm to derive at a discounted rate which tends to give a zero valued NPV (Andor, Mohanty and Toth 2015). The main purpose of the Internal Rate of Return is to measure the efficiency of the capital investment which has been made. Although NPV and IRR are capital investment techniques, however they are very different from one another. 

Profitability Index (PI) 

The profitability index measures the value per unit of a given project. The given ratio tends to calculate a project based on the per unit value of investment (Cooper 2017). This method measures the ratio of the given amount of money which is invested to the profit earned.

Payback Period 

This is an appraising capital investment technique which helps to analyze the time which would take decisions based on the time it takes to get the money invested in a project back into an organization. It is one of the easiest methods to calculate the credibility of the project.

Cash flows (£ms)

Proposal 1

Proposal 2

Proposal 3

Proposal 4

Year 0









Year 1









Year 2









Year 3









Year 4









Year 5














Residual value





Profitability Ratio





Hence from the given table, the different proposals available to Cucumber Limited can be analyzed. It can be seen that four proposals are available to the firm, ranging from 1-4. The discounting rate of 10% has been taken to analyze each project and to measure the credibility of them. Two discounting capital budgeting techniques have been employed which range from Net Present Value to Profitability. According to the given analysis, the Proposal four should be selected as it has a Net Present value of 18.54 which is the highest. The profitability index of the given proposal is 1.57 which is also the highest. Hence, the company needs to go ahead with the given proposal.

Capital Investment Appraisal Techniques

A business plan tends to serve as a roadmap for the organization whereby it identifies and determines the future of the organization. It can be referred to as a blue print; using which the organization can achieve its strategic goals of the organization (Dhillon 2013).  Planning provides a process for the achievement of the financial objectives of an organization. Forming a business plan or a strategic plan is considered to be an essential part of an organization.  Various companies tend to form a business plan for the organization which then tends to help it in forming the large scale strategy of an organization. This is the reason why the senior executives of an organization lay down the vision of the firm.

The overall plans of an organization may be divided into follows:

Strategic Plans- These are business plans formed for the purpose of determining the long term objective of the organization. This comprises of where the organization wants to be in the future.

Long range plans- These are plans formed for a time frame of 3-5 years whereby the organization aims to achieve strategic advantage. These plans are revised regularly in order to maintain a firm`s position in the market.

Annual Plans- These plans are formed regularly and go a long way in helping the organization to analyze and determine its milestones. Annual plans often tend to form the long term plans of the company.

Business plans help the firm to either enter into a new segment or engage in a new process which relates to the process of production or providing services.

Budgeting can be described as a financial statement formed to help the organization in maintaining its activities and determining the right path of success. Budgeting helps the organization to supply the execution plan with details about the operations and the budgeted expenses (Bogsnes 2016). A budget is very useful in outlining the performance of an organization in the sense that it helps a firm to analyze and determine the objectives of the firm and measure how the firm is actually performing.  They also go a long way in monitoring the historical progress of the organization and adjusting certain activities to meet the profitability of the determined goals. Budgets are of various types:

Sales/Gross Margin Budgets

Capital Expenditure Budgets

Headcount Budgets

Operating Expense Budget

As it can be seen from the case of the Cucumber Limited, as Mr. Mc Donald prepares the given budget on the last Friday of each month with the data from previously month, this might be the reason why the variances occur hence it is suggested that the company adopts a forecasting method of budgeting and prepares them depending on the various factors affecting the given organization. If the firm is able to do so then it will be able to avoidances in the performance (Wildavsky 2017). The targets which need to be set need to be realistic enough.

Balanced Scorecard Approach

To find out the estimated products to be sold,

SP: 150$

CP: 100$

Fixed cost: $1500000

Targeted Profits=5000000$

Hence, let number of products be x

5000000= 150x-(100x+1500000)

= 130000

Hence, the company needs to sell 1, 30,000 products to achieve the desired profits. 

A balanced scorecard can be described as a performance metric which is generally used in strategic management in order to identify and to improve the results of the various internal functions of an organization (Brooks 2015). It is also used to analyze the results of the factors external to an organization. A balanced scorecard is popularly used to provide feedback to the various departments.  The balanced scorecard was introduced by Dr. Robert Kaplan and theorist Dr. David Norton (Shafiee, Lotfi and Saleh 2014). They undertook to adapt the metric performance measures into non financial information.

The balanced scorecard is useful in re-enforcing good behaviors in a business by differentiating between the four primary areas that need to be analyzed. These four areas, popularly known as the four legs, are the learning and growth, customers, finances and business processes (Brunzell, Liljeblom and Vaihekoski 2013). The balanced scorecard helps to attain the objectives of a business, and initiation of goals and results. If a company is able to perform the balanced scorecard analysis then it can easily, identify those factors that are hindering the company from performing well (Sainaghi, Phillips and Corti 2013). Organizations used the balanced scorecard to implement a strategy mapping and see where value can be added. Strategic initiatives and objectives are also developed with the balanced scorecard.
Balanced scorecard for Cucumber Limited

Figure 1: The balanced scorecard for Cucumber Limited. (As created by the author)


Therefore from the given analysis it can be stated that although Cucumber Limited has been performing well, there exists certain areas where the company needs to improve. These areas include areas like the budgetary control processes, management accounting implementation and the performance management aspects. The given essay outlines the four major areas of concerned. Various theories have been used along with connection to the Cucumber Limited. If the manager is able to convince this to the various members of the organization, it can become a leader in the industry. 


Andor, G., Mohanty, S.K. and Toth, T., 2015. Capital budgeting practices: A survey of Central and Eastern European firms. Emerging Markets Review, 23, pp.148-172.

Bogsnes, B., 2016. Implementing beyond budgeting: unlocking the performance potential. John Wiley & Sons.

Brooks, R., 2015. Financial management: core concepts. Pearson.

Brunzell, T., Liljeblom, E. and Vaihekoski, M., 2013. Determinants of capital budgeting methods and hurdle rates in Nordic firms. Accounting & Finance, 53(1), pp.85-110.

Burns, R. and Walker, J., 2015. Capital budgeting surveys: the future is now.

Cooper, R., 2017. Target costing and value engineering. Routledge.

Dale, B.G. and Plunkett, J.J., 2017. Quality costing. Routledge.

Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.

Dhillon, B., 2013. Life cycle costing: techniques, models and applications. Routledge.

Drury, C., 2013. Costing: an introduction. Springer.

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control practices in a lean manufacturing environment. Accounting, Organizations and Society, 38(1), pp.50-71.

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), pp.414-428.

Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.

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.

Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts and practice. Routledge.

Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts and practice. Routledge.

Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.

Shafiee, M., Lotfi, F.H. and Saleh, H., 2014. Supply chain performance evaluation with data envelopment analysis and balanced scorecard approach. Applied Mathematical Modelling, 38(21-22), pp.5092-5112.

Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.

Wildavsky, A., 2017. Budgeting and governing. Routledge.

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