Full version of Management accounting 1

1. Explain the impact which globalization and technological advancement have on
management accounting in the past two decades.
1.1 Globalisation
Globalisation is a process of integrating and interaction among people from different
nations and companies. It creates boundaryless among country due to its tendency to move
beyond domestic and national markets. Due to the impact of globalization,it causes a lot of
changes around the globe. According to Ahid & Augustine, the change of roles in the
accounting profession began from 1980 when practice of globalization was fully entrenched
in economies and the flow of information across boundaries became more thorough
(Augustine, 2012).
In past decades, majority traders and people depends on land and sea transportation for
trading or travelling. From middle of 20th century until now,there was an increasingly
efficient and new forms of transportation.This included advances made in land-based
transportation air transportation that ease the delivery of good and services.It helps the
products to be delivered in short time period and decrease the cost of transportation. A firm’s
transportation strategy is vital to support its competitive strategy where it helps to reduce the
inventory and warehousing cost by speed up the delivery to the end customers.
Besides, globalization also eases the transformation of managerial information by
practising outsourcing. Outsourcing has becomes a common trend in business world that is
the practices of hiring another individuals or company to handle the business activities.
Outsourcing enables multiplier effects in the productivity of a company as the strategy to
outsource help in accomplish some task will be done by certain expert company. For instance,
Shell outsources their back office department, global IT infrastructure and engineering
technology to achieve efficiency and increase productivity. Due to the influence of several
factors such as political, economic and others, Shell was strategic in their decisions where
outsourcing really help them to reduce cost of company and increase profitability. Shell’s
outsourcing strategy has proved to be the success factor for them in long term.
Global market was also occurred due to the impact of globalization. Global market is the
activities of buying and selling good and services around the countries.As we all know,
McDonald’s is one of the successful global brand nowadays. The main reasons that lead to the
achievement of McDonald’s were practising “glocal”marketing efforts. McDonald’s
introduced specific menu items which brings local flavor,literally, to different

countries.(Ramesh&John,2006,p.130). Started from 2003,McDonald’s comes out with
McArabia,a flatbread sandwich to its restaurants in Middle East.Besides, they also introduced
macaroons and McSpaghetti to its menu in French and Philippines respectively.. This “glocal”
approach has helped McDonald’s company to gain the competitive advantage towards others.
In addition, Hennes & Mauritz AB (H&M, 2016) is one of the clothing retailer company
that is on track with their international marketing.Today, H&M group continues to grow with
their focus on quality and sustainability in both existing and new market. In order to thrive
and operating in the globalized marketplace,management accounting that plays a important
role in decision making has to move towards the resource management through application of
process analysis tool such as activity based costing, life cycle costing, and costs management
techniques.
In the era of globalization,there is the existence of global products where those products
are commercialized or marketed throughout the worldwide under the same brand name.One of
the well-known products is Starbucks where it has around 20,000 stores in 63
countries.Furthermore, Cola-cola is still also one of the world’s recognized brands after gone
through all their competitors.To sustain in modern business,management accounting team has
become the core partners.
Apart from that, globalization also attracts competitors from other country.This results in
global competitors where every business is trying to emerge and gain competitive advantage
over others.This situation can be seen clearly from the case of Nokia’s company.Nokia still
dominated the market after great recession but due to the competition was catching up ,Nokia
had failed and slow movement of their company has lead their market share to decline
tremendously.This causes their product life cycle to become shorter.Instead, gadgets such as
Iphone,XiaoMi,Samsung and others were able to sustain in the market because they always
improve the feature and quality of it to satisfy the needs and wants of their target
customers.To overcome it, it is the role of management accounting to track the performances
of other companies as well as alert the managers the possible changes customers are
observing and evaluating (Seal et al, 2006).
Global services also arised results from globalization.Nowadays,people have made used
of this services as it brings convenient to us.Besides, AirAsia Berhad is also offering global
service as it provide lowest fares to 100 over destinations and in the mean time people can
directly book the hotels as well.In order to get better control throughout the business,

management accounting’s roles has become vital in the internal control system and
implementation of fraud prevention within their businesses.(Ahid & Augustine ,2012).
1.2 Technology Advancement
The advancement of technologies has also made several significant impacts on
management accounting during the past two decades. The impacts that were brought by the
advances in manufacturing technologies on management accounting is the reduction of waste,
emphasis on quality of the product and the simplification of the manufacturing processes. The
company is able to reduce wastage of inventories while manufacturing products by
implementing the just-in-time (JIT) production system which is able to be carried out by using
advanced manufacturing technologies. This is because advanced technologies decrease the
number of manufacturing processes that the inventories need to go through for the production
of goods and services. As a result, a fair amount of time is able to be saved that allows the
producer to use the (JIT) system while being able to handle the competitive demands from
customers. Thus, many elite manufacturing companies are seen using lean manufacturing
systems that replace their traditional production systems in order to produce high quality
products at a lower cost. Moreover, advanced manufacturing technologies will also help to
provide and maintain customer satisfaction by being flexible enough to cope with the short
lifespan of products and demands for a wider product variety.
Secondly, the use of information technologies has also increased dramatically in business
activities. One of the advanced information technology application that was created is the
enterprise resource planning system (ERPS). ERPS is business process management software
that includes a set of integrated software application modules that manages all of the
information flow within an organization. Consequently, it allows managers to interpret
information more swiftly that’s improves the efficiency of processes. It has made a significant
impact on management accounting as the users are able to get access to the organization’s
database by using their own personal computers. Therefore, managers are able to access the
system to obtain their desired information instead of consulting the management accountants
for the information. As a result, management accountants have adopted the role of advisers
and internal consultants as they have become more involved in analysing information that is
generated by the ERPS. Thus, ERPS helps to reduce routine information gathering and the
processing of information.

2. Discuss some different managerial uses of cost information in an airline company
2.1 Introduction
British Airways Plc (BA or the Group) is the largest international scheduled airline in UK and it
is one of the world’s leading global premium airlines which serve in 75 countries. The airline
provides quality services to consumers to meet their needs and maintain its market share.
However, the airline faces challenges that could impair its competitive advantage, including
labour issues, safety issues and stiff competition from its rivals. The company is a part of
Internatnional Airline Group (IAG) that also owns three other airline brands which are Aer
Lingus, Iberia and Vueling. It flies globally to more than 400 destinations worldwide in nearly
80 countries. By the end of the year 2015, British Airways had 39,304 employees globally
(Annual Report, 2015).
2.2 Planning
Planning is the crucial part in the management as it’s to prepare for the future, unforeseenevent,
budgeting and various management techniques to make improve in services and the most
important is to gain high profit. British Airways is focusing on expanding its business
operations to better serve increasing amounts of passengers due to the slight recuperation of the
global economic conditions. Among the planning strategies that the airline currently undertake
include
· Purchasing new aircraft.
· Upgrading the customer experience through the introduction of mobile application services
for business class customers.
· Managing a better cost base operation.
· Increasing corporate responsibility through environmental performance and partnerships.
Furthermore, British Airways has allocated budgeting for long term and short term plan.
Planning strategies € Amount in million
Capital Expenditure Long term: €14,022 million
Short term for 2015 is £1,073 million
Sensitivity Analysis Aer Lingus :£1.2 billion
Environmental programme : £503 million
Activity Based Costing Target save from fuel :£400 million
Cost-volume-profit analysis New mobile application :£205 million
2.3 Implementation of management techniques

Management accounting is critical in helping the management solve the problems
affecting the company by providing financial and non-financial information. Managers use
financial and non-financial information to make decisions, solve issues and develop plans to
achieve the organizational goals. BA management can utilize different management accounting
techniques to address the problems affecting the firm and make sound decisions in the future.
First and foremost, capital expenditures are major purchases by BA management for
long term benefits such as facilities and equipment that companies make to maintain or expand
their business worldwide. This is because such purchases involve acquiring assets that provide
value and they are able to recover the cost of these acquisitions gradually by depreciating the
assets over time.Besides, activity- based costing is a technique used to cost and monitor
activities by tracing how resources are used and costing the output. The method is used to
identify and get rid of ineffective productionprocesses and assign processing concepts that lead
to the production of similar products and services at a cost- effective method (BusinessZone,
2015).
Moreover, sensitivity analysis is another technique used to evaluate risks and facilitate
decision making and planning. It is helpful to British Airways especially when they decided to
combine operations with Spanish Iberia. The merged has been successful in the market as both
airlines of market shares in the London Stock Exchange have increased (Clark,et al., 2010).
Lastly, the cost-volume-profit (CVP) analysis is used to calculate how the changes in
costs and volume affect the airline company's operating income and net income. For example,
BA offers a selection of mid-price flight tickets. Its strategy is to provide comfortability in the
airplane at reasonable prices. Hence, its variable costs are high because of the usage of high
quality products for the seating, while their selling price remains fairly mass market. As such,
its contribution margin is not high. Inorder to cover its fixed costs and create a profit, BA has to
compensate with high volume.
2.4 Review of Management Principles
2.4.1 Capital expenditure - Purchasing new aircraft.
First and foremost, the capital expenditure authorised and contracted for amounted to
€14,022 million for the Group. The majority of this is in US Dollars and includes commitments
until 2022 for 106 aircraft from the Airbus A329 family, 18 Boeing 787s, 43 Airbus A350s, and
Airbus A330s(AIG Group consolidated results, 2016). In the year 2015, the total capital
expenditure in the year amounted to £1,073 million. This comprised £993 million in
fleet-related spend (aircraft, aircraft progress payments, spares, modifications and

refurbishments) and £80 million on property, equipment, software, and landing rights. During
the year the Group took delivery of seven Airbus A320 aircraft, two Airbus A380 aircraft, five
Boeing 787-900 aircraft and one Embraer E-190 aircraft (Annual Report, 2015).
2.4.2 Sensitivity Analysis - Increasing corporate responsibility through environmental
performance and partnerships.
With the growing revenue with BA partners in 2015, BA announced that they are
extending their codeshare agreement with Aer Lingus to cover all routes which cause £1.2
billion. This extension of their partnership with Aer Lingus is great news for their customers.
Besides, British Airways took the environmental responsibility very seriously. They have an
extensive programme to cover the carbon footprint, areas of noise, air quality and waste
management (BA corporate responsibility report, 2010/11). BA was the first airline to
participate in carbon trading in the year 2002. They have allocated £503 million and proactively
developed solutions to help governments prepare for aviation emissions caps from 2020
(Airways, 2016).
In their climate change programme, they focus on securing a global sectoral policy
regime with ambitious long-term CO2 reduction targets and improve their carbon efficiency.
They also focus on developing the potential of low-carbon fuels and supporting scientific
research into the impact ofaviationon climate change. Theyset a target to improve their carbon
efficiency by 25% by 2025 from a 2005 baseline. (Annual Report , 2015)
2.4.3 Activity Based Costing - Managing a better cost base operation.
For the Group, the low oil price has helped them over the past year, boosting even the
Europe’s struggling legacy airlines which have been heightened competition from Middle
Eastern and budget rivals (The Financial Times News, 2017).
BA remains completely focused on creating a competitive cost base that will underpin
their future performance, in good economic times and bad. They benefited from two areas of
radically reduced cost during the year. Fuel costs decreased year-on-year by £484 million
which is 13.8 per cent, to £3,031 million compared to £3,515 million in the prior year (Annual
Report, 2015). The decrease of it is mainly attributed to a reduction in average fuel price, net of
the impact of hedging, partially offset by the adverse impact of foreign exchange and by the
increase in volume. BA also benefitted from the performance of their next generation fleet
which are more fuel efficient (Annual Report, 2015). At the same time, BA was able to reduce
their non-fuel cost by £191 million to £7,038 million which having a 2.6 percent decrease. A

large proportion of that reduction was down to much lower restructuring cost which was down
by 30.8 per cent. Moreover, selling costs have reduced by 10.7 per cent in line with the
reduction in revenue on top of the benefits seen froma cost saving initiative. Aircraft lease costs
have increased by 41.3 per cent primarily due to additional Boeing 777 and Airbus A320
aircraft being financed under operating lease agreements (The Financial Times News, 2017).
2.4.4 Cost-volume-profit analysis -Upgrading the customer experience through the introduction of
mobile application services for business class customers.
In 2015, BA has introduced a new mobile application services targeted at business class
customers worldwide in order to improve their customer’s experience. As a result, the company
has incurred an amount of £205 million in order for the implementation of the mobile
application services in the business class flights. This will increase their variable cost by £405
million that makes their contribution margin short of £155 million (Foo, 2009). Therefore, in
order to cover their fixed costs of £3031 million that results from the cost of fuel and landing
charges, Thus, some strategies that BA uses to increase volume includes reducing their prices
for air tickets in hopes that the results would generate positive contribution margin to defray its
fixed costs.
2.5 Conclusion
To conclude, British Airways is considered to be over-dependant in the UK market.
This is supported by the evidence that more than 50% of revenues from British Airways
originates from the United Kingdom. Despite having a presence worldwide, BA has not
penetrated markets with high potential like China and India. Thus, BA can increase their
volume of sales by expanding their business to other areas such as Asian countries. Other than
that, it was reported that BA had made losses in certain periods such as the record loss of €292
million over the year 2009 (TheGuardian, 2016). This is because their costs are not managed
well which is not able to be covered by the revenue earned that generates losses. Therefore, it is
certain that BA should implement the four management techniques which include capital
expenditure, activity-based costing, sensitivity analysis, and cost-volume-profit analysis in
order to reduce their operating costs to a minimum level.

3. Do you think that a management accountant can play an important role in a non-
profit organisation? Choose a specific non-profit organisation which you are familiar
with to explain your answer.
3.1 Introduction to World Food Program
We have come to agreement among all members based on our research to choose World
Food Program, (WFP) as non-profit organisation in explaining the crucial of management
accounting role. The World Food Program came into existence in 1961 under joint UN
General Assembly and Food and Agriculture Organization (FAO) resolutions passed in
parallel to establish a body with the focus of providing Food Aid throughout the UN system.
The organization was originally intended to have been a 3--‐ year operation following
international crises that demanded the supply and distribution of Food Aid to people in need,
but it has since become the principle UN framework for Food Aid. Its mandate is broad,
encompassing aspects of emergency--‐ response/ disaster relief, development of agriculture,
and food/nutrition--‐ security. Alongside the World Health Organization (WHO) and other
UN bodies, it forms part of the UN’s primary--‐ response to any natural disaster.
Furthermore, World Food Program as non-profit organizations have not traditionally
been accustomed to evaluating operations using managerial accounting principles but the
adoption of managerial accounting techniques could be as beneficial to ensuring the longevity
of WFP as it is to for-profits, provided that non-profit managers can select appropriate
measurements, or benchmarks, that provide practical information for planning, control, and
decision-making. Managers of WFP are often compensated based on their performance in
areas such as dollars raised, visits to donors made, and overall team success in meeting
fundraising goals.
3.2 Objective of World Food Program
The WFP strives to eradicate hunger and malnutrition, with the ultimate goal in mind of
eliminating the need for food aid itself.
The objectives that the WFP hopes to achieve are to:
 Save lives and protect livelihoods in emergencies
 Support food security and nutrition and rebuild livelihoods in fragile settings and
following emergencies
 Reduce risk and enable people, communities and countries to meet their own food and
nutrition need
 Reduce undernutrition and break the intergenerational cycle of hunger
WFP food aid is also directed to fight micronutrient deficiencies, reduce child mortality,
improve maternal health, and combat disease, including HIV and AIDS.

3.3 Planning
World Food Programme (WFP)’s funding and donors comes from three main ways which
is through government, corporations, and individuals. Government acts as a main source of
funding for WFP where the government support is based on voluntary basis entirely. On
average, over 60 governments underwrite the development projects and humanitarian of WFP.
(Program, 2016).This includes contribution from our country to WFP which cost one hundred
thousand.
Besides, individual companies are also urge to make contributions in order to fight
hunger. WFP has sets meaningful sister agencies relationships that are able to create business
outcomes and solve global problems such as knowledge transfer and others. According to
WFP, they have received frontline support in emergency operations, critical cash for school
feeding and others. In addition, to create shared value that can be measured against
Sustainable Development Goals (SDGs), WFP works with global leaders in almost every
industry (Private Sector, 2016). WFP has spread their messages, lifesaving programmes and
draws on their partners’ positioning to strengthen the operations and others in order to achieve
the SDGs by 2030.They also plan to come out with other means to face the challenges.
WFP also welcome the donations from individuals. They may provide foods during crisis
or contribute for the people to rebuild infrastructure, schools, roads, and other to help the
refugee, poor families and hunger people.
Over years, WFP has helped to retain the children in schools by providing school meals
to 17.4 millions of children. This has access the children to education without interruption.
Besides, WFP have reached more than 50 millions of people during emergencies by improve
and providing them nutrition and food security.93% of WFP project activities were successful
and this was implemented with their sister agencies such as FAO, UNHCR and UNICEF.The
program done by WFP as below:
Program Budget
1)Emergency Relief and Response - When
emergencies strike, WFP is first on the ground
helping people. Whether in the wake of a natural
disaster or in the midst of conflict, WFP responds
with life-saving food and logistical support.
$19,292,145.00

2)School Meals- involve just what the name
implies by providing meals in schools. The idea is
simple; the impact is significant. Serving food at
school not only helps alleviate hunger among the
world’s poorest children, it also helps get them into
school, providing them with an important key to a
better future for an education.
$35, 034, 155.00
The method apply by management accountant in WFP are capital expenditure and cash
budgeting. Capital expenditure refers to the acquisition of assets whose useful lives are
greater than the current period. WFP owned few classes of capital such as buildings for
permanent and temporary, computer equipment, office equipment, motor vehicles and others
equipment. For example, when there is an urgent event happened in other country WFP may
get the latest news by using the computer and internet. The motor vehicles of WFP are mainly
use for transfer the food commodities and service to the particular places.
Addition, cash budgeting is a guide that can help a WFP’s plan for the future as well as
assess its current financial health. It is quite common to periodically review the budget as well
as compare it to the actual cash flow and expenses, to determine whether they are playing out
as expected during the course of the year. It may be necessary to amend the budget during the
year.
3.4 Monitor/ Implementation
Determine the cost information
Management accountant plays an important role in a non-profit organisation. Firstly,
management accountant can help an organisation to determine their operating costs. By this,
the manager can manage it in accordance with the cost information to have a lower cost of
operation. The director of WFP may reduce or eliminate some wasted cost through the
information given by the management accountant.
Lengthening organization’s lifespan
Then, management accounting can help in lengthening the organization lifespan.
Although WFP is a non-profit organization, but management accounting can help the

company in planning, controlling and performance measurement to make sure the company is
not operating in a deficit way. Management accounting can provide the cost of the
organization in a very detailed form to make sure the organization is operating wisely. WFP is
not expecting to earn a huge profit, but management accounting can help WFP to plan for
future action, control the performance and make sure the organization is operating well. This
is a key to help WFP to operate for a longer period. With a proper planning and controlling,
WFP can operate efficiently. Therefore, WFP can operate for a longer lifespan and also
provide a better quality of service. In short, management accountant is extremely vital in
maintaining the operation of the non-profit organization and increasing its lifespan.
Prepare a new budget & attract more donor
Moreover, management accountant also can help to prepare a new budgeting after
examining the capital expenditure based on previous budgeting. By comparing and
monitoring previous year’s budget, management accountant can come out with a more
efficient and effective way in preparing their budget but must figure out how to measure their
operations if they hope to keep them afloat, because competition is as real among nonprofits as for-profits. More
than 50,000 organizations receive non-profit status each year, and, due to duplication of efforts. Therefore, WFP
may offer tax deduction to attract more donors. Moreover, WFP may launch new program such as:
Program Budgeting
Purchase for Progress - supports
initiatives that help empower local
farmers in developing countries and
address long-term hunger needs.
$ 34 million
Food for Work - supports the value of
work and of helping people acquire the
training necessary to feed their families
and rebuild their nations in the wake of
armed conflict and natural disasters.
$ 55 million

Evaluating and managing the inventory
Furthermore, management accountant is good in evaluating and managing the
inventory. WFP needs some inventory to maintain its daily operation such as the stocks of
foods and daily necessities. Management accounting can determine the holding cost and order
cost of the stock. Besides, management accountant can also reduce the expenses of the
inventory to the lowest level. Moreover, with inventory evaluation, WFP can ensure there are
always enough equipment to serve the communities make sure all the equipment and tools are
in good condition. Undoubtedly, a management accountant can evaluate and manage the
inventory, and the organization can provide a better service to the members.
Provide relevant information
Last but not least, a management accountant can provide relevant information to help
manager of the non-profit organization to make a better decision. To make an informed
decision, a decision maker needs some crucial information like the costs involved that affects
his or her final decision.. In the context of WFP, the costs that are possibly incurred in its
daily operation might be the cost of purchasing the equipment, the maintenance cost, the
salaries of the workers, and the operating expenses. A management accountant can calculate
these costs in a detailed manner. An appropriate amount of donation can cover all possible
costs of the programme, and therefore, it can reduce the possibility of WFP having a deficit.
Thus, it is obvious that a management accountant can play an important role in term of
decision making of the non-profit organization.
3.5 Conclusion
In conclusion, WFP is a non-profit organisation that fights micronutrient deficiencies,
reduce child mortality, improve maternal health, and combat disease, including HIV and
AIDS. In the planning phase, the non-profit organisation had discussed on how to attract donors
in order to get more donation for the organisation to fund for programmes. Moreover, we have
studied on how management accountant applied in the non-profit organisation. For instance, it
can help a non-profit organisation to determine the capital expenditure and also to prepare cash
budgeting for non-profit organisation. Last but not least, in the monitor phase, the management
accountant is able to prepare a new budget based on previous budgeting. Management
accountant also can evaluate and manage the inventory, and so WFP can provide a better
service to the community.

Citation
(2017). Retrieved from The Financial Times News:
https://www.ft.com/content/38c54aea-dc68-11e5-98fd-06d75973fe09
A., A. M. (2012). The Roles and Responsibilities of Management Accountants in the Era of Globalization.
Retrieved from Global Journal of Management and Business Research,Vol.12 Is.15:
http://www.theunitutor.com/role-management-accounting-globalised-economy
Airways,B. (2016). Corporate Responsibility. Retrieved from
https://www.britishairways.com/en-gb/information/about-ba/csr/corporate-responsibility
(2015). Annual Report . British Airways.
Annual Report. (2015).Retrieved from
https://www.britishairways.com/cms/global/microsites/ba_reports/pdfs/09_BR_Our_business.pdf
Augustine, A. M. (2012). Global Journal of Management and Business Research. Retrieved from The Roles and
Responsibilities of Management Accountants in the Era of Globalization.:
Doran, M. &. (2008). The changing role of management accountants. Retrieved from evidence from the
implementation of ERP systems in largeorganizations:
Foo, J. L. (2009). Cost Volume Profit Analysis for profitability management . Retrieved from
http://www.visions1.com.sg/resources/CVP.pdf
Private Sector. (2016). Retrieved from World Food Program: http://www1.wfp.org/node/280
Program, W. F. (2016). Donors. Retrieved from http://www1.wfp.org/funding-and-donors
Ramesh, K. (2006). Responsible marketing for sustainable business.Retrievedfrom. Retrieved from
https://books.google.com.my/books?id=Z5PnCwAAQBAJ&pg=PA104&lpg=PA104&dq=McDonald
Seal, W. (2006). ManagementAccounting. 2nd edition. Singapore: McGraw Hill. Retrieved from
TheGuardian.(2016). British Airways makes record loss of £292m. Retrieved from
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