Page 13 - CIMA MCS Workbook May 2019 - Day 1 Tasks

CIMA MAY 2019 – MANAGEMENT CASE STUDY

From a P2 perspective:

The primary responsibilities for the student are associated with management accounting.

Expansion

Jord’s institutional investors are pushing for growth. This could come through organic growth or
via acquisition. Either way, capital investment decisions will need to be made and investment
appraisals will need to be produced to support the decisions. With no significant experience in
other markets, there will be a level of uncertainty in any forecasts that will need to be
incorporated into the appraisals.

If the company expands into new markets, it will have to gain an understanding of how its
management accounting will be affected, for example in terms of changing costs (e.g. training,
salary expectations).

Capacity issues

The business operates at full capacity. It may have to make decisions about how best to use this
capacity, given the recent success of the hotel build (e.g. continue to focus on housing or free up
capacity for more hotel projects). In the long‐term capacity may be increased, but in the short‐
term, relevant costing‐based decisions may be needed.

Just in time system

The business operates a just in time system, meaning failures in the system could have significant
adverse effects on production, with knock on effects on reputation. Jord needs to be sure that
appropriate responses to any breakdowns of the system are tested in advance.

Costing and pricing

The budget prefabricated home market is growing. If Jord is to access this market it will have to
review its pricing policy (and the effect on its brand) and may have to be more rigorous in
analysing costs. It can currently afford to pay less attention to costs as it has such high margins.
Cost control would be more of an issue with a product aimed at the budget market.

10 KAPLAN PUBLISHING