Page 14 - CIMA MCS Workbook November 2018 - Day 1 Tasks

CIMA NOVEMBER 2018 – MANAGEMENT CASE STUDY

From a P2 perspective:

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

TQM
Grapple is a manufacturing organisation so will have a strong focus on cost control.
Their strategy is based on high quality in their products so a total quality management system
may be in operation or might be considered. The value chain might also be a useful tool. Brand
identity is key in the industry. Grapple’s is based on being high quality with a superior taste so
they cannot undertake any cost cutting measures that will compromise this.

BIG DATA
Big data plays a role in the industry and Grapple has an expert in this field – the sales and
marketing director Li Ying has previous experience but is this relevant for Grapple?

THEORY OF CONSTRAINTS
Grapple’s production processes comprise a sequence of steps that have to be performed in the
same order each time – this means that the theory of constraints may come into play if a
bottleneck arises and throughput accounting may be needed to deal with bottlenecks in the short
term. A failure in any part of their production process could be catastrophic, whether due to
health and safety issues (e.g. chlorine remaining in the mix) or an inability to meet production
targets.

PRODUCT PROFITABILITY
The company sells to various different customers but not enough info is given to determine
customer profitability.

COSTING SYSTEM
A total absorption costing system is used based on machine hours but products are produced in
batches, so an activity based costing system may be more appropriate to calculate accurate costs.

WORKING CAPITAL
A massive increase in sales last year has been accompanied by an increase in receivables and
payables days, decreasing liquidity ratios and a small cash balance. The company could be at risk
of overtrading. The finance director comes from a financial accounting background so may not
have a lot of experience with management accounting techniques and considerations.

POTENTIAL INVESTMENT PROJECTS
Growth through acquisition to consolidate market presence may be a possibility as could other
investment projects. All investment appraisal techniques are relevant to the preseen

Funding would need to be sourced for any large projects.

10 KAPLAN PUBLISHING