Essay, Management
management accounting
Project description
BE111 Management Accounting 1
2013/2014
Coursework Assignment (25%)
This assignment has two components:
1. A review of how, in general, ‘management via accounting’ operates in modern managerially-run enterprises, drawing on the Introduction to Chandler, The Visible Hand (1977).
2. An analysis of how ‘management via accounting’ can be applied to keep fuel costs as low as possible at a low-cost airline, while also ensuring that safety is not compromised (using published data from and on Ryanair).
NB: Each question is weighted 50% and has a word limit of 750 words. In each case, you are asked (i) to describe some aspects of ‘management via accounting’ and (ii) to provide some form of reflective or critical evaluation on the ‘management via accounting’ process. To obtain high marks you need to meet both the descriptive and reflective/critical requirements of the question.
1. How ‘management via accounting’ operates: key aspects
Alfred Chandler, in the ‘Introduction’ to The Visible Hand (1977), argues that the modern business enterprise is totally new. The new line-and-staff structure, once combined with the new continuous process of producing and analysing accounting and statistical information, enables plans and information to flow up and down the enterprise. This enables economic, efficient and effective ‘administrative coordination’ of activity in and across all business functions. This ‘management via accounting’ produces sustained advantage over all previous forms of business enterprise, so remains central to running organisations today. He specifies the following advantages (1977: p7) which apply to both manufacturing and service enterprises:
• Lowering internal transaction costs by ‘routinising the transactions between units’:
• Reducing costs for information on markets and supply sources by ‘linking the administration of producing units with buying and distributing units’
• Enabling the flow of goods or services, and of information, from one unit to another to be faster and cheaper
• More intensive use of facilities and personnel through more effective scheduling of flows (of goods or services)
• More certain cash flow and more rapid payment to and from customers and suppliers.
He concludes: ‘The savings resulting from such coordination were much greater than those resulting from lower information and transaction costs.’ (Chandler, 1977: 7)