ACCY7101 Assessment 2

Weighting 

25%

Learning outcomes

• Analyse strategic cost and profit management across the value chain.
• Critically analyse contemporary approaches to performance management relevant to an organisational context.
• Analyse advanced management accounting issues to inform strategic decisionmaking for an organisation.

Instructions

Complete and submit your assessment according to the Open Polytechnic’s Assessments webpage. This includes information on academic integrity, formatting, word limits and referencing.

• Include your name, student number and the assessment number.
• Number your pages.

Submission

• Submit your assessment in one file.
• Submit your work through your iQualify course.
• Emailed assessments will not be accepted.
• You will receive an automated notice advising you of your successful submission.

By submitting your assessment, you confirm that it is your own, original work.

Part A

Case study: Countrywide Plants Ltd (CWP) is an Aotearoa New Zealand-owned and operated company with a network of stores and plant nursery facilities across the North Island. They produce and sell a wide range of plants, including bedding plants and shrubs.  Bedding plants take a few months to grow, while most shrubs take two years to grow. CWP also grows specialty plants for the divisions.  Most of these are popular regional plants grown for a specific division.

Divisional structure

The company is organised into five divisions: Nursery, Taranaki, Kāpiti, Head Office and a newly established Auckland Division. The performance of the divisions and the company as a whole is measured using return on investment (ROI), with a target return of 16%. If divisional managers exceed the ROI target, they receive a bonus equal to 15% of their salary for the year. If the company as a whole meets its ROI target, members of the head office management team, which includes division managers, receive an additional 4% bonus.

The company is restricting divisions’ purchases so they can only purchase products from the Nursery division. It is considered that more centralised purchasing will give the firm more bargaining power and lead to lower costs.

Divisional management

The divisional managers have been expressing concerns about the current performance measurement system, as they feel it doesn’t capture all aspects of their performance. Both the Taranaki and Kapiti divisions have queried the high price of the plants grown by the Nursery Division.

‘We pay cost plus 15% for plants, which for some plants leaves little margin. We can buy from outside plant nurseries at lower prices.  The Nursery Division has a guaranteed margin We believe we should get a lower price so we can be more competitive in the marketplace.’  The Nursery Division has countered that they need to receive a good margin as they take the risk of plants not selling.

Helen Johns, Countrywide Plants’ CEO, is concerned this issue may result in a lack of cooperation between the divisions, which may lead to the company not meeting some of its strategic objectives. The strategic objectives focus on operational efficiency, quality management, cost management, sustainability and market expansion.

Helen has been in discussion with the division managers. They have all raised the issue of performance measurement and how the company links this to its incentive scheme. They also expressed concern that ROI has well-known limitations. One manager indicated that ROI would not be suitable for the new, recently established Auckland division that will focus on tropical plants which have longer growing periods. The manager of the Auckland Division has expressed concern that her asset values are higher than those of other divisions for the same equipment, as the division was set up with all new equipment when it was established 18 months ago.

‘All my manufacturing equipment is new, resulting in a higher operating asset value for the ROI calculation compared to the established divisions, which have depreciated assets and therefore have a lower operating asset value for the ROI calculation.’

Helen raised the issue of performance measurement with the board of directors, which decided that Countrywide Plantsneeded to review its performance measurement system. One of the directors liked the idea of introducing a balanced scorecard (BSC) but admitted he knew little about how it worked. Another director commented that getting buy-in from the managers and staff being evaluated was important to ensure that any performance measurement system adopted would influence and encourage the outcomes they wanted. The board asked Helen to present a report at the next board meeting outlining the issues involved in the current performance measurement system and those associated with adopting a BSC approach to performance management.

Performance management

Helen has approached you, as the management accountant, to draft a report on Countrywide Plants’s performance measurement system. She provides you with the following information to help you with your report.

Countrywide Plants’ plants are grown in several nurseries in the Nursery Division, with divisions being required to purchase plants from their nearest nursery to control transport costs.  Each nursery calculates its own costs, so costs vary between nurseries.

Countrywide Plants produces several unique plants, which were bred by the company’s nursery.  These plants are sold to divisions with a 25% markup to cover development costs.

The Nursery Division produces all of the speciality plants.  The marketing manager notes that speciality plant sales are falling while higher-volume products are gaining sales. The Nursery Division’s production manager notes that the decreasing volume of speciality plants is increasing unit costs due to the high level of fixed costs.

The marketing manager has also received feedback from clients that the company’s plants are not always of equal quality or price and that some customers source their plants and products from outside their local division. Helen has had the junior management accountant carry out some preliminary research. She discovered that spending on quality management varies between divisions and locations. She suggested it might be worthwhile to adopt a total quality management (TQM) approach for some key activities.

Helen has raised the issue of the performance measurement approach and the possible use of a BSC with divisional managers and other management staff. They raised a number of points Helen thought should be considered in your report. She provides you with the following summary of the points the managers raised.

• The current system doesn’t encourage cooperation among managers, as the annual bonus is mainly based on divisional performance, not Countrywide Plants’ overall returns.
• Managers don’t control investment decisions or purchase costs, so they do not control all aspects of profit. Is it reasonable to treat them as profit centres?
• The ROI target is clear and easily understood.
• The BSC requires strategy mapping. How would this be done?
• A BSC has multiple measures. How will they know which one to prioritise?

Required:

Write a report of 2500–3000 words for Helen, the CEO of Countrywide Plants, which has the aspects Helen requires (as listed in the following tasks). Remain within the overall word limit. A 10% excess is allowed before any penalty is applied. The word count does not include the reference list or any appendices.

Task 1: Current performance measurement

Discuss five major limitations of the current performance measurement system, excluding transfer pricing issues. Ensure you identify the possible negative impacts these limitations may have for Countrywide Plants.

(Word count guideline: 350 words)

(10 marks)

Task 2: Non-financial measures

Provide a discussion of why non-financial measures, including quality and sustainability measures, can help monitor performance at Countrywide Plants.  

(Word count guideline: 150 words)

(5 marks)

Task 3: Balanced scorecard (BSC)

Develop a proposed BSC for the Nursery Division. Ensure the focus is on evaluating the performance of the division and how it supports other divisions and the company.

• Provide two to four measures for each of the four perspectives of the BSC. In total, your BSC must have 14 measures (with a minimum of two measures and a maximum of four measures for any one perspective). Ensure three measures are lead measures. Indicate which of your measures are lead measures.
• Identify three sustainability measures to add to your BSC (these are in addition to the measures already identified and can be from any perspective).
• For each measure (including the sustainability measures), explain why it is important and whether the performance target is to increase or decrease the measure.
• Ensure you explain the measures clearly so Countrywide Plants managers can understand what the measure is and how it is to be used.

(Word count guideline: 700–800 words)

(20 marks)

Task 4: Addressing the concerns of managers

Suggest a response to address each of the five concerns raised by managers.

(Word count guideline: 350 words)

(10 marks)

Task 5: Incentive scheme

Develop a proposed incentive scheme for Countrywide Plants linked to the proposed BSC you developed. Provide details of the incentives provided and use only measures from your BSC (use one measure per perspective, but you can choose more than one for some perspectives). Explain the reason for selecting a particular measure. Provide two reasons why it is important to link an incentive scheme to the BSC.

(Word count guideline: 350 words)

(10 marks)

Task 6: Divisional performance and BSC

Discuss two advantages and three disadvantages of using different BSC objectives and measures for each division.  

(Word count guideline: 150 words)

(5 marks)

Task 7: Total quality management

Provide the board of directors with a discussion of total quality management (TQM). Provide two examples of quality measures that could be used by Countrywide Plants.

(Word count guideline: 450–500 words)

(15 marks)

Task 8: Presentation of a report

You need to present your answers to each task in report format. Your report should include an introduction and a conclusion. All sources should be cited and referenced using APA7 style.

(Total word count guideline for introduction and conclusion: 250–300 words)

(5 marks) 

[Total for Part A: 80 marks]

Part B: Research in management accounting

Task 1: Strategic management accounting

Based on the research by Hadid and Al-Sayed (2021), complete the following.

a. Explain the concept of strategic management accounting (SMA).

(3 marks)

b. Briefly explain the role of management accountant networking in implementing SMA, as identified in the study.

(3 marks)

c. Outline how information system quality and organisational culture influence the implementation of SMA practices. In your answer, distinguish between outcomeoriented and innovation-oriented cultures.

(5 marks)

(Word count guideline: 450–500 words)

Task 2: New technologies and the expanding role of management accounting

Based on the review by Kerr, Taken Smith, Smith, and Xu (2025) in the article A Review of AI and Its Impact on Management Accounting and Society, complete the following.

a. Explain the concept of artificial intelligence (AI) as applied to management accounting. In your answer, distinguish between early rule-based expert systems and more recent generative AI technologies.

(2 marks)

b. Describe how the increasing use of AI may influence both the role of management accountants and wider organisational or societal outcomes.

(4 marks)

c. Why do professional judgment and ethical oversight remain critical for management accountants despite or because of advances in AI?

( 3 marks)

(Word count guideline: 450–500 words)

[Total for Part B: 20 marks]