QUESTION

In a two-part essay:

1. a.     Discuss the tools and techniques in management accounting that can be used to support an organisation’s sustainability objectives.
2. b.    Go to:  http://www.bluescopesteel.com/responsibilities/cse-reports. Critically evaluate the company’s community, safety and environment report for 2010-2011.

Two good starting points for your research are: the textbook (Chapter 17) and the IFAC’s International Guidance Document on Environmental Management Accounting. 

Please note the following:

• Format: Essay
• Contribution to overall assessment: 25%
• Length: 2000–2500words
• Due date:??
• Your work must comply with the University’s General Guide for the Presentation of Academic Work.

http://www.ballarat.edu.au/current-students/publications,-policies-and-forms/general-guide-for-the-presentation-of-academic-work

• This is a group-assignment. Each group needs to have 2 to 3 members in it. Please organise yourselves into groups.
• Please make sure that names and ID numbers of all group members are stated on the cover sheet of your submission.

As this is a group assignment, each member of a group is awarded the same mark.  Working in groups has its pros and cons. I am sure that you will hold constructive and energetic group discussions on the issues at hand.  In case of any disagreements, you will be able to resolve them in a democratic and rational way. There will be times when you may have to agree to disagree with each other.  Invariably different group members bring different skills to a project; it is up to you to make the best of it. I believe one can learn a lot by discussing the issues with one’s colleagues.

If you happen to find your group members are “not pulling their weight” or there are problems with any member’s commitment, then please try to resolve those issues amongst yourselves.  Open and honest communication always helps.  If you are unable to resolve these issues, you are most welcome to see me and we will try to sort out the problems together. Do this as soon as possible and certainly before the due date.

• BUACC2614, Management Accounting 2
• Semester 1,  2012
• Group Assignment

SOLUTION

1. Answer :

Traditionally, the sustainability objectives used to be in the list of corporate and social responsibility (CSR) of an organisation. The main aims of sustainability were regulatory requirements, moral obligations or reputations of the organisation. In past few years this has taken a big shift. Now focus is on capturing the opportunities rather than risk management. The business sustainability can be achieved only if the management of the organisation is aware of all opportunities available for its improvement. Good performance forever is called sustainability. An organisation’s sustainability needs a thorough analysis of the business; hence management accounting tools and techniques are proved to be very useful in achieving sustainability objectives. (EPA,1995)

Management accounting is the accounting or analysis of financial statements prepared for the managers within organizations to make them aware of the business conditions and eventually it helps them to make better decisions for the future.(Gouzee,1996)

Tools of Management Accounting

The following are the major tools and techniques of management accounting that can help an organization or business to support its sustainability objectives.

Balanced Scorecard

It is an important tool of management accounting. It measures performance of all aspects of a business such as customers, finance, human resources, marketing, training and development. Due to its multi aspect phenomenon the balanced scorecard is a most used tool of management accounting. It is not a pure financial performance indicator only.

Flexible Budget

Flexible budget is a budgeting technique in which the budget is evaluated and prepared again at different levels of the activity. It allows comparing the planned cost with the actual cost. If there is a difference in planned and actual cost then proper action can be taken before moving to further activity. The budget is differentiates the fixed and variable cost, thereby allowing adjustments in the budget at each activity level.

Cost Volume Profit (CVP) Analysis

CVP analysis investigates the impact on total revenue, profits and costs, for a change in selling price, output and the variable costs.CVP analysis provides the analysis which helps the managers in understanding the relationship between price, cost and output.(Garrison, Noreen & Brewer, 2009 – 2010).

Lean Thinking Model or Just In Time (JIT)

Lean thinking model or Just in Time helps management is in producing the right output at the right place and on the right time. The lean thinking model has 5 steps in the whole process. It produces units at customer orders avoiding the high inventory, high defects and more efforts. It leads to low inventory, less defects, less efforts and attracting quicker consumers. (Garrison, Noreen & Brewer, 2009 – 2010).

The five steps are as follows –

1. Identify value in the product
2. Indentify value in the business process of that product
3. Make arrangements around customer orders
4. Create the system responding to customer complaints/queries/requirements
5. Continuously pursue the process of perfection and improvement in the process.

Theory of Constraints (TOC)

Goldratt published a novel “The Goal” in 1985. This novel summarizes the 9 principles which guides to optimal production. His principles not only provides guide for manufacturing process but also a problem solving approach to the bottlenecks of the business. It is called the Theory of Constraints (TOC).

Six Sigma

Six Sigma is a management accounting technique which helps in improving the quality of the process and the product. It identifies the customer requirement and then variations of the produced product from the customer requirements. Once this gap is identified the process improvement steps are taken to align the product process with the customer requirements. Six Sigma helps in eliminating or keeping the variations in requirement and process at acceptable level.

Thus Six Sigma follows the following steps :

–        Defining user or customer requirements

–        Identifying the variations of customer requirement from the actual process

–        Improving the process to align it with customer requirement

–        Continuous efforts to maintain or improve the acceptable level of variations.

Six Sigma measures the quality as frequency of defects per million operations. Variations are measured by standard deviations from the given mean. It defines the lower limit and upper limit. (Landel, Robert)

Total Quality Management (TQM)

W. E Deming introduced the concept of Total Quality Management (TQM). The TQM focuses on quality improvement by modernization of the machines and equipment and proper training to the workers and eventually increasing customer satisfaction. The purpose of TQM is to make employees to use statistical methods and take the proper training and use problem –solving methods in the process. Employees are encouraged to state hypotheses, to collect the data and analyze and interpret and come up with new findings and formulation of new hypothesis. (Wruck, Karen Hopper and Jensen, Michael C.).

Enterprise Resource Planning (ERP)

Enterprise resource planning integrates the functional areas and processes within the organization. ERP system includes inventory control, material requirement and planning software.  Recent development in ERP involves management of vendor and customer relationships.(Schmicheiny,1992)

Activity Based Costing

Activity Based Costing identifies the multiple cost drives to assign the overhead costs to the multiple activities. It evaluates the relationship between cost drivers and the activities. ABC provides cost information to the managers for decision making. It is a supplement of usual costing system. There are two ABC systems in many organizations, one for internal purposes and other for external stakeholders. (Garrison, Noreen & Brewer, 2009 – 2010).

Job Order Costing (JOC)

Job order costing is a method of allocating material, expenses and time to individual projects. JOC is a software based technique which helps in forecasting, analyzing and reporting the expenses and revenue of a particular project or activity. JOC is mostly used in service industries rather than in manufacturing industries. Accounting firms, hospitals, advertising firms are the major users of JOC techniques. (Garrison, Noreen & Brewer, 2010).

Process Costing

Process costing measures the average unit cost at each stage of the production process. It is mostly used in the organizations where a single product is produces for long periods (Gouzee ,1996).

Absorption Costing

Absorption costing divides the costs in two parts: product costs and period costs. The product costs are manufacturing costs (fixed and variable both) and non manufacturing costs are such as selling and expenses and called period costs. It allocates all fixed and variable cost to each product produced. Thus it includes all costs that is why it is also called as full cost method.

Variable Costing

This method considers direct and variable costs as product costs. It excludes indirect and fixed costs from the product costs.

Standard Costing

Standard costing allocates costs on per unit basis. It measures variation is the standard and actual costs and the proper actions are taken for correction. It includes all direct costs, indirect costs ,product and period costs.

Transfer Pricing

Transfer pricing is a method of allocating the charges between different parties of related good or service or property. It distributes all charges among the users of a particular service or good. It is also used by the government to allocate taxation between national and international tax payers.

Thus there are numerous techniques and tools of management accounting which can support the organization in achieving its sustainability objectives. The implementation of these tools and techniques may differ across organizations.

b) Answer

Critical evaluation of the company BlueScope Steel’ community, safety and environment report for 2010-2011.

The company’s community, safety and environment report is given on its website in the heading of responsibilities. It clearly indicates that the company take its concern to community, safety and environment as its responsibility.

COMMITTMENT TO IMPROVE THE ENVIRONMENTAL PERFORMANCE

BlueScope Steel’s management says that they are committed to improve their environmental footprints. They aims to improve their environmental performance in the following ways :

–        Continuous improvement culture adoption

–        Investing capital to improve the machinery and equipment performance

–        Make the system more modernised and robust to handle the responsibilities.

The company has been awarded by ISO 14001, World Steel Association, Sydney Water etc for its fabulous environmental performance. The company is managing environmental performance by using LAWWNE that is ,-Reducing impact on Land, Air and Water, reduce waste and noise generation,  reduce use of energy and greenhouse gas generation.

The company also tries to reuse and recycle the waste material. It monitor self performance and reports it in the public.

Restructure of Australian Operations:  For environment protection the company has announced on 22 August,2011, reducing its operations from 5.3 million tonnes per annum to 2.6 million tonnes per annum.

Environment management system :  The employees of the company play an important role in implementation of Environment Management System.They are in the bond of choosing to  do what is right and doing in the right way.

HSEC Policy : The company is committed to reduce and prevent the pollution and use the resources efficiently. The company is committed for the following objectives for environment protection :

–        Setting the objective which are measurable

–        Develop the standards

–        Implement the standards

–        Maintain the standards

–        Follow the industry standards

–        Identify the risk

–        Assess the risk

–        Consult the stakeholders

–        Provide training to the employees.

–

Environment Principles : The company has a set of principles which helps in implementation of environmental management system as follows:

Environment protection is every employee’s responsibility

All employees need to identify, correct and report the environmental issues.

All employees are required to undergo through environmental protection training.

Communication is very necessary and it should be open, honest and timely.

Environment Standards : The company has a set of 12 environmental standards which are in line with teh requirement of International Environment Management System Standard , ISO 14001:2004. These 12 standards cover training, leadership, risk, legal requirement, emergency management etc.

Company-Wide Procedures and Guidelines :The company also has  a procedure and guidelines to help the employees understand the environment protection

Operational Procedures : Each business unit has operational procedure which incorporates environmental protection.

Environmental training : Training is given the employees to create environmental awareness. It has formed a program of corporate environmental protection and awareness also it has  developed an Environmental e-learning package. In these two programs employees get great insights into the company’s environmental goals and the environmental issues. The company is aiming not to use the dam water because water is limited for the community living in nearby areas. To achieve this company is exploring new designs of the operations by which recycled water can also be used.

Thus the BlueScope Steel Company is continuously making efforts to improve the environmental effect of its operations. It is highly pollution driven company if does not take care of its environmental issues. It is investing a lot to improve its environmental efficiency. It is achieving its aim of environmental protection by Environmental management system. There is a continuous focus on providing training to the employees so that they can be aware of environmental issues. These are the employees who can protect the environment , because these are the people who take operational decisions and work on day to day basis. Whereas, the management is the one who stays far away from day to day activities but held responsible for any adverse impact of its activities on the environment, safety and health. The company has a set of nine principles and 12 standards which supports the employees working towards environmental protection. It is striving for resource efficiency and to protect the limited resources. It has closed its many operations to achieve the environmental protection. BlueScope protects air by zero emissions and continuous control on the pollutants.  Land management is another environmental protection aspect at BlueScope. It reduces waste of land and tries maximum utilisation of the land. It also drives the employees to achieve elimination or reduction of noise pollution. The company has been following the regulatory compliances of environment protection. Thus we can conclude that BlueScope has been a company which sets remarks for other companies in the same industries and for the companies in other industries which are highly exposed to environmental impact by their activities.

REFERNCES

Garrison, R.H & Brewer P.C. (2010)‘Managerial Accounting’ PhD, CPA (Miami University), Twelfth Edition (International).

Gouzee N. (1996), Implementation of the Rio Agreements: Indicators of Sustainable Development, Brussels, Working Paper 1-96

Environmental Protection Agency (1995), An introduction to environmental accounting as a

business management tool: key concepts and terms, Washington D.C.

Graaff J. de. (1986), Economics of crops in developing countries No. 1, The economics of coffee, Wageningen

Schmidheiny S. with the Business Council for Sustainable Development (1992), Changing course, a global business perspective on development and environment, London

http://www.bluescopesteel.com/responsibilities.html#

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