BKAM 3033 CONFIDENTIAL

TAKE-HOME EXAMINATION
FIRST SEMESTER 2020/2021 SESSION

COURSE CODE & NAME : BKAM 3033 SEMINAR IN MANAGEMENT ACCOUNTING

DATE : 31 JANUARY 2021 (SUNDAY)
TIME : 9.00 AM - 7.00 PM (10 HOURS)

INSTRUCTIONS :
1. This examination paper contains FIVE (5) questions in TWELVE (12) printed pages
excluding the cover page.
2. You have to answer ALL questions in the answer book provided.
3. Candidates are bound by the UUM’S RULES AND PROCEDURES ON ACADEMIC
FRAUD.

MATRIC NO : ____________________________________
( in words ) ( in numbers )

IDENTIFICATION CARD NO. :

LECTURER : ____________________________________________

GROUP : TABLE NO. :

DO NOT OPEN THIS EXAMINATION PAPER

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CONFIDENTIAL
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MATRIC NO: ______________________

QUESTION 1 (15 MARKS: 90 MINUTES)

“Over the last two decades, firms have had to respond to changes in the business environment
with new and better business management approaches. These new approaches are being
implemented by companies in the name of improving management quality, empowering
employees, reengineering business processes, continuous improvement, and other important
approaches. In today's competitive environment, the development and use of management
accounting information has an important role in the enterprise's success”.

Berisha, V., & Asllanaj, R. (2017). Historical Evolution of Managerial Accounting Theories
and Practice Development: Evidence from Kosovo. Journal of Economic & Management
Perspectives, 11(3), 287-303.

REQUIRED:

(a) Explain the evolution of management accounting practice from 1950s to 2000.

(8 Marks)

(b) Describe THREE (3) factors that influence the evolution of management accounting
practice around the world.
(3 Marks)

(c) Discuss TWO (2) impacts of technological advancement on the management accounting
practice.
(4 Marks)

QUESTION 2 (10 MARKS: 60 MINUTES)

IKEA is a multinational organization that designs and sells ready-to-assemble furniture,
kitchen appliances and home accessories. Founded in Sweden in 1943 by 17-year-old Ingvar
Kamprad, IKEA has been the world's largest furniture retailer until today.
The rise of furniture price in Sweden between 1935 – 1946 has trigger Mr Kamprad to take the
opportunity to form IKEA. In 1953, IKEA started its operation from a factory that was
converted into a warehouse. It sales grew from SKr 3 million to SKr 6 million in 1955. In 2020,
there were a total of 445 IKEA stores worldwide. In the financial year of 2019,
the global revenue generated by the IKEA Group amounted to 41.3 billion euros.
Lead by an extremely ambitious leader, IKEA hold onto a unique management philosophy
instill by the founder. Mr Kamprad main focus is not the profit alone but on improving the
quality of life of the people. He is a visionary leader who always look at problems as an
opportunity. He taught his employee that it is good to be different. Kamprad has built a very
close relationship with his employees. In their annual dinner, the employees went first to the
buffet, followed by the managers and Kamprad was among the last. The company operated
very informally. They stressed on simplicity and attention to details. In IKEA – “Complicated

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rules paralyze”. They organized “antibureaucrat week” that requires managers and employees
to work together in their showrooms and warehouses for at least a week in a year.
Compare to traditional wood furniture that were normally made from dark wood, IKEA offer
a line of simple contemporary design furniture. IKEA had over 20,000 products offering, of
which 12,000 types formed the core of simple, functional items that are common across their
stores worldwide. They also introduced self-service and cash and carry concept that is new to
furniture business model.
In its operation, IKEA’s designers and managers were always looking for less expensive, good
quality alternative materials for their products that lead to change from using teak wood to oak
and finally pinewood furniture. With regard to its products, IKEA aims to provide products
that cover the total home area, indoors as well as outdoors with loose as well as fixed home
furnishing that are affordable to the majority of people. Initially, the target market was the
young, low to middle income families. Currently, they also targeted the office segment as well
the older and richer people.
Additionally, to maximize its production, IKEA always search for new suppliers who have
access production capacity. By having reliable suppliers and utilized the suppliers’ access
capacity, IKEA was able to sustain its unique low price levels. Among all, the most noticeable
aspect of IKEA strategy was its successful retail operation despite of its worldwide locations.
Its unique characteristics of its stores such as having a supervised play area for children, in
stores café and fully equipped nursery and baby-changing facilities were proven successful.
Since 1970’s IKEA has expanded its retail outlets and warehouses to cover Austria, Belgium,
Canada, Denmark, France, Italy, Netherland, Norway, Malaysia, Singapore, Thailand, Kuwait,
Morocco, Egypt and many others. It has approximately 208,000 co-workers worldwide.
Having the expansion strategy in placed and implemented rapidly, the biggest concern of the
management was whether the expansion would make it difficult to retain the company’s
cultural values that was one of the back bone of its success. In order to maintain the cultural
bond, it is important for the headquarters to sustain the common cultural beliefs among the top
management of its branches. Thus, they try as much as possible to have the majority of their
management group are among Swedish or Danish in which somehow were questioned by some
employees in different countries. Another concern was the different of attitudes among workers
from different part of the world for instance the American. The founder’s cultural beliefs and
management style has dominated the way IKEA works and sustain its competitive advantages.
Some has questioned what will happen if the Mr Kamprad is no longer in the company?

REQUIRED:

(a) Explain THREE (3) strategies with related example used by IKEA to build and sustain
in the home furniture industry.
(6 Marks)

(b) Discuss TWO (2) challenges faced by IKEA to maintain the quality of its products and
services to customers due to the huge expansion to many geographical areas worldwide.

(4 Marks)

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QUESTION 3 (25 MARKS: 150 MINUTES)

A. AYIKI Malaysia (AYIKI) was founded in 1963 has come a long way since. From being
a tiny Malaysian business, selling through a mail-order catalogue, AYIKI has become
one of the most well-known home furnishing brands in the world. Today, there are
hundreds of AYIKI stores around the globe, and more are coming.

At AYIKI, every new employee is carefully selected to fit the profile of how AYIKI
wants them to be. The employees need to know how important the core values are for
AYIKI. The education and other credits are not the most important thing when they
search for a new employee. It is the personality, the type of person you are and the values
you have, which are more important. Hence, selection of employees is important and
AYIKI tries to employ people that already have the right values and beliefs to fit the
culture. This corporate culture includes entrepreneurial spirit and a momentum to do
things, as well as being active and to be able to take responsibility at work when the
opportunities are given.

The management also think that it is important for the applicants to have interest in
AYIKI, which is why they only show employment ads on their own website. They
believe that if the applicant has visited their own website to look for employment, they
have taken the first step to show interest in AYIKI.

To instill the feeling that everyone at AYIKI are members of the same group and are
working towards the same goals, they are dressed in the same way. Everyone have the
same AYIKI-clothes, even the top managers. The idea is that at AYIKI, everyone should
be alike and every employee should be able to make their own decisions even though the
important decisions are made by the managers. They also accentuate the importance of
the managers to work as close as possible to their subordinates. The office of the store is
designed as an open plan office where everyone sits beside each other in the same room.
The only closed offices are the ones used by the human resource (HR) department, due
to the confidential matters that may have to be discussed there.

New employees will undergo an induction training for three days. The first day of
training is when the new employee arrives to the store for the first time, receives his/her
working clothes and familiarise themselves at the store. The second day of training takes
place a month later and it covers trainings in safety, selling and customer relations. After
another month, the last day of the induction training will take place and it will be on the
history of AYIKI, corporate values and beliefs, personnel ideas and ergonomics. Further
training is provided depending on position and function. To be trained at AYIKI, it is
important to learn on a daily basis but AYIKI also provide supplementary trainings, such
as managerial (or shopkeeper) and leadership courses. Training is also provided when an
employee transfers to another department.

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To ensure all the essential information to control the organization reaches the right people
or departments, AYIKI has a meeting schedule. This schedule determines who should be
at which meeting, how often the meetings should be held and how long they ought to be.
Firstly, there is a meeting for the store management team which includes the store
manager, the departmental store manager and the eight function managers. Another
regular meeting is the commercial team meeting where people from sales, logistics,
communication and interior design participates. The purpose of these meetings is to
discuss how to increase the efficiency of sales and how to meet the customer needs the
best way possible. Furthermore, there are meetings at all the various functions and at all
the various departments. These four types of meetings enable information to be spread
throughout the whole organization in just two or three days. There are also other kinds
of meetings, such as daily meetings to make plans for the day, as well as meetings that
take place three times per year.

At all the levels of the store, policies and procedures are frequently used. For instance, if
a certain product is about to be replaced by a new one, there are guidelines on how it
ought to be done. The sales staff also uses work tasks checklists where each employee
marks the tasks they have performed. All procedures, policies and other guidelines used
are constantly being reviewed, if someone thinks they could be improved in some way.
Employees may suggest what they think could be done to improve things. However, the
basic idea is that everything should be in line with the vision and mission of AYIKI.

REQUIRED:

Based on the information about AYIKI above:

(a) Identify TWO (2) types of control that are employed by AYIKI.
(2 Marks)

(b) Describe FOUR (4) control mechanisms that are adopted by AYIKI.
(8 Marks)

(c) Suggest THREE (3) ways how the cultural control is able to control behavior.

(3 Marks)

B. AYIKI mainly uses two planning control systems; budgets and business plans. Budgets
are for one year ahead and business plans are for approximately three years ahead. The
process of preparing the business plan is concurrent with the process of setting the budget
targets.

A global business plan is made by AYIKI and this business plan is divided into national
business plans in each of the countries where AYIKI has its operations. The national

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business plans are further divided into smaller business plans for the stores. In this way
the management at higher levels guides the management at the lower levels and show
what areas they should focus attention to. For instance, the Service Offices (SOs) at each
and every country of operations can suggest that the stores should focus on areas such as
environmental knowledge, reaching the lowest price, decrease waiting time in the
counters or improve interior design inspiration.

It is up to the management team of the store to decide what guidelines apply to their store.
If the management team knows that they are already very good at showing interior design
inspiration, they might decide to focus more attention to another area such as decreasing
waiting time in the counters. If they decide to focus attention to decreasing waiting time
in the counters, a target figure is set for that purpose. For instance, if 75 % of the
customers are satisfied with the waiting time in the counters, they might set a target that
90 % of the customers shall be satisfied with the waiting time in the counters next year.

The process of working out the business plan takes about three months for the store, but
the business plan itself contains both short-term and long-term targets. After a team
consisting of all 35 managers at the store has decided what areas to focus attention to and
has set targets linked to those areas, the various functions and departments develop action
plans for how they can participate in achieving those targets.

Another important planning process is the personnel planning. As the budget is set, the
store starts planning the staff schedule for the year ahead. This is an important task since
the personnel cost is one of the largest costs of the store. There are three staffing planners
at the store that exclusively work with scheduling. The goal of the staffing planners is to
match customer needs to working hours, which is planned for each day. Even though this
is an important task it is also a difficult one since the company cannot expect the
employees to work three hours in the morning and then go back to work two hours in the
afternoon. To solve some of these issues they try to implement a cross-functional staff
system. For instance, a worker can start the day in the logistic function and end the day
selling in the living room department. By working at various departments and functions,
the employees can develop personal skills as well as in their professional role. This also
increases the cooperation and understanding for other departments and functions in the
store.

Budgets are a quite large management control system at AYIKI. The budgeting process
starts at the top of the organization, where the Malaysian Service Office (SO), with some
input from the global head office, first set a forecast for the Malaysian market. This
forecast looks like an ordinary income statement with total sales and costs divided into
different cost categories. For the sales and every different cost category there are an index
number which shows the difference between this year’s figures and last year’s figures.
This national forecast is communicated to the stores and works as a base for the forecasts
made at the store level.

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When the store gets the national forecast they make their own forecasts of sales and costs,
where costs are set as a percentage of sales. Even if the Malaysian SO think that personnel
cost will increase by 3 %, the store can have another forecast depending on their own
assumptions and background. During the setting of forecasts at the store, they work in
files that the SO have access to at any time which creates and raises communication and
discussions. The whole management team of the store, as well as the heads of the
different functions and departments, contributes in the process of setting forecasts of
sales and costs. The sales forecast is one of the most important ones and the sales manager
has a major role in this process, even though the store manager and the Business and
Operations (BNO) manager have the overall responsibility of the whole budget process
at the store.

During the process of setting the budget, different scenario plans are also made. These
scenario plans are used later on during the budget year if the store forecast higher or
lower sales than what was originally planned. Different scenario plans are made
depending on what the forecast will show, for instance -10 %, -5 %, +5% or +10% of
planned sales. The scenario plans then show how the store should handle costs such as
personnel cost, in terms of worked hours, through the rest of the years. An example is if
the forecast shows that sales will increase 5 % compared to original budget, the number
of worked hours will increase by approximately 3 %. The scenario plans are made
beforehand so there will be less discussions if the plans change.

AYIKI does not have a strict budget. If the sales forecasts made during the budget year
prove to be too far from originally planned figures, they will not continue to compare to
original budget. Instead they will compare to forecasts and the scenario plans. During the
budget year the store makes their own forecasts and they are the ones that decide whether
they want to increase their sales targets or not. If the sales targets are increased by many
Malaysian stores, the Malaysian SO might decide to increase the national sales target as
well. In the budget set up, sales have been forecasted week by week and, during the
budget year, when a certain week is approaching, forecasts for each day of that week and
for every single department are made.

REQUIRED:

Based on the information about AYIKI above:

(a) Explain the method of budget setting used by AYIKI. (2 Marks)

(b) Examine THREE (3) advantages of adopting the method of budget setting used by
AYIKI as you have identified in (a) above.
(6 Marks)

(c) Assess the management control system (MCS) applied in AYIKI in terms of
Kenneth Merchant’s perspective of management control system.
(4 Marks)

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QUESTION 4 (25 MARKS: 150 MINUTES)

A. AYIKI is an organization that uses a lot of financial measures, mainly based on sales and
productivity. Reports are made weekly by the Service Offices (SO) and are available as
a tool for follow-up by the stores. Hence, the measurements are mainly made by the SO
and the only numbers that the managers at the store measures themselves are sales on a
daily basis. The reports are used by the store manager and the sales manager as well as
all interested employees. Information about yesterday’s sales and today’s forecasts are
called out in the store every morning. A lot of comparison is made to last year’s figures,
as well as the budget figures, through index numbers. A table of the financial and non-
financial measures has been compiled and is shown below.

Performance measures
Financial Non-financial Ratios
Sales (daily, weekly, Customer based Sales/working hours.
monthly)
- by department
Costs Customer Satisfaction Index Sales/visitor
(CSI) from customer survey
Gross margin Number of visitors Sales/customer
Value of damaged Number of customers Customers/worked hour in
products the counters.
Value of recovered Market based Sales/m3 handled.
products
Market survey Value of damaged
products/value of recovered
products.
Personnel based
Employee survey
Productivity based
Working hours
- by department
Extra internal handling
Cubic metre (m3) handled
Supply (stock) based
Stock value
Number of articles in store
Number of articles that passed
expiration date

Fig. 1: Performance measures used by AYIKI

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Weekly sales are reported to the store from the SO, which is the overall measure of
performance. Weekly sales are also compared among various stores within Sweden and
AYIKI stores often compares and benchmarks to certain other stores that are quite alike.
It is almost like an internal competition of which store obtains highest sales. The outcome
of weekly sales is compared to last year’s figures and a percentage difference is inferred
by the index numbers.

The numbers of visitors are also measured on a weekly basis, as well as the number of
paying visitors, which are called customers. The weekly sales are also divided by the
number of visitors and customers to obtain a ratio of how much is purchased per visitor
and customer (average receipt). Weekly sales are also reported by each department so
that the performance of every department can be deduced. Numbers on weekly sales,
daily sales and sales by department are available to every employee at the store.

Other important figures are the productivity measures, for instance sales per worked hour.
Every department is measured separately and the outcome is compared to the
forecast/budget as well as last year’s figures. Another productivity measure is the
productivity in the counters, where numbers of customers are counted and divided by
worked hours. The logistic function gets measured on productivity by the measures
managed cubic meters per week and numbers of extra handling per week. The measure
numbers of extra handling needs further explanation. The goal is for the arriving products
to go straight out to the store to be exposed to customers right away, but sometimes there
is not enough space because all remaining units of that product are not yet sold. If this is
the case, the employees have to place the arriving products in the storeroom which means
there will be an extra activity in the logistic process. This extra activity is what is
measured by the numbers of extra handling.

The logistic function also measures stock value, numbers of articles in store and numbers
of articles in store that have passed expiration selling date. On national level, a date is set
when a certain product should be sold out. If there are a lot of units left in stock and they
will not be sold up to the set expiration date, with the normal rate of sales of that article,
the store activates them in various ways to try to sell them in time. However, sometimes
they will not be sold before expiration date even if they are activated. This is what the
last measure mentioned above shows.

Another measurement system they use at AYIKI is the so called “Recovery Index”. This
is where the damaged products that cannot be sold, or at least not to the normal price, are
recognized. It is important for the store to control these costs since they make up a large
part of the total cost. The products are divided into different groups depending on the
reason why they cannot be sold at the normal price. For instance, some goods may have
been damaged during transport, some by the store’s employees or customers, some are
repurchased and some have been used for display at the store. As far as possible, the store
tries to sell these products by first recovering them to the original state and replacing
them back in stock or selling them at a reduced price. The store tries to lower the number

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of products damaged and when products are damaged they try to “recover” as many as
possible. This is not only done to be able to sell more, but also from an environmental
perspective; a kind of recycling.

Apart from the sales and productivity measures, AYIKI also has more non-financial
measurements systems such as market- customer- and employee surveys. These surveys
are standardized yearly surveys made by external companies and the obtained data are
compared to other stores of AYIKI as well as the results of last year’s survey. The
customer survey, called customer satisfaction index (CSI), is used to identify the largest
strengths and weaknesses of the store in the view of the customers. By analyzing the
result of the CSI, the store can compare their result year by year to be able to recognize
improvements or deterioration. The CSI is often used to the setting of targets in the
business plan.

Aside from already mentioned figures, the department managers (which are called
Shopkeepers) use another statistics report made in the headquarters in Kuala Lumpur.
This report shows figures like gross margin, product mix, top 30 and top 15 articles sold
at different departments. It enables the Shopkeepers to compare their result to last year’s
result as well as the same departments at other stores.

The store’s sales targets are communicated to the sales staff and all employees shall know
these and the store’s performance. The communication of targets and performance is
made through different kinds of channels. Firstly, as mentioned before, every morning a
loudspeaker announcement goes out to the employees before the store opens. For
instance, the loudspeaker announcements include information on yesterday’s sales and
what index it corresponds to compared to last year. This informs the personnel about how
they are doing and what to focus attention to that working day. It is also a way to
encourage the staff and create an internal competition where the goal is to reach the
targets and perform better than last year. Secondly, department meetings are held, where
important information discussed at the management team’s meetings is provided. Some
of the largest departments do not have department meetings, but instead they inform the
sales staff by sending weekly information e- mails. Furthermore, a weekly magazine is
distributed, where all important information is provided.

REQUIRED:

(a) Analyse the performance measurement used in AYIKI.

(14 Marks)

(b) Compare and contrast the performance measurement used in AYIKI as analysed in
(a) above against the four perspectives of Kaplan and Norton’s Balanced
Scorecard.
(4 Marks)

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B. AYIKI uses different types of reward systems in their stores around the world, but in the
future, the goal is to use a single system to make it fairer and easier to evaluate and
administer. At the store level of AYIKI, they use a premium salary system where the size
of the premium salary is determined by three parameters; sales, costs and customer
satisfaction. Depending on how the store has performed on these parameters, a certain
amount is paid for every hour worked by each employee the past year. The amount paid
is not dependent on what level of the store an employee works; rather, an equal amount
is paid for the same number of hours. They do not use any individual monetary rewards,
only group rewards. The total yearly premium salary does not make up a large percentage
of the employees’ income, at most about a half month’s salary. The reward system looks
the same at all stores in Malaysia but it is not used in the same way. Some of the stores
consider this system to be a very important motivational factor and highlights it to the
employees, whilst in other stores this system is not considered to be a great motivational
factor.

In addition to the usual payroll system, AYIKI tries to work as much as possible with
feedback and activities to show appreciation. Sometimes the employees get smaller
things, such as products from the store or cake at the staff canteen. The great possibilities
of development and promotion to another position and/or to another store, are an
important incitement. The idea is that all employees should make individual, self-made
plans for what they want to achieve at AYIKI, since there is no predetermined plan for
how a career at AYIKI could look like. As much as possible, AYIKI tries to use internal
recruitment to be able to satisfy and encourage their employees and assure that the culture
stays within the organization. The employees are encouraged to apply for new posts or
placements within the AYIKI group.

REQUIRED:

Provide your opinion on the incentives and reward systems used in AYIKI.

(7 Marks)

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QUESTION 5 (25 MARKS: 150 MINUTES)

D’Sintok is a restaurant based in Sintok. It was formed in 1994 by Mr and Mrs Ramli. The
growing development of Sintok due to the existence of a University in the area is one of the
catalyst for D’Sintok success. It offers various Thai based recipe such as tomyam, pattaya fried
rice and thai soups. Over the years, D’Sintok has successfully grow. In year 2020, D’Sintok
has 15 branches around Malaysia consist of approximately 230 employees.

As it grows bigger, D’Sintok has to sustain its brand name in the industry. In its operation,
D’Sintok pays great attention to customers’ feedback as they believe that D’Sintok is nothing
without customers. They have also identified varieties of menu, fast delivery of order, hygiene
and cleanliness of the restaurant and frontline services are the critical success factors of a
restaurant. D’Sintok was well-known for its tasty foods and excellent services for many years.

D’Sintok used functional based organizational structure. Every branches were managed by
trusted branch managers who the majority were from the family members. The branch
managers hold the most power in making operational decision at the branch level which
sometimes create dissatisfaction among the lower level line staffs. Basically, all D’Sintok
branches follow the same standard operating procedures outlined by the main branch that
become the headquarters for other branches. In the larger branches, the branch managers were
assisted by an assistant branch manager and a few administrative staffs depending on the size
of operation in that particular branch. Other than that, D’Sintok line of staff consist of the chefs
and the waiters and waitress.

In D’Sintok, the branch managers, the assistance and chefs were given basic salary plus
medical benefit in a form of medical insurance of RM150 per month. They were also entitled
for annual salary increment of RM120 per year. Compared to other restaurants, this pay system
provide a better sense of security among employees in similar level in the industry. The
waiter/waitress were also being given a basic daily salary plus a piece-rate pay – i.e bringing a
plate of food to customers. 5% of each plate of food serve will be allocated to an account. At
the end of a month, the amount collected will be distributed equally among the waiter/waitress.
This practice has boost the motivation among the employees. However, being evaluated and
rewarded based on team performance provide a loop hole for some employees to take
advantage on others. Employees who work harder feel it is unfair to share the extra pay with
those who are not performing.

Compared to in the initial stage of D’Sintok development, the waiter/ waitress that they hired
previously were normally youngsters who have just finished schooling and were searching for
income. They were normally worked on part-time basis. Therefore, many of them do not have
the right skills to serve the customers. In addition, they were only using D’Sintok as a platform
to gain some money and experience. Majority do not plan to work for long as they have
different goals and priorities while working in D’Sintok. They have very little concern towards
D’Sintok performance. Besides these, D’Sintok practices a monthly recognition performance
award among the branches. Branches that contribute the highest sales will be award with
certificates of “Top Performer of the Month” that motivate competition among branches.

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Managing D’Sintok as a small restaurant is much easier previously. Mr and Mrs Ramli have
given an autonomy to their branch managers and treated them like their business partners. They
will only interfere when necessary. They let the branch managers to decide on how they manage
daily and personnel issue in their branches. As the restaurant grow and expand, maintaining
excellent performance of its employees is challenging. D’Sintok critical success factors were
highly dependent on its employees. After many years, Mr and Mrs Ramli received a lot of
complaints and frustrations among the administrative staffs and chefs regarding their monetary
benefits as they saw that the waiters and waitress were receiving more income from the piece-
rate pay system. The relationship between the managers and the waiters/waitress also loose.

REQUIRED:

(a) Explain THREE (3) motivational factors that has been used by D’Sintok to motivate its
employees.
(6 Marks)

(b) Suggest THREE (3) ways to improve employees’ motivation at D’Sintok based on
Maslow’s Motivational Theory.
(6 Marks)

(c) Explain THREE (3) sources of conflict in D’Sintok.

(6 Marks)

(d) Suggest THREE (3) ways to manage conflict in D’Sintok.

(6 Marks)

(e) Determine the types of leadership style practiced by Mr and Mrs Ramli.
(1 Marks)

END OF QUESTIONS

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