Area of Responsibility Accounting

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Area of Responsibility Accounting
A very important aim consistently stressed out by the executive management
in Bathroom Supplies and Design Limited encompasses effectiveness of divisions in
reaching corporate objectives as well as efficiency in the organization’s operations.
Being an importer and retailer of bathrooms, tiles and sanitary ware, which is a very
competitive market, it is central that the aforesaid factors are consistently applied in
order to ensure the sound running of the company. In this respect responsibility
accounting is exercised in all the divisions of the company, which comprise,
Marketing Department, Purchasing Division, Project Department, Stores Department
and Administration Section.
Purchasing Division
The two main objectives of the Purchasing Division entail efficiency and
quality. It is important that this section purchases bathrooms, tiles and sanitary ware
at good prices to enhance a sound profit margin. However, it is also important that
the merchandise acquired is of a good quality to ensure that the image of the company
does not suffer from low-quality products. Responsibility accounting rests upon the
aforesaid two aims. In this respect the following standards are set:
Efficiency in Prices – a standard price is set for each type of
bathroom, tiles and sanitary ware. Such attainable standard is revised on a
period basis in order to sustain its applicability. Variance analyses are
conducted at the end of each month in order to evaluate the performance of
the purchasing department.
Quality of Materials Acquired – the setting of a standard for
quality is much more complex than the previous one. Such attainable 
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standard is set by looking at the number of complaints put forward by
customers on the product quality. Further more, a quality inspection exercise
is carried out on the goods once delivered in stores by a specialized staff.
Even though such activity entails considerable expenditure, management
believes that it is imperative that the image of the organization is safeguarded,
because it may have a detrimental effect on the firm’s future...
…References:
Drury C. (1996). Management and Cost Accounting. Fourth Edition. New
York: International Thomson Business Press.
Lucey T. (2003). Management Accounting. Fifth Edition. Great Britain:
Biddles Limited.