Essays on Management Accounting Assignment

Download full paperFile format: .doc, available for editing

Debenhams plcIntroductionDebenhams plc was founded in 1778 and has since been in continuous operation (Debenhams, 2011). The company retails in clothing and other goods. The line product of the company includes women’s wear, menswear, children’s wear, home and, health and beauty products. The firm has over 150 stores located in England (Debenhams, 2011). International stores of the company are mainly franchised. The company was acquired by Burton Group in the late 1980s at a cost of about US $900 million. However, the firm regained its independence in 1998 when it “demerged” from the Burton group, which changed its name to Arcadia Group at a cost of £65 million.

The group opened its largest store at the new Bull Ring shopping centre in Birmingham in 2003. The firm was again acquired by a private consortium in late 2003 (Debenhams, 2011). The consortium comprised of CVC Capital Partners, Merril Lynch Global Private Equity, Texas Pacific Group and management. The firm expanded rapidly in 1998 and 1999 by opening 17 new stores and modernizing 10 of its existing stores (Debenhams, 2011). By the end of 1998, which was the first year after demerging, the company saw its profits and revenues rise.

The company was listed again on the London stock exchange in 2006. The firm has a unique mix of exclusive own brands, which includes Designers at Debenhams and a third party brands. These help the firm to differentiate itself from its competitors. The firm is primarily involved in the selling of fashion clothing and accessories in addition to cosmetics (Debenhams, 2011). The firm has both in store and in online stores for selling its products.

The online retailing and departmental store serves over 3 million customers per month. Online shopping is so popular because thousands of products are available in every department, has great savings and is regularly updated, the customers are able to shop at the comfort of their own home, goods are delivered directly and customers are able to try on Debenhams Designer pieces at the comfort of their own home. The firm was awarded in 2010 for having the best website shopping at the Comfort Prima High Street Fashion Awards 2010.

The firm as part of corporate responsibilities supports charitable causes such as breast cancer campaigns, National Society for the prevention of Cruelty to Children, Retail Trust, Children 1ST and the Marine Conservation Society. As part of marketing its products the firm holds accounts with social networks such as facebook, twitter, You Tube, foursquare, polyvore, and flickr (Debenhams, 2011). The top performing store of the firm is the debenhams. com. The firm earned £151.0 million in headline profit before tax in 2010, which was a 20.6% increase over the prior year.

The firm gained market share in both menswear and children’s wear by 5.1% and 3.9% respectively in 2010. In the 2010, direct sales of the firm grew by 88.4% to £103.8 million (Debenhams, 2011). This was necessitated by the strategy of integrating the store business with the online business. Costing method and non costing management accounting techniquesMarginal costingThis is an accounting system where variable costs are charged to cost units and the fixed costs of the period are written off in full against the aggregate contribution. Contribution in this case refers to the difference between sales and marginal costs (Debenhams, 2011).

The marginal cost is the sum totals of the variable cost direct labour, direct material, direct expense and variable overheads. It is used in decision-making process (Gazely and Lambert, 2006). Under the theory of marginal costing, an increase in volume of output is accompanied by reduction in cost per unit while reduction in output results in an increase in the cost per unit (Coombs, Hobbs, and Jenkins, 2005). In the case of the online shopping at Debenhams plc, the cost of hosting a website are relatively constant and therefore when a customers order several products at ago the cost per unit to the firm is reduced since the cost of delivery will remain constant and so is the cost of running the website.

However, if online orders reduce drastically, then marginal costing will increase resulting in reduced returns. This is also true to other departmental stores. In case many customers are served by the employees of the Debenhams plc in a day, the marginal cost per unit reduce while the sales increase.

This results in increased returns on investment as compared to when few customers are served by employees of the firm in a day. Under the theory of marginal costing when there is an increase in output more than one, marginal cost per unit is the total increase in cost divided by the total increase in output.

Download full paperFile format: .doc, available for editing
Contact Us