Note: Can you help me solving this case study which is of 9 marks, its related to ACCT3001 Accounting, Behaviour and Control .

Jordan Fit is a leading shoe retailer in the UK. During the last two years Jordan Fit has experienced considerable financial pressures: its performance has been declining, along with its share price. The accountants of the company have been ordered by their executives to review various aspects of their business and recommend some fundamental changes to improve the company's financial performance.

One area of the business that has become very costly is holding stocks of saleable products in the stores. Storage and handling of stock is identified as an expensive operation for Jordan Fit. The accountants want this aspect of the business to be better controlled than it has been to date.

As a new and more immediate mechanism for control within the business, the accountants decide to introduce a charge into the profit statements of individual stores. Every store has its own profit statement which broadly speaking records revenues and costs attributable to that store. These are internal management reports, compiled by the management accountants, and constituting an important part of how executive and divisional managers assess store performance over time. Importantly, the senior managers in each store, including the store manager, have a significant proportion of their salary and annual bonus based on a percentage of their store's net profit figure. The new charge is to be based on the amount of stocks being held on average, over a year, by a particular store. The higher the average stocks held, the higher the charge in a store's profit statement and, consequently, the lower the net profit. All other employees of a store (retail assistants, administrators and storeroom staff) also receive an annual 'Christmas bonus' that is calculated in relation to their store's net profitability.

The accountants will implement the changes to stores' reporting within two months, in time for the start of the new financial year. The changes, approved recently by majority vote at executive level, will be 'sold' to employees mostly via memos and email on the basis that the organization is facing a serious crisis, costs must be cut drastically, and that the introduction of a charge for holding stocks in stores was a sensible way to improve control over this particular element of business costs. No further consultation was planned, and the accountants intended to run brief training courses for their store managers, at which the technicalities of calculating the new charges for stock-holding (but not much else) would be explained.

Required:

You are a senior management accountant in Jordan Fit, although you are not actually leading this particular change programme. You have serious reservations about what is being proposed. Prepare a memo to the CFO of Jordan Fit explaining the reasons why you have serious reservations about the proposed changes, and describe alternative options (not just accounting related) that might be considered during this extremely testing time for the organization.