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UNIVERSITY OF PORTSMOUTH UOP BAAFM Intake 15 P30896 Management Accounting (MA) MA Main Assignment Submission Date: 29 April 2020 Individual Assignment (15%) The following assignment contains one case study. Please answer all questions. FIT is a small, mature and stable, privately owned health services company with 26 employees serving a limited number of large clients. FIT's accounts department comprise one part-qualified accountant who has a heavy workload. A fixed budget is prepared using spreadsheets. FIT's two sales managers earn an annual salary of $150,000 and an individual bonus based on a two-tier (a lower and an upper level of fee income) sales targets set at the beginning of the year. For the current year end, for example, each sales manager was given a lower target of securing $1.5m of fee income each and is rewarded with an individual bonus of 20% of salary. If the further $1.5m of fee income is secured, their bonus would increase by 5% to the upper target of 25%. To-date, all the managers achieved only the lower target, and this is recurrent. Work is secured from several major clients early in the year to reach the $1.5m target before the year end and little effort is made to secure extra fees for FIT, as the second target was deemed too idealistic. FIT is thus seriously considering whether its current budgeting process could be improved, and the bonus scheme changed. FIT proposes to use a monthly rolling budget instead, to make the budgeting process more relevant and timelier, encouraging managers to focus on the future to prevent the meeting of the targets too early, since the targets would be set for monthly instead of annual performance. Required (a) Explain monthly rolling budget and how it would operate at FIT. (7 marks) (b) Discuss the issues of introducing monthly rolling budgets together with a new bonus scheme, such as the one outlined above. (10 marks) (c) Discuss the issues with the current bonus scheme. Describe and justify an alternative, more effective bonus scheme, in lieu of rolling budgets. (7 marks) (d) Discuss the risk of using the company accountant's own spreadsheets for budgeting. (6 marks) NOTE: Please remember to provide references using the APA Referencing Standard. Additional 5 marks will be allocated for proper presentation (i.e., structure, clarity, use of grammar, correct spelling and referencing). Ensure all sections are numbered. (Total = 35 marks) Page 1 of 1