Case Study of Upm-Kymmene

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detailed information about the firm’s costs drivers.

Based on the figures of customers A, B and C provided in the Appendix, VC only allocates direct materials and freight costs to each customer, resulting in highest outcomes of customer profitability among three ways of analysis. However, when FC system was implied to those customers, the first profitability results were decreased significantly since FC covers direct costs and overhead costs. ABC assigns all costs of related activities and showed that the manufacturing cost per tonne, order handling, invoicing and transports are higher in B and C, than A. Consequently, it turned B and C to unprofitable customers.

Obviously, it can be argued that customers B and C should not be left out if they are loyal customers and just that the company may need to alter the level of resources, supporting these customers. However, investing in resources to support the unprofitable customers decreases the company’s profitable opportunities and it can lead to losing profit with every transaction in the long-run (Blocher et.al., 2012, p.143). Managers should consider the customer B and C’s growth potential, reactions and future sales references, before taking decisions (Blocher et.al., 2012, p.152).

Questions IV

The management accountants’ roles are changing from a pure “bean counting” role towards an analyst role. This change is crucial for Wisapaper in their pursuit of implementing new management and costing models. The management accountants will work as an analytic pivotal within the firm, gathering and supplying information from both internal and external sources. In order to take correct analytical decisions, they need to have the profound understanding of all aspects of the business; its customers; the markets they are working in; and future prospect markets and customers. Supplying the management with accurately processed information about key financial performance figures, which can be benchmarked, and nonfinancial measures; trend predictions from customers’ and competitors’ behaviours, all in real-time. This is, as one can understand, highly demanding but equally important for Wisapaper to stay ahead of the competition on the global market.

To establish the management accountants as “true business partners”, it is important that the entire organisation understand why this change is needed in the first place. There will always be people in the company that will oppose changes, no matter how big or small they are, but we firmly suggest that transparency and communication from the management and the accountants is a vital first step. It is also crucial that everyone in the organisation feel that they are involved and contribute to the change process, especially the operational managers and their employees in the bottom in the hierarchy. Once this change is anchored within the organisation, the management accountants need to be highly skilful in their new analytical role, as we discussed above. However, even though the accountants must be unbiased, they need to appear understanding towards the different departments they are gathering information from, so they can rely on that the information is adequate and not embellished. Therefore, we emphasise on the importance of building good relationships between the accountants and the rest of the organisation. It is not only the accountants’ that need to put in an effort, but the rest of the organisation also needs to be open and provide support and educate the accountants, so that they can understand and correctly analyse the data given to them.

Reference list

Partanen, V., Järvenpää, M., Tuomela, T-S., (n.d.). Wisapaper: the role of management accounting in managing customer relationships.

Blocher, E., Stout, D. E. & Juras, P. (2012). Cost Management: A Strategic Emphasis., New York; London: McGraw-Hill Higher Education ; McGraw-Hill