Management Accounting-Performance Evaluation: Ian Herbert Explains Why Exam Questions Focus Mainly on Manufacturing When Most People-In the UK at Least-Now Work in the Service Sector

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As a CIMA Learning assessor who visits colleges, I'm often asked by students why the scenarios in exam questions are so biased towards the manufacturing sector. A quick show of hands usually confirms that most students see themselves as working for an organisation that provides services rather than products. I'm also asked why the syllabus (including the new one starting 2010) includes so many techniques--standard costing, throughput accounting, just-in-time management etc--that people normally associate only with factories. In fact, there are some good reasons for this.


The first is that the world actually manufactures more goods than it ever has done. If you need convincing, simply look in your domestic rubbish or recycling bin before it's collected and consider the amount of packaging in there resulting from your consumption of physical goods. Someone somewhere in the world is still making an awful lot of products. CIMA is a global qualification that needs to be relevant in all of its markets. And, because factories are largely automated today, there is a greater premium on getting the cost structure right before production even starts and then on controlling costs in detail thereafter.

The second reason concerns where you draw the distinction between manufacturing and service provision. The traditional approach of vertical integration--eg, starting with a tree and making a piece of furniture--meant that nearly everyone used to work for a manufacturer. Today, most of the pre- and post-production processes, such as design, purchasing, marketing, distribution, maintenance and administration, might typically be performed by third-party contractors who are categorised as service providers rather than manufacturers. Michael Porter's value chain model has helped people to appreciate how production processes can be viewed as a linear sequence of operations supported by functional activities such as HR and accounting. This separation of activities is increased by the growing trend for organisations to outsource service activities--although specialist service providers are becoming "white-collar factories", with a manufacturing-style division of labour and a workflow process approach. …