Vitality Health Enterprises Incorporated Management Accounting Case Study

Introduction

This paper is a management accounting case study on Vitality Health Enterprises Incorporated. Management accounting refers to the practice of examining business expenditures and the tasks accomplished within a particular period to prepare a financial statement, account or report which will aid the management of the organization when it comes to making decisions as to the proper strategy to achieve their goals. Management accounting can just be explained as the act of translating financial data within an organization to suitable information for use by the management in planning or strategizing it is also known as cost accounting.

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Identification of the Main Issues

It is noted that the employees at Vitality Health Enterprises Incorporated tend to be paid a higher salary than their competitors' employees. It has been calculated that the wages of vitality health Enterprises employees tends to be about seven to eight percent (7% to 8%) higher than the salaries of employees of their competitors. However, the employees at Vitality Health Enterprises do not receive financial incentives such as bonuses when work has been well done, and the organization has had an increase in profits. The employees at Vitality Health Enterprises are also not exposed to or offered alternative forms of remuneration such as living quarters or a company car as compared to their competitors this is because the payment scheme utilized at Vitality Health Enterprises is modeled around a flat salary.

Analysis and Evaluation of Issues

Concerning the main issue identified above that is of employees at Vitality Health Enterprises being rewarded at a percentage of seven to eight percent higher than their competitors and not being offered any alternative forms of compensation several issues arise some of which are benefits while others are unbeneficial to the organization.

One of the benefits of Vitality Health Enterprises incorporated using a payment scheme modeled around a flat salary is that of having a low turnover by having a heightened pay. The problem with this system is that it fixated on the stability of having a flat salary payment scheme and did not regard bonuses when performance is, and profits are high, and neither does it regard other alternative forms of compensation. What this means is that when an employee sticks with the company for an extended period, they are assured of a high salary regardless of their performance as an employee and also irrespective of the overall performance of the organization as a whole.

It can thus be seen that the payment scheme at Vitality Health Enterprises makes it difficult to motivate employees to perform better since it offers no reward or incentive to the top performers. Thus the flat salary payment scheme makes it challenging to recognize and reward top performers and also makes it hard to identify and terminate low performers. All this is because all the employees will be tempted to have an indifferent attitude towards the work because why should they work so hard to be the best if the salary is guaranteed to be paid equally to every employee including those who do not go the extra mile. It can thus be seen that flat salary payment scheme may end up being unbeneficial to the organization and can lead to the organization performing at a standard that is lower than what it is capable of thus making fewer profits.

Recommendations on Effective Solutions

The best step that the management at Vitality Health Enterprises Incorporated can take is to do away with the flat salary payment scheme and introduce a more competitive system of remuneration which includes financial incentives such as bonuses to top performers and other alternative means of payment. Such a step will motivate the employees to work harder thus increasing the output and profits of the organization in addition to enabling the organization to reward top performers and therefore root out the low performers.