Managerial Accounting Assignment - Case Study

Managerial Accounting

Table of Contents
Managerial Accounting....................................................................................................................1
INTRODUCTION ..........................................................................................................................2
TASK 1............................................................................................................................................2
1. Different types of cost.............................................................................................................2
2. The relevant and irrelevant information to make the decision of purchase the appliances....3
3. Cost to the couple to launder the cloths..................................................................................4
4. Calculation for hiring the employees for child care................................................................5
5. Calculation for accommodation and hiring new employees...................................................6
TASK 2 ...........................................................................................................................................7
1. Components of management accounting system in each of two companies and discuss their
decisions is to be made effectively and efficiently.....................................................................7
2. The contribution of management accounting in innovation process......................................8
3. Outcome or lessons from the study of article..........................................................................9
CONCLUSION..............................................................................................................................10
REFERENCE ................................................................................................................................11

INTRODUCTION
Managerial accounting is the process of measuring, identifying, interpreting, analysing
and communicating the useful information to the higher authority or managers to make the
decision and set the goal for the organisation. It is also known as cost accounting. The report
highlights the case study and the practical study of uses of accounting information in real life
companies. The case study is based on a married couple Douglas and Pamela who decide to start
a business of day child care in their house and they named their business Nanna's house. This
report focus on the different types of cost like variable cost, fixed cost, direct cost, indirect cost,
opportunity cost etc. and the cost which are included in the case study. It explains the various
kind of information which are relevant for the decision making of purchase of appliances and
also the information which are not related to the purchase decision and they can be avoidable. It
also explains the various cost for launder the clothes through different way. It highlights the cost
of hiring the employee and how it can be benefited for them and how much. It helps to
understand the cost of expanding their business and to understand that should they have to accept
the 14 children or not. It explains the cost of accommodation, rent, and increase in energy. It
helps to analyse the various cost on including the no. of children and to make the decision that
they have to rent the house for 14 children or they have to operate their business at home with 9
children.
The second part of the study explains the component of management accounting and their role in
making decision efficient and effective.
TASK 1
1. Different types of cost
There are different types of cost in the accounting system. The types of cost are direct
cost, indirect cost, fixed cost, variable cost, opportunity cost, sunk cost, controllable cost etc. The
estimation of cost helps to prepare budget for the organisation and manage the activities
according to the budget. In the case study of Douglas and Pamela the cost involve are:
Fixed cost : Fixed cost does not vary with change in number of goods and services (Sun and
et.al., 2015). For example, the cost of machinery, house, building are fixed in nature. Fixed cost
are less controllable in compare to the variable cost.

In the case study of Douglas and Pamela the fixed cost are:
Fixed cost Amount
Insurance $3840
Cost of home and its renovation $79500
The insurance and cost of home are fixed in nature because it does not increase with increase in
no. of children in their child care.
Variable cost: Variable cost are not fixed in nature. It varies with change in number of
products. Variable cost increase with increase in production or decrease with decrease in
production. The examples of variable cost are packaging cost, light and water bill, food expenses
etc (ambaud, Richard, 2015).
In these case study the variable costs are licensed fee, meals and snack cost, fee charges
for the child care etc. the licensed fee for 6 children is $225 but it varies with increase in no. of
children from 6 to 7 or 8.
Direct cost: Direct cost are completely attached with the production of goods and
services. We cannot separate the direct cost from the production. It includes the manufacturing
supplies, commissions, wages, power and water supplies, fuel etc. Direct costs are directly
connected with production activities.
In the case study of Douglas and Pamela the direct costs are utility cost. Utility cost
include the power and water supply cost. Utility cost is directly connected with the household
expense to care the children. The laundry services are also included in direct cost.
2. The relevant and irrelevant information to make the decision of purchase the appliances
The relevant information to make the decision of purchase the appliances
Relevant information is the information which helps to make the efficient decision for
purchase any items (Tonchia, 2018). These information helps us to make an estimation of the
total cost and the future outcome of the purchase of item. In these case study, the cost of washer
and dryer, cost of additional accessories for installation, delivery cost are relevant for making the
decision to purchase the appliances of dryer and washer. These are relevant information because
it helps to make the appropriate decision.