Target Costing in Food Manufacturing Industry

EXAMINATION PAPER
Faculty of Business and Law
Trimester 3 2020 Examination
Unit Code: IPA004
Unit Name: STRATEGIC MANAGEMENT ACCOUTING
Anticipated writing time: TWO (2) HOURS
Maximum exam time: You must submit your exam response within THREE (3) hours. The
additional hour includes 15 minutes reading time, and time to
download and save the exam paper and upload the completed paper
into CloudDeakin
Special instructions for candidates:
 This examination is OPEN BOOK.
 Calculators are ALLOWED.
 This examination constitutes 60% of your assessment in this unit.
 This examination comprises 5 questions. You are required to answer ALL 5 questions.
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 The breakdown of marks in this exam is:
Question Marks Question Marks
1 20 4 14
2 5 5 12
3 9
Total Available Marks 6
0
 All candidates MUST complete this section.
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Type your student ID number here:
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IPA004 Strategic Management Accounting T3 2020 Examination
Question 1 [10 + 5 + 5 = 20 marks]
Background
In April 2020 Virgin Australia went into voluntary administration owing almost A$7billion. After a
lengthy process, the Administrator, Deloitte, sold the business to Bain Capital for around $A3.5
billion. As a result, the previous shareholders lost their entire investment.
Required:
Carefully read the following article which recently appeared in the financial press and answer
questions 1(a), 1(b) and 1(c) at the end of the article:
New Virgin CEO Jayne Hrdlicka unveils new plan for airline.
Virgin Australia’s new chief executive, Jayne Hrdlicka, has unveiled her plans to resurrect
the airline from its financial woes, sparked by the coronavirus lockdown.
In a statement on Wednesday morning, Ms Hrdlicka said the new Virgin would target the
mid-market of the aviation industry and would cater to price-conscious travellers wanting a
premium experience.
“Australia already has a low-cost carrier and a traditional full-service airline, and we won’t
be either,” she said, in reference to Jetstar and Qantas, respectively.
“Virgin Australia will be a mid-market carrier appealing to customers who are after a great
value airfare and better service”.
Ms Hrdlicka replaces Paul Scurrah as CEO who announced his resignation in October.
The former boss of rival airline Jetstar between 2012 and 2017 said the Adelaide COVID-19
cluster outbreaks highlighted the ongoing uncertainty plaguing the travel market, but
demand for flights was improving.
“As we have seen with the recent issues with South Australia, the travel market remains
uncertain. We are however seeing some positive signs of recovery,” she said.
“We expect continued volatility, but as demand recovers, we’ll achieve a market share
consistent with our pre-COVID position and continue to invest in, and grow, the fleet in line
with increases in demand”.
The airline will retain its regional flight business and expects to retain one-third of the
Australian aviation market, which it held before the health crisis.
No changes will be made to its Velocity frequent flyer program and will be the only domestic
airline to offer three different seating classes.
Question 1(a) [10 marks]
Using the PESTEL model, prepare a brief analysis of the external issues currently
impacting the domestic aviation industry in Australia. You should pay particular attention as
to how the Covid-19 pandemic has impacted the sector and identify 2 specific issues that
the new CEO will have to deal with.
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IPA004 Strategic Management Accounting T3 2020 Examination
ANSWER HERE
External analysis:
Through technological factor, it has been analyzed that digital transformation
considered one of the major factor because it helps to increase the performance of
operation along with its profit., but there is no specific guidelines defined pertaining to digital
transformation and this in turn affect the profitability. On the other side, through economic
factor, it is examined that Australian economy is keep fluctuating after pandemic and this in
turn decrease the demand of travelers. Therefore, it affect the performance of aviation
industry in opposite manner. Moreover, as per the legal factors, it is examined that laws and
regulations are also changing that might affect the operations of Airline industry. Also, after
Covid-19, Australian government amend the rules regarding safety of people that affect he
business performance.
COVID-19 has had a significant impact upon the aviation industry due to travel
restrictions. As a result, there is a significant reductions in the number of passengers that
directly affect the performance of a company in opposite manner. Majority of the flights
become canceled and some of them attempted to avoid refunding canceled trips in order to
diminish their losses (Abu-Rayash and Dincer, 2020). Also, in 2020 entire Australia is lock
down and this in turn affect the performance of a company in opposite manner. Further due
to health issues. Social distancing measures could force a reduction in passengers load
factor that directly affect the sales of flights. This reflect that entire traveling system has
affected in adversely that also lead to impact upon the changes in consumer behavior too.
By analyzing the current situation, new CEO have to deal with two different situations
which are as mentioned below:
 CEO has to identify the strategy that helps to enhance the sales. As per the current
situation, company faces issue pertaining to decreases in number of passengers due
to covid-19.
 Further, the risk of government intervention also negatively affect business dynamics
and productivity. For that, CEO has to deal with a situation in order to identify ways
that might affect the performance positively.
Question 1(b) [5 marks]
Using the GE/McKinsey framework, explain whereabouts in that model you would position
Virgin at this point in time. Provide reasons for your response.
ANSWER HERE
Virgin is position at middle because there are many competitors who uses the resources
more efficiently as compared to quoted firm. Though CEO of Virgin Australia uses different
strategy in order to deal with current pandemic situation which helps customers to get better
service at low cost prices. Formal CEO of a company do not put extra efforts to reach
company at further level of success and that is why, firm invest in order to increase the
demand (Gechkova and Kaleeva, 2020). Also, as per the shared values of cited firm
reflects that company revolutionise air travel again and this time across all market
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