Management Accounting Assessment Part I – T2 2018

Running Head: Management Accounting
MANAGEMENT ACCOUNTING
ASSESSMENT PART I – T2 2018
Name: Yousuf Admani Mohamed Abdullah
Student ID: 218316105

Management Accounting 1
Part 1
Question 1
In order to promote the ethical professional practices, the institute of management accountant
has issued a statement in context of standards to be followed by the members of the institute
while engaging themselves in the professional practices. The hiring of George as the
management accountant of Fridges-R-Fun has jeopardised certain standards which are as
follows:
 Competence:
As George is not holding the professional degree in the field of management accountancy, he
is not competent to be appointed as the management accountant of the company even though
he possesses sound knowledge about the pipes (IMA, 2018).
 Integrity:
As George is the relative of general manager of the company, the appointment of him as the
management accountant will lead to conflict of interests in the company.
Part 2
Question 2.1
System Development Prevention Costs
Technical support to suppliers of
compressors
Prevention Costs
Technical support to suppliers of pipes Prevention Costs
Field testing at customers’ sites Appraisal Costs
Inspection on assembling line Appraisal Costs

Management Accounting 2
Rework on assembling line Internal Failures
Warranty repairs of fridges External Failures
Warranty replacements of fridges External Failures
Question 2.2
In the present case, Fridges-R-Fun has not taken up any activities to prevent or detect the
errors occurred in the products of the company and due to this reason the company had to
face higher quality cost to deal with the internal or external failures of the products. In year 2
the total quality cost has increased further because of implementation of such activities that
could prevent or detect the product errors and failures. However, the quality costs are
generally long term investments that take time to offer the benefits. Therefore, such activities
could not result in sudden decline in the overall quality costs. However, in year 3 the quality
cost again was settled down to the same level as that of year 1 due to reduction in the internal
and external failures.
Part 3
Question 3.1
John believes that it is better to spend cost and time to fix the defects of the products once
they are ready to be delivered or once they are finally delivered to the customers rather than
spending time and money to take up preventive and other actions that facilitates the
identification of product errors or failures. However, Paul supports the view of company’s
management accountant who believes that quality cost is a kind of long term investment that