Management Accounting Case Studies

This assignment focuses on management accounting case studies, including cost analysis for Pamela and Frank, and a journal article critique comparing Canon Inc and Apple Inc. It covers topics such as categorizing costs, conducting cost-benefit analysis, and evaluating management accounting systems. The assignment provides insights into decision-making, innovation management, and the role of managerial accounting in organizations.

Running head: MANAGEMENT ACCOUNTING CASE STUDIES
Management Accounting Case Studies
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1MANAGEMENT ACCOUNTING CASE STUDIES
Table of Contents
Introduction:..................................................................................................................2
Part A: Case Study Analysis.........................................................................................2
Answer to Question 1:...............................................................................................2
Answer to Question 2:...............................................................................................2
Answer to Question 3:...............................................................................................3
Answer to Question 4:...............................................................................................3
Answer to Question 5:...............................................................................................4
Part B: Journal Article Critique.....................................................................................6
Answer to Question 1:...............................................................................................6
Answer to Question 2:...............................................................................................6
Answer to Question 3:...............................................................................................6
Conclusion:...................................................................................................................7
References and Bibliographies:....................................................................................8

2MANAGEMENT ACCOUNTING CASE STUDIES
Introduction:
The current assignment aims to deal with two provided cases; the first case is
to conduct cost analysis for Pamela and Frank. The next section involves providing
critical analysis of a given journal related to the management accounting systems
used in Apple Inc and Canon Inc. The main objective of the assignment is to conduct
a cost-benefit analysis for the first option along with evaluating the management
accounting systems evident in Apple Inc and Canon Inc.
Part A: Case Study Analysis
Answer to Question 1:
It is possible to segregate costs into different categories depending on their
nature and application. Based on such nature, it could be divided into variable costs,
fixed costs and semi-variable costs. The variable costs are defined as the expenses
that rise in proportion with the output volume. This rises or falls in the same rate with
rise or fall in output. On the other hand, the nature of the fixed costs are observed to
be periodic based on the amount of time and they do not rely on the output level.
They remain identical regardless of the output to a fixed output volume. The semi-
variable costs are those costs, in which a part of its components varies with change
in output level, while the remaining part does not change or stay fixed (Apostolou et
al. 2019).
The provided case deals with the usage of a number of cost components like
annual insurance, annual fees related to license, which could be categorised under
fixed costs. This is because any change in volume would not have any impact on
these costs; instead, they rely on the period. The variable costs comprise of the
costs related to snacks and meals that rely on the number of days and number of
children. Finally, laundry expenses are identified as the semi-variable costs in which
a considerable portion is fixed, while the remaining part alters with the utilisation of
the laundry facility and pick-up mileage.
Answer to Question 2:
Management and cost accounting is an accounting branch, which assists an
organisation to undertake significant managerial decisions. It could provide cost-
related information depending on which it is possible to undertake investment
decision. In the provided case, the firm is in the requirement to launder soiled clothes
for the babies. The firm was holding an old appliance in relation to the laundry;
however, it is no longer in a working condition. This mandates the need to buy a new
appliance in the place. Therefore, the option available to the organisation is to
launder clothes from an outside laundry shop at some particular costs, The outside
laundering expenses comprise of weekly expenses along with pick-up costs based
on the distance. Thus, it could be categorised under semi-variable expenses. On the
contrary, buying the appliances would raise the cost of power as the costs related to
utility (Apostolou et al. 2015).
For conducting analysis of the proposed option, pertinent costing information
is required. The relevant costs to be considered for the feasibility analysis comprise
of new appliance costs, increased costs of power along with increased costs of utility
are pertinent for feasibility analysis of appliance purchase. On the contrary, the costs

3MANAGEMENT ACCOUNTING CASE STUDIES
pertaining to the laundering of clothes from the outside parties are pertinent for the
analysis as well.
The information associated with yearly license fees, yearly insurance, meal
and snack expenses and house rent are not pertinent for undertaking decision
regarding whether to buy the appliance or not. The information associated with the
appliance cost and its useful life provides the base for cost-benefit analysis taking
place from the appliances having no effect by the meal expenses, yearly license
expenses and yearly insurance expenses.
Answer to Question 3:
There are two options available to the couple for laundering baby clothes for
the centre of baby care. They have two options, which include either buying the
appliance to launder clothes with the help of additional utilities and power or clothes
could be laundered from the outside laundering shop. The yearly costs of laundering
clothes for all the options could be computed as follows:
Particulars Option
1
Option
2
Option 3
Initial Cost:
Cost of Washer $420.00
Cost of Dryer $380.00
Installation Cost $43.72
Delivery Charges of Appliances $35.00
Total Initial Investment $878.72
Operating Expenses:
Monthly Laundering Cost of Agency $52.00
Monthly Travelling Charges to
Laundromat
$14.55
Monthly Laudering Charges in
Laundromat
$34.64
Monthly Laundry Supplies for
Laundromat
$11.67 $11.67
Monthly Depreciation of Appliances $9.15
Additional Energy cost of Washer $10.00
Additional Energy cost of Dryer $12.08
Total Monthly Operating Expenses $52.00 $60.86 $42.90
Annual Expenses $624.00 $730.27 $514.84
Total Cash Out Flow $624.00 $730.27 $1,393.56
Based on the above computations, it could be observed that the laundering
cost in the second option is significantly higher, in which the self-servicing facility of
the Red Oak Laundry would be utilised. The lowest could be seen in the third option,
in which there would be purchase of new appliances and they would be utilised by
using increased utilities and costs related to energy. Hence, the couple is advised to
purchase the new appliances (Brewer, Garrison and Noreen 2015).
Answer to Question 4:
The couple has the alternative of appointing an employee for serving three
additional children in the centre of day care. For undertaking the employee

4MANAGEMENT ACCOUNTING CASE STUDIES
recruitment decision, there has to be conduction of cost-benefit analysis. By
considering the pertinent earnings and costs, the analysis could be conducted as
follows:
Particulars Amount
Additional Number of Children 3.00
Revenue per Child 800.00
Incremental Revenue per Month 2,400.00
Number of employees 1.00
Labour Hour per week 40.00
Labour Charges per hour 9.00
Incremental Labour Charges per month 1,558.80
Food cost per day for each child 3.20
Number of days per week 5.00
Incremental food cost per month 207.84
Total Incremental cost 1,766.64
Incremental Profit per month 633.36
The yearly license fees, yearly costs of insurance and laundering expenses
are deemed to be fixed in nature. Therefore, these costs would remain unchanged
regardless of the rise in the number of children in the centre of day care. There
needs to be consideration of only the variable expenses in the analysis. By taking
into account revenues and variable expenses, it could be said that additional profit
per month of $633.36 would be generated by appointing an additional employee that
would accommodate three additional children in the centre of day care.
Answer to Question 5:
The couple is provided with the alternative of renting a space in the area
having the capacity of accommodating 14 children. Even though it might result in
increase of fixed costs, they could generate additional income, since the estimated
revenue would offset the increased fixed costs. Therefore, the following letter is
drafted representing all the pertinent calculations associated with the alternative.
To,
Pamela and Douglas Frank
Date: 31st May 2019
Subject: Viability of space rent in the area for the centre of day care
The main reason of preparing the letter is to assist the couple in gaining an
insight of renting a town space for running the daily operations of the day care centre
having extra accommodation up to 14 children. In the below sections, all pertinent
costs have to be taken into account for evaluating the four possible alternatives that
constitute of the current one as well.
Staying in Current Location:-
Particulars 6 children 9 children
Revenue $
4,800
$ 7,200
Expenses:
Meals $
416
$ 624
License $ 19 $ 19

5MANAGEMENT ACCOUNTING CASE STUDIES
Insurance $
320
$ 320
Laundry $ 43 $ 43
Depreciation $
265
$ 265
Rent $ - $ -
Utilities $ 50 $ 50
Employee $ - $ 1,559
Monthly net income $
3,688
$ 4,321
Shifting to Larger Facility:-
Particulars 12
children
14 children
Revenue $ 9,600 $
11,200
Expenses:
Meals $ 831 $
970
License $ 19 $ 19
Insurance $ 417 $
417
Laundry $ 43 $ 43
Depreciation $ - $ -
Rent $ 650 $
650
Utilities $ 125 $
125
Employee $ 3,118 $
4,676
Monthly net income $ 4,398 $
4,300
For performing the calculations, there has been consideration of all pertinent
costs and despite the laundry depreciation expenses are same for all the
alternatives, they are taken into account as well. In case; the day care centre is
operated from house, only 9 children could be accommodated for which an
additional employee needs to be appointed. On the contrary, if the utilisation of the
rented space is made, it could accommodate up to 14 children for which 3 additional
staffs are required. By taking into consideration all these aspects, it is advised to run
the centre from house.
However, if two additional staffs are appointed for accommodating 12
children, the monthly net income would stand at $4,398. This is higher in contrast to
the other available alternatives. After analysing all the possible outcomes, the day
care centre is advised to run the centre from home, since the third alternative is
subject to a number of uncertainties.

6MANAGEMENT ACCOUNTING CASE STUDIES
Part B: Journal Article Critique
Answer to Question 1:
A technique of cost analysis is managerial accounting and financial data of
an entity that would assist the business managers in undertaking suitable decisions.
The role is deemed to be pivotal in different significant management decisions. The
application of managerial accounting could be witnesses internationally in different
big organisations. In the provided journal of “Towards a new theory of innovation
management: A case study comparing Cannon, Inc. and Apple Computer Inc”, some
applications of management accounting techniques could be cited (Nonala and
Kenney 1991).
Canon Inc is identified as the market leader in the photocopier section of the
technology sector and Apple Inc is a popular and market leader in manufacturing
innovative and premium computers. Success in any competitive condition relies on
various core competencies and effective management of the organisation. Owing to
the rapid advancements in technology, the organisations need to incorporate
innovation to offer and provide products along with showing innovativeness in cost
management.
Answer to Question 2:
The process of management accounting as well as managerial accounting are
a continual process in a firm, which assists the same to undertake innovation in the
management system along with assisting in decision-making. The provided journal of
“Towards a new theory of innovation management: A case study comparing Cannon,
Inc. and Apple Computer Inc” sheds light on the process innovation in the
management of an organisation, since the development of information and sharing
such information is made in a sound manner. The proposition is held to be true to a
certain degree, since it could be observed easily from different organisations that
majority of the management process includes different analysis and use of financial
along with non-financial information. Hence, it could be identified that the
development of beneficial information and sharing such information among the
management and executives is necessary.
In the provided case, there has been utilisation of different system related to
management information along with using the system for undertaking different
business issues along with undertaking significant business decisions. They have
made various innovation in their process of managerial decision-making along with
information sharing system (Kaplan and Atkinson 2015).The approach to business
solution is quite different between Canon Inc and Apple Inc. Canon Inc solves
managerial issues with the help of management personnel and by using the
available managerial information. They are observed to use various traditional
processes of management accounting for making sound business decisions.
Answer to Question 3:
In the journal “Towards a new theory of innovation management: A case study
comparing Cannon, Inc. and Apple Computer Inc.”, emphasis is placed on Apple Inc
and Canon Inc that operate in the technology sector. Since technologies are always
changing and there are numerous innovations making way in, the organisations are
making their way in the market by introducing innovative products over time resulting
in intensified competition. For ensuring survival in such a situation along with
ensuring business growth, the organisations operating in the market need to conduct
various activities for ensuring innovation in service and product offerings. They

7MANAGEMENT ACCOUNTING CASE STUDIES
require analysing all the possible aspects related to market rivalry along with
enhancing their process of undertaking decisions for countering the market
challenges.
Hence, innovation and enhancement in the creation of information and
sharing system of information is crucial when it comes to undertaking decisions for
the management. On the contrary, information sharing system implies ensuring the
availability of all managerial information to the necessary personnel engaged in the
process of making decisions along with execution of the same. The sharing system
of information takes into account the collection of information from different
departments and business segments contributing to a sound process of decision-
making.
Conclusion:
Based on the above discussion, it could be stated that for conducting analysis
of the proposed option, pertinent costing information is required. The relevant costs
to be considered for the feasibility analysis comprise of new appliance costs,
increased costs of power along with increased costs of utility are pertinent for
feasibility analysis of appliance purchase. On the contrary, the costs pertaining to the
laundering of clothes from the outside parties are pertinent for the analysis as well.
For performing the calculations, there has been consideration of all pertinent costs
and despite the laundry depreciation expenses are same for all the alternatives, they
are taken into account as well. In case; the day care centre is operated from house,
only 9 children could be accommodated for which an additional employee needs to
be appointed. On the contrary, if the utilisation of the rented space is made, it could
accommodate up to 14 children for which 3 additional staffs are required. By taking
into consideration all these aspects, it is advised to run the centre from house.
However, if two additional staffs are appointed for accommodating 12 children, the
monthly net income would stand at $4,398. This is higher in contrast to the other
available alternatives. After analysing all the possible outcomes, the day care centre
is advised to run the centre from home, since the third alternative is subject to a
number of uncertainties.
In the second scenario, Since technologies are always changing and there
are numerous innovations making way in, the organisations are making their way in
the market by introducing innovative products over time resulting in intensified
competition. For ensuring survival in such a situation along with ensuring business
growth, the organisations operating in the market need to conduct various activities
for ensuring innovation in service and product offerings. They require analysing all
the possible aspects related to market rivalry along with enhancing their process of
undertaking decisions for countering the market challenges.
Hence, innovation and enhancement in the creation of information and
sharing system of information is crucial when it comes to undertaking decisions for
the management. On the contrary, information sharing system implies ensuring the
availability of all managerial information to the necessary personnel engaged in the
process of making decisions along with execution of the same. The sharing system
of information takes into account the collection of information from different
departments and business segments contributing to a sound process of decision-
making.

8MANAGEMENT ACCOUNTING CASE STUDIES
References and Bibliographies:
Apostolou, B., Dorminey, J.W., Hassell, J.M. and Hickey, A., 2019. Accounting
education literature review (2018). Journal of Accounting Education, 15(8), pp.367-
385.
Apostolou, B., Dorminey, J.W., Hassell, J.M. and Rebele, J.E., 2015. Accounting
education literature review (2013–2014). Journal of Accounting Education, 33(2),
pp.69-127.
Brewer, P.C., Garrison, R.H. and Noreen, E.W., 2015. Introduction to managerial
accounting. McGraw-Hill Education.
Cardoş, I.R., 2014. New trends in budgeting–a literature review. SEA–Practical
Application of Science, 2(04), pp.483-489.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Elmassri, M.M., Harris, E.P. and Carter, D.B., 2016. Accounting for strategic
investment decision-making under extreme uncertainty. The British Accounting
Review, 48(2), pp.151-168.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance.
Pearson Higher Education AU.
Hoque, Z., 2018. Methodological issues in accounting research. Spiramus Press Ltd.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI
Learning.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Kravet, T.D., 2014. Accounting conservatism and managerial risk-taking: Corporate
acquisitions. Journal of Accounting and Economics, 57(2-3), pp.218-240.
Mahieu, K., Vroman, S. and Calluy, P., 2015. Asset-based Budgeting in
Practice. Controlling & Management Review, 59(5), pp.29-37.
Miller-Nobles, T.L., Mattison, B. and Matsumura, E.M., 2016. Horngren's Financial &
Managerial Accounting: The Financial Chapters. Pearson.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI
Learning Pvt. Ltd.
Nonala, I. and Kenney, M., 1991. Towards a new theory of innovation management:
A case study comparing Canon, Inc. and Apple Computer, Inc. Journal of
Engineering and Technology Management, 8(1), pp.67-83.
Pazarceviren, S.Y. and Celayir, D., 2014. Target costing based on the activity-based
costing method and a model proposal. European Scientific Journal, ESJ, 9(10),
pp.105-113.
Ponisciakova, O., Gogolova, M. and Ivankova, K., 2015. Calculations in managerial
accounting. Procedia Economics and Finance, 26, pp.431-437.
Popesko, B. and Šocová, V., 2016. Current trends in budgeting and planning: Czech
survey initial results. International Advances in Economic Research, 22(1), pp.99-
100.
Raudla, R. and Savi, R., 2015. The use of performance information in cutback
budgeting. Public Money & Management, 35(6), pp.409-416.
Shields, M.D., 2015. Established management accounting knowledge. Journal of
Management Accounting Research, 27(1), pp.123-132.
Smith, M., 2017. Research methods in accounting. Sage.

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Weygandt, J.J., Kieso, D.E., Kimmel, P.D. and Aly, I.M., 2018. Managerial
Accounting: Tools for Business Decision-making. John Wiley & Sons Canada,
Limited.