Managerial Accounting Case Study

This case study examines the managerial accounting practices of Nanna's House, a childcare business. It analyzes different types of costs, evaluates appliance purchase options, examines the impact of hiring additional employees, and analyzes the management accounting systems of Canon and Apple. The study provides insights into cost analysis, decision-making, and innovation in a business context.

Managerial Accounting
Case Study

INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1. Explain the different type of cost.............................................................................................1
2. Best option to purchase the appliances by making sound decision.........................................2
3. Detailed calculation for each option........................................................................................3
4 Calculations in context to hire additional employees...............................................................4
5. Calculations which shows that how much employees are needed to be hire..........................5
PART 2............................................................................................................................................6
1. Management accounting system in Canon and Apple computer.............................................6
2. Process of information creation and innovation contribution..................................................7
3. Specific outcomes or lessons from article research.................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management is the process of identifying, measuring interpreting and communicate the
information with manage which further helps in continue their organizational goals & objectives.
It include the various accounting information which help the manager to analyses their financial
information which further helps the business maintain their records in presentable way (Cadez,
and Guilding, 2012). As external as well as internal party can understand the information and
make their important decision according to it. Nanna's House chooses for the better
understanding of these concepts where it is founded by the Douglas and Pamela which is child
care business. This report includes the various topics such as different types of cost and required
information for the purchase of appliances. Along with this, it includes the calculation about the
cost of launder cloths and components of managerial accounting system which include the
discussion about efficiency or effectiveness. In addition, it includes the innovation process which
includes the process of information creation.
PART 1
1. Explain the different type of cost
Cost refers to that amount which is occurring at the time of producing product or services.
It is important for the organization to identify the cost of each unit which they produce and it will
further help in setting their product cost. Lower the product cost will help to increase their profit
margin same as, higher cost of product reduce the margin of profit. Cost will be considered as a
expenses for the business. So it is important for the organization to minimise their product or
service cost. As per given case study, Douglas & Pamela decided to start child care business
which name has Nanna’s House. At the time of starting their business company face the different
type of cost which is discussed below:
Fixed cost: It is the cost which is not changed for the whole period of production either
production unit is increased or not. Basically fixed cost will not changed it remain same for the
longer period (Chiarini, 2012). For the organization it is difficult to reduce their fixed expenses
such as rent, salary, any premium amount or other expenses. According to the case study,
Douglas & Pamela have to bear different types of fixed cost in their business. Such as, company
have to pay annual $ 3840 for the cost of insurance. Frank charge a fee of $ 800 per month for
each child and it is the fixed cost for the company. Because they have to pay fixed amount on
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every month because of that it will be the fixed cost for the company. Initially, business has to
pay the licence fee.
Variable Cost: It is the cost which can vary as per the production volume changed
because as the number of units increase then cost of variable cost also increased. So it is totally
depend upon the production. Organization can control their variable cost in order to reduce their
overall cost which directly affects the business in terms of profitability as well as profitability.
Variable cost include the direct labour, material, overheads cost etc. According to the given case
study, variable cost of the business is food expenses, frank charges and it will depend upon the
production. For example if number of children increased then cost automatically increased.
Douglas & Pamela also provide the snakes and food for the children where they charge
additional $ 3.20 per child.
Semi Variable cost: It includes those cost, which include the features of variable or fixed
cost. In the organization, cost will be fixed for the certain level after that it will be charges as per
the usages. If any organization not produce any single item or not provide any king of services
then they also have to bear fixed cost because it does not matter that either company producing
something or not (Miller, Proctor and Fulton, 2013). As per this case study, variable cost of the
appliance is $ 440 and delivery charges are semi variable because business provide the option for
the delivery. Semi variable cost can change as per the requirement which is totally depend upon
the demand & supply of products and services.
2. Best option to purchase the appliances by making sound decision
It is very important for the every organization to take effective decision in order to increase
their productivity or profitability. For the smooth functioning of their business functions and
operational activity company required to take effective or sound decisions which further helps
the organization to increase their business goals & objectives (Manetti, 2014). Douglas &
Pamela determine their financial performance which helps the business to identify their income
or expenditure related to their business activities. Owner of the Nanna’s house wanted to make
effective decision in order to increase their efficiency or effectiveness (Bhasin, 2013). Cost of
older appliances is $ 440 and according to the given case study alternatives are available for the
business growth and purchase cost of the appliances is $ 878.72.
Laundry from Red Oak Laundry & Dry Detail $ 52 Per month.
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6 miles for 4.33 weeks (6*4.33) 25.98 * 0.56 per mile 14.5488
Cost of Laundry $ 8 per week 34.64
Cost of detergent or Fabric sheer per month 35/3 64
Total cost of alternatives per months 60.855
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Cost of Dryer plus washer 380+420 800
Accessories for the both appliance 43.72
Delivery charges 35
Total cost of applications 878.72
Annual depreciation 109.84
9.15333333
Per month depreciation 3
22.08333333
Incremental cost 120+145 33
31.236666
Total cost 67
3. Detailed calculation for each option
Particular Detail 52 weeks
6 miles for 4.33 weeks (6*4.33) 25.98 * 0.56 14.54
$8 Per week cost of laundry 34.64
Cost of detergent or fabric sheer per month 11.6666666667
Total cost of alternative per month 67
Particulars Detail Amount
Cost of washer and dryer 420+380 800
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Additional accessories for both
appliances 43.72
Delivering cost 35
Total cost of appliances 878.72
Annual depreciation 109.84
Per month depreciation 9.1533333333
Incremental cost 120+145 22.0833333333
31.2366666667
From the above calculation, it has been analysis that cost of the single option is 60.85
another cost of second option is 31.23. After all the analysis, second option is best because its
cost is less than option one. Lesser the cost of product will increase the productivity or
profitability of the business. It will further help in achieving their business goals & objectives.
4 Calculations in context to hire additional employees
Income statement for the monthly basis Details Amount
Revenue
Fees from each child 800*6 4800
Expenses
State and annual fees 225/12 18.75
Insurance charges 3840/12 320
Cost of meals and snacks 6*3.2*30 576
Depreciation (79500/25)/12 265
Utility cost 50
Total cost 1229.75
Net profit 3570.25
Income statement after additional employee hired
Particulars Details Amount
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Revenue
Fees from each child 800*9 7200
Expenses
State and annual fees 225/12 18.75
Insurance charges 3840/12 320
Cost of meals and snacks 6*3.2*30 576
Depreciation (79500/25)/12 265
Utility cost 50
Salary to additional employee 40*9*4.33 1558.8
Total cost 2788.55
Net profit 4411.45
From the above table, it has been analyses that total net profit of the company is $
3570.25 but after hiring new employee in their organization then met profit will be increased
because net profit of the company is $ 4411.45. It is beneficial for the Franks to hire new person
who increase the productivity as well as profitability of the company. Further it helps the
business to increase their market share.
5. Calculations which shows that how much employees are needed to be hire
Particulars Detail Amount
Fees from each child 800*14 11200
Expenses
State and annual fees 225/12 19
Rented space cost 650
Insurance charges 5000/12 417
Cost of meals and snacks 6*3.2*30 576
Utility cost 125
Salary to additional employee 1558.8 * 3 4676
Total cost 6463
Net profit 4737
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From the above calculation, it has been concluded that when Franks hire a new employee for
their business then net income of the company will be $ 4737. Then profit will b increased more
when company hire three people as per state regulation because a single person can’t handle
more than three children. Franks can accommodate maximum 9 children and it will be possible
when company hire three more employees. After that Franks can rent a place for 14 children so
they have to shift their focus on a place where they hire 3 employees and take 14 children which
increase the productivity as well as profitability.
PART 2
1. Management accounting system in Canon and Apple computer
Management accounting is the process which includes the various factions which help the
organization to take their essential decision on the basis of available financial information
(Horngren and et.al., 2012). Management accounting used for the for the internal purpose where
manager of the company take important decision and build strategy with the help of financial
information and it will be getting from financial accounting. With the help of financial report
manager get the effective decision which further helps in achieving their business goals &
objectives and increase their market shares.
Cost reliability improvement system: Cost will include with the various aspects such as
cost of manufacturing, repairing, spares as well as warranty. All the expenses under the
corporation will be consider as cost where lower cost will increase the reliability or improve the
system. Canon launched new product in the market that is mini copier and it will be available at
lower cost. It required by the organization to analyse the demand or market trend and then
manufacture products according to it. It will include the various cost such as labour, material,
overheads and other cost related to the innovative technology. So it is important for the
organization to reduce their products cost because it further helps in increasing productivity
which provide high profit margin (Watson, 2015). Along with this, Apply Company launched
Macintosh computer which is cheaper than their other products and its main aim to provide the
cost effective price. Which increase the productivity as well as profitability and further it will
help the organization to achieve their business goals & objectives. To increase their profit margin
company introduce new products at lower cost which attract more customers as well as increase
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productivity. So manager of the company build effective strategy to increase their productivity as
well as profitability.
Quality control system: For the product quality, it is important for the organization to
capture the market to enhance their quality. According to case study, Canon is the multinational
organization, where it’s management team continuous work to enhance the quality of mini
Canon so more customers can attract because quality is the essential requirement of the
consumers. It will help the business to increase their productivity or profitability of the company.
To maintain their product quality Canon use the total quality management (TQM) system which
improve the quality of products and further it will increase the efficiency or effectiveness of the
organization (Kanellou and Spathis, 2013). Further it will help the manager to take effective
decision which increase productivity or profit margin of the company.
2. Process of information creation and innovation contribution
As innovation and development of new product or service which emphasis the value of
customers. According to the case study, Apple & Canon introduce new product in the market
which include the latest features which attract the more customers for the competitive advantage.
As per case study, process of innovation majorly focuses on those activities which are related to
the human. It will help the organization to encourage and innovate new things in the market
which increase the market share and provide the huge market growth. Such as MC revitalized the
number of product line where Mac & Canon lead the market. This is very important for the
organization to keep innovate or introduce new products and features which help the business to
increase their productivity or profitability.
Management team of the Canon, launched new product that is mini Copier and Apply
company also wanted to introduce Macintosh which help the business to collect new information
in order to manufacture new products. In the American organization, top management level build
strategy regarding any new development of any product and convey this message to the middle
level along with required information (Arroyo, 2012). After this, provide necessary instruction to
the lower level for the functioning of their work and start getting developing new product for the
market to attract more consumers. in order to achieve the high productivity or profitability which
profit high market growth. With the help of management accounting, organization can take
essential decision regarding innovation after all the necessary research. Manager of the Canon,
analyse the market as well as consumer’s demand in the market and then take effective decision
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which help the organization to achieve their business goals & objectives. Along with this,
management accounting also helps in maintain their financial record which further helps in
maintaining their each product cost which is beneficial for the organization. It will provide the
contribution in context of the innovation in Canon.
Apple manager also implement the management accounting for the innovation in their
products line for the more productivity or profitability of the company. This accounting system
helps the business to measure their product cost and price (Gillet, 2012). By using inventory
management system, company can regularly keep their eyes in their inventory level which help
the Apple Company to maintain their stock level in order to fulfil the requirement of production
to achieve their business goals & objectives. Along with this, it is beneficial for the organization
because it helps in measuring future profit.
3. Specific outcomes or lessons from article research
Accountant of the both companies follow the management accounting techniques to manage
their accounts where they have to record each transaction and maintain proper reports. Because it
further help the organization to understand their financial information along with their financial
position of the company (Maskell, Baggaley and Grasso, 2016). Management accounting used
for the effective decision making in context of organization where it provide the market growth.
For the future analysis, accountant prepares a budget with the help of financial information
which is very useful for the organization. There are important outcomes which are discussed
below:
In the Canon, with the help of management accounting organization build effective strategy
regarding innovation. It is also helpful for the decision making process because it provide
necessary information regarding financial position of the company. Company introduce the new
product that is mini copier which is innovative or attract the more consumers in order to increase
their productivity or profitability. It will also helps in providing quality product which retain
their consumers for the longer period (Hiebl, 2014. Company also set reasonable price of their
products which fulfil the goals & objectives of the company.
In the Apply company, by using management accounting company get the best results
and then analyse the their financial reports for the purpose of building effective strategy which
help the company to increase their productivity as well as profitability. Management accounting
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also helps in decision making. Which further help the organization to achieve their business
goals & objectives (Nguyen, Winata and Chong, 2017).
CONCLUSION
From the above discussion, it has been concluded that managerial accounting helsp the
business to increase their efficiency as well as effectiveness. It also helps the business to identify
their financial position and take effective decision as per the results. Different types of cost plays
different role in the organization where fixed cost always have to bear either company produce
something or not. With the help of cost analysis, managers can reduce or control their cost for
the whole period of time which increase the efficiency as well as profit margin too,. In addition,
after increasing the number of employees organization get the more profit. Along with this, with
the help of management accounting manager can build effective strategy which increases the
productivity as well as profitability of the company.
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