Managerial Accounting

This document provides a case study analysis and journal article critique on the topic of managerial accounting. It discusses the categorization of costs, the role of cost and management accounting in decision-making, and the analysis of different alternatives. The document also explores the importance of innovation in managerial accounting and the creation and sharing of information. Study material and solved assignments on managerial accounting are available at Desklib.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student:
Name of the University:
Author’s Note:
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1MANAGERIAL ACCOUNTING
Table of Contents
Part A: Case Study Analysis..............................................................................................2
Answer to Question 1:....................................................................................................2
Answer to Question 2:....................................................................................................2
Answer to Question 3:....................................................................................................2
Answer to Question 4:....................................................................................................3
Answer to Question 5:....................................................................................................4
Part B: Journal Article Critique..........................................................................................5
Answer to Question 1:....................................................................................................5
Answer to Question 2:....................................................................................................6
Answer to Question 3:....................................................................................................7
References and Bibliographies:.........................................................................................9

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Part A: Case Study Analysis
Answer to Question 1:
Costs could be categorised into different types depending on their application
and nature. Based on nature, it is possible to categorise costs into fixed costs, variable
costs and semi-fixed or semi-variable costs. Variable costs are the costs that increase
in proportion with the output volume. This increases or falls in the similar rate with the
increase or fall in the level of output. On the contrary, fixed expenses are periodic in
nature based on the nature of time and not on the quantity of output. It remains constant
regardless of the output to a particular output volume. Semi-fixed or semi-variable costs
are those costs, in which some of the elements changes with the output, while the
others stay constant (Appelbaum et al. 2017).
It could be identified from the provided case that there is use of certain
components of cost like annual license fees and insurance, which are part of fixed
costs. They do not rely on the output level; instead, they rely on the period. The costs
pertaining to snacks and meals are the instances of variable expenses, as they rely on
the number of days and children. An instance of semi-variable or semi-fixed cost is the
cost of laundry, in which a portion of cost is fixed and the remaining part changes with
the use of laundry facility and pick-up mileage.
Answer to Question 2:
Both cost and management accounting are two branches of accounting that aids
an entity in its managerial decision-making process. They provided cost information
depending on which it becomes easy to make the investment decision. In the provided
case, the firm is having the requirement to launder soiled clothes for children. The firm
has an old laundry appliance; however, it could not be used currently because of its
poor working condition. They have to buy a new appliance for replacing the old one. In
the form of an alternative, the firm could launder clothes from an outside laundry shop at
some particular costs. The outside laundering expense takes into account weekly
expenses and pick-up costs based on the distance, which makes it an instance of semi-
variable costs. On the contrary, the purchase of appliances would raise the costs of
power and utilities (Benson et al. 2015).
For conducting analysis to buy appliance or use the service from an outside
party, there is requirement of pertinent costing information. Information associated with
the new appliance cost, rising cost of power and higher cost of utilities are relevant
costs for viability of appliance purchase. On the contrary, laundering cost expenses
from external parties are pertinent for the analysis as well.
Information associated with yearly insurance, yearly license fees, meal and
snack expenses and house rent are not pertinent when it comes to undertaking decision
of whether buying the appliances or not. The information associated with appliance cost
and appliance life forms the base for cost analysis taking place from the appliances
having no effect by the meal costs, annual license costs and yearly insurance
expenses.
Answer to Question 3:
The couple has two alternatives for laundering clothes for the baby care centre.
They could buy the appliance by laundering clothes using additional and power utilities

3MANAGERIAL ACCOUNTING
or clothes could be laundered from the outside laundering shop. The annual costs for
laundering cloths for the two options could be provided 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 Laundering 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 Outflow $624.00 $730.27
$1,393.5
6
The above calculations clearly make it visible that the laundering cost in the
second option is maximum, in which the self-servicing facility of Red Oak Laundry is
used and the lowest could be observed in Option C, in which there is purchase of new
appliance and the same is used for incurring higher utilities and energy costs.
Therefore, it could be advised to the couple to move towards the purchase of new
appliances (Bloomfield 2015).
Answer to Question 4:
The couple is having the alternative of recruiting a staff and three more children
could be served in day care centre. For undertaking decision on employee recruitment,
it is necessary to conduct cost-benefit analysis. By using the relevant earnings and
cots, the analysis could be made as follows:
Particulars Amount
Additional Number of Children 3
Revenue per Child $800
Incremental Revenue per Month $2,400
Number of employees 1
Labour Hour per week 40
Labour Charges per hour $9
Incremental Labour Charges per month $1,559

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Food cost per day for each child $ 3.20
Number of days per week 5
Incremental food cost per month $208
Total Incremental cost $1,767
Incremental Profit per month $633
The yearly license fees, laundering expenses and yearly insurance expenses are
constant in nature in this regard. Therefore, all the costs remain same regardless of the
rise in the number of children in the centre of day care. The analysis would cover only
the variable expenses. By taking into account all revenues and variable costs, it could
be stated that the incremental profit would be $633 for each month in generating
additional staff along with admission of three more children in the centre of day care.
Answer to Question 5:
The couple has the alternative of renting a space in the town that has the
capability of accommodating up to 14 children. There would be some rise in fixed
expenses; however, they could generate some additional income. This is because
additional revenues would offset the increased fixed costs. A letter could be drafted that
reveals all the pertinent calculations associated with the option.
To,
Pamela and Douglas Frank,
Australia,
Date: 07/06/2019
Subject: Viability of renting an area in the town for day care centre
The letter is prepared for making the couple understanding the ability of renting a
space in the town of running the day care centre with excess accommodation up to 14
children. The following considers all pertinent expenses for evaluating the possible
options along with the existing option.
Staying in Current Location:-
Particulars 6 children 9 children
Revenue $ 4,800 $ 7,200
Expenses:
Meals $ 416 $ 624
License $ 19 $ 19
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

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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
The above table has mainly considered the relevant costs necessary for the
analysis. When the activities of day care centre are performed from home, 9 children
could be accommodated and for this, the centre needs to recruit an additional
employee. On the contrary, if rented space is run by the centre, 14 children could be
accommodated needing 3 additional staffs. By taking into account all the above factors,
the above computation reveals that it is more profitable to perform the centre activities
from home.
However, if two staffs are appointed for accommodating 12 children in the rented
region, the net income is computed as $4,398 on monthly basis, which is higher than
the recruitment of three additional staffs. However, after analysing the outcomes of the
provided options, the second option is recommended to Franks.
Part B: Journal Article Critique
Answer to Question 1:
Managerial accounting deals with analyzing costs and financial details of a
company and using it in the process of making managerial decisions. It plays an
important role in various management decisions. Large global organizations apply
managerial accounting in various important aspects of their business. The journal
“Towards a new theory of innovation management: A case study comparing Cannon
Inc. and Apple Computer Inc.” contains applications of managerial accounting (Nonala
and Kenney 1991).
Cannon Inc. is one of the major companies in the photocopier field of technology
industry while Apple Inc. is a pioneer in producing premium computers. Core
competencies and sound management of a company play a significant role in
determining the success of an organization in a competitive situation. In the ever-
changing market of technologies, companies must produce and offer innovative
products while also coming up with new measures to control the costs. Efficient
management goes a long way in helping an organization overcome the challenges
posed to it and establish its superiority in the market. In the given journal, information
creation and sharing process have been identified as the most important aspects of
managerial accounting. In case of Cannon Inc., the company formed a group to conduct
the feasibility study of a mini copier. They took the views of various personnel from

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different departments of the organization. The strategy was to have a group which
consisted of executives from all possible departments of the organization to help in
making an effective and conscious decision. The struggles of Steve Jobs in building the
Apple Mac are well documented. However, ever since the inception of the company,
efficient and proactive management are the pillars of the success of the company. As
mentioned in the given journal, the company had a strong management team and they
had regular interactions with each other. This went a long way in strengthening the
management (Butler and Ghosh 2015). Application of different managerial accounting
procedures and tools through modern information development and sharing systems
have helped them to utilize the wide opportunities available in making innovative and
cost effective products. It is also observed that the management accountants have been
working in tandem with various engineers, managers and other management people to
create harmonization in the business process. These collaborations have played an
important role in creating highly innovative products in their respective segments of
operation (Dopson and Hayes 2016).
From the given discussion, it is evident that the applying the tools and techniques
of managerial accounting in the business practices of various organizations is helpful in
improving the decision making process of an organization and is needed in making
important business decisions.
Answer to Question 2:
In every organization, the processes of management accounting and managerial
accounting are continuous. They are helpful in making an organization innovate their
systems of management and also play an important role in decision making. The journal
“Towards a new theory of innovation management: A case study comparing Cannon,
Inc. and Apple Computer Inc.” It explains the importance of innovation in creating and
sharing information in an effective and efficient manner (Collier 2015). This proposition
stands true in most cases. It can be observed from various cases that the management
process mostly consists of analyzing and using various aspects of financial and non-
financial information. This underlines the positive impact of creation of useful
information and sharing it with the executives and important people in management
(Nonala and Kenney 1991).
Managers or executives are the top brass of organizational structure of any
organization. Managers and executives are at the top of the pyramid in the
organizational hierarchy of most organizations. They use various aspects of financial
and non-financial information to analyses various business activities in order to make
decisions on the basis of that analysis. Proper decision-making and efficient usage of
information systems of business is crucial for the success of a business (Gitman,
Juchau and Flanagan 2015).The necessity of a business information system cannot be
understated for a business organization. Success of a decision is dependent on using
information efficiently and meaningfully. Innovation is also crucial.
Emphasis is laid on innovations in information system. As managers tend to use
a lot of information which is both financial and non-financial, innovation is extremely
necessary in creation of information and in sharing it. In the given journal, it is
mentioned that Apple Inc.’s executives and management work together to analyze

7MANAGERIAL ACCOUNTING
different problems relating to management and to make conscious decisions to solve
them (Nonala and Kenney 1991).Strong relations between the management and
various other internal parties has helped them in making innovations in the process of
creating information and sharing it with related parties. All managerial problems have
been analyzed and solved diligently with the help of these innovations. It was used to
address various problems relating to the management. For instance, while making
decisions related to the development of the next generation Mac Book, they utilized the
improved information available to them to create information and an analysis system
helpful in making decisions.
Also in the case of Cannon Inc., management information from various sources
have been utilized in making decisions related to important aspects of business.
Innovations have also been made in the process of creating managerial information and
the system related to sharing the information (Greenberg and Wilner 2015). The
approach of Cannon Inc. towards problem solving and making business related
decisions varies from that of Apple Inc. They prefer to solve their managerial issues with
the help of their management personnel and the help of managerial information
available to them. They implement traditional management procedures to make various
business related decisions. They do not always depend on innovative information.
When required, they prefer to use traditional management techniques and principles
(Henderson et al. 2015). For instance, during the making of mini cooper, which was an
innovative idea for the existing market at that time, they used traditional management
practices to come up with decisions and made a product which competed with the
technological innovations and advancements which were happening in the market.
Based on the provided analysis and discussion, it could be inferred that
innovation in creation of information and process of sharing information are vital to
enhance efficacy managerial and management decision-making.
Answer to Question 3:
For every business entity, management is deemed to be its key backbone. It is
involved in organising the elements of a business entity along with using the available
business resources through sound quality management in order to fulfil the entire
business objectives. The significant management function is to undertake different
decisions along with handling different organisational resources (Bobryshev et al. 2015).
The perspective of decision-making of the management is the most important to ensure
business success. The firms are involved in constant competition with the rivals in a
competitive market scenario with innovation and progress in their service and product
offerings. The major element if a firm is management that always undertakes efforts to
fulfil the short-term as well as long-term objectives of the organisation (Brewer, Garrison
and Noreen 2015).
It is possible to observed significant management information system behind
every effective decision-making process of the management. In addition, the sound
management team makes significant contribution to the process of decision-making
along with aiding the firm in accomplishing the business goals. There are different
conventional management decision-making processes as well as managerial tools,
which is applied in business activities for resolving organisational issues (Hoque 2018).

8MANAGERIAL ACCOUNTING
In the provided journal of Apple Inc and Canon Inc, the case studies of the
mentioned two organisations are provided and they are observed to operate in the
technological industry. Owing to the ever-changing technologies and varying
innovations, the firms are making their entry in the market with innovative products
everyday resulting in greater market competition (Kaplan and Atkinson 2015). For
ensuring survival in competitive situation, each firm in the market needs to conduct
activities continuously for making innovations in product and service offerings. All the
market competition and aspects have to be analysed along with enhancing the process
of decision-making for dealing with the market uncertainties.
Hence, improvement and innovation in the creation of information and sharing
system of information is crucial to undertake management decisions. Innovation in the
process of information creation implies developing additional and meaningful financial
and non-financial information for the management to make decisions and on the other
hand, the sharing system of information implies ensuring availability of managerial
information to personnel engaged in the processes of decision-making and
management execution. The sharing system of information takes into account the
accumulation of information from different departments and business segments, which
could result in sound process of decision-making (Ponisciakova, Gogolova and
Ivankova 2015).
Based on the above discussion, it could be inferred that the absence of
management information system is adequate for an organisation to undertake sound
decisions and there needs to be innovation in the creation of information and sharing for
enabling the management more effective and efficient. Finally, there needs to be the
utilisation of different enhanced management information system for assisting the
management in different significant business decisions.

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References and Bibliographies:
Appelbaum, D., Kogan, A., Vasarhelyi, M. and Yan, Z., 2017. Impact of business
analytics and enterprise systems on managerial accounting. International Journal of
Accounting Information Systems, 25, pp.29-44.
Benson, K., Clarkson, P.M., Smith, T. and Tutticci, I., 2015. A review of accounting
research in the Asia Pacific region. Australian Journal of Management, 40(1), pp.36-88.
Bloomfield, R.J., 2015. Rethinking managerial reporting. Journal of Management
Accounting Research, 27(1), pp.139-150.
Bobryshev, A.N., Tatarinova, M.N., Grishanova, S.V. and Frolov, A.V.E., 2015.
Management accounting in Russia: problems of theoretical study and practical
application in the economic crisis. Journal of Advanced Research in Law and
Economics, 6(3 (13)), p.511.
Brewer, P.C., Garrison, R.H. and Noreen, E.W., 2015. Introduction to managerial
accounting. McGraw-Hill Education.
Butler, S.A. and Ghosh, D., 2015. Individual differences in managerial accounting
judgments and decision making. The British Accounting Review, 47(1), pp.33-45.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Dopson, L.R. and Hayes, D.K., 2016. Managerial accounting for the hospitality industry.
Wiley Global Education.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance.
Pearson Higher Education AU.
Greenberg, R.K. and Wilner, N.A., 2015. Using concept maps to provide an integrative
framework for teaching the cost or managerial accounting course. Journal of Accounting
Education, 33(1), pp.16-35.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Hoque, Z., 2018. Methodological issues in accounting research. Spiramus Press Ltd.
Hrabal, M., 2016. Process-oriented managerial accounting. International Advances in
Economic Research, 22(2), pp.225-227.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI
Learning.
Kravet, T.D., 2014. Accounting conservatism and managerial risk-taking: Corporate
acquisitions. Journal of Accounting and Economics, 57(2-3), pp.218-240.
Langfield-Smith, K., Smith, D., Andon, P., Hilton, R. and Thorne, H., 2017. Management
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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.

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Parker, L.D. and Fleischman, R.K., 2017. What is Past is Prologue: Cost Accounting in
the British Industrial Revolution, 1760-1850. Routledge.
Ponisciakova, O., Gogolova, M. and Ivankova, K., 2015. Calculations in managerial
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Shields, M.D., 2015. Established management accounting knowledge. Journal of
Management Accounting Research, 27(1), pp.123-132.
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.
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