Managerial Accounting

This document provides a comprehensive analysis of managerial accounting, including case study analysis and journal article critique. It discusses the different types of costs, relevance of costs in decision-making, incremental analysis, and the importance of managerial accounting in the success of companies. The document also highlights the application of managerial accounting in Canon Inc. and Apple Computer Inc. The journal article critique focuses on the role of managerial accounting in innovation management.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Part A: Case Study Analysis....................................................................................................................2
Answer to 1.......................................................................................................................................2
Answer to 2.......................................................................................................................................2
Answer to 3.......................................................................................................................................3
Answer to 4.......................................................................................................................................3
Answer to 5.......................................................................................................................................4
Part B: Journal Article Critique...............................................................................................................5
Answer to 1.......................................................................................................................................5
Answer to 2.......................................................................................................................................6
Answer to 3.......................................................................................................................................7
References.............................................................................................................................................9

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Part A: Case Study Analysis
Answer to 1
It can be seen from the provided scenario that there are examples of four
types of costs; they are fixed cost, variable cost, and incremental cost and sunk cost.
However, it needs to be mentioned that it is not needed to consider the sunk costs
due to the fact that these costs are not included at the time to make decisions. Fixed
costs are considered as those costs that do not changes with the fluctuation in the
number of products or proceeded services or sold. After that, variable costs are
considered as those costs that increases or decreases on the basis of the increase
or decrease in the production volume. After that, incremental costs are considered
as those costs that the managers use at the time of the analysis of business
planning in order gain an insight about the company’s additional costs when they
undertake a specific action (Hilton and Platt 2013). The following table shows the
examples of the above-discussed costs from the provided case study.
Example
Fixed Costs The annual licence fee of $225 can be considered as an
example of fixed cost. The main reason is that there would
not be any change in this fee due to the actions of the couple
Variable Costs The collected total amount at a rate of $800 per child for the
purpose of child care is the example of variable cost because
of the variation of this cost in accordance with the number of
students
Incremental
Costs
The increase in cost of utilities that is $50 is a fixed cost.
Provided information states that this would increase in each
month due to day care and children’s number is not an issue.
Thus, this is an incremental cost that can be adjusted
because of the change in utilities (Kaplan and Atkinson
2015).
Answer to 2
There is a major necessity for differentiating the costs that are relevant or
irrelevant to the decision related to the purchase of appliance. The presence of two
inherent issues can be seen in this case; first, whether the cost would be incurred on
the basis of future undertaken decision, and second, one can differentiate the cost
from the available alternatives. It is needed to consider the cost as relevant after it
satisfies particular criteria (Brewer, Garrison and Noreen 2015). For this reason, in
case Franks takes the decision of purchasing the appliances, following are the
relevant costs then:
1. Cost of new appliance
2. Cost for delivering the new appliance
3. Cost of installation of the new appliance
4. Added utility cost
It is required for Frank for the effective consideration of the differences in the
costs of the available alternatives if he takes the decision of the investigation of all
the available alternatives. For this reason, some additional costs would be relevant
for Frank; they are as below:
1. Cost of delivery as well as the delivery of the laundry services
2. Self-service laundry expenditures such as detergent, laundering and others

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There is a major necessity for gaining understanding about the costs that are
already incurred which do not have relevancy with the future decisions. Thus, there
are some costs that can be considered as irrelevant to the appliance purchase
related decisions and they are as follows:
1. Cost of old appliance
2. Cost of detergent in case the available options do not consider the series like
delivery and pick-up (Needles, Powers and Crosson 2013).
Answer to 3
There is a major need for the use of the prior spotted relevant costs for the
determination of the alternative that is most relevant. Thus, the analysis of the three
different alternatives is required. The first option signifies Red Oak Laundry and
Cleaning’s rental services; Laundromat Service needs to be considered as the
second option and the purchase of the new washer and dryer needs to be
considered as the third option. There is not any requirement of initial investment in
case of the first and second option. However, there is a need for initial investment in
case of the third option in certain forms like dryer, washer and the delivery as well as
installation charges of the purchased appliances (Warren, Reeve and Duchac 2013).
The following table shows the detailed computation regarding the three
possible alternates.
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 Out Flow $624.00 $730.27 $1,393.56
The above table has major significance in this situation. The above table
indicates towards a crucial fact that the third option’s total monthly operating
expenses is the lowest among all the three options, then comes the first option and
the second option. The presence of the similar trend can be seen in case of the
annual expenses. However, it needs to be mentioned that there would be greater
cash outlook for the third option when compared to the first and second option.
Despite of all of these facts, the most effective as well as feasible option of the
couple would be to purchase the appliances (Needles and Crosson 2013).

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Answer to 4
There is a need for the evaluation of the provided scenario through the
assistance of the incremental analysis. On a more precise manner, there is a need
for the evaluation of the incremental costs of the changes in this scenario. It is
needed to take into account the changes in costs for additional staffs as well as the
feeding of additional children. There would be rise in revenue because of the
additional children and thus, it is required to take into account the changes in
revenue (Crosson and Needles 2013). The following table shows the incremental
changes.
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
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
It can be seen from the above that $2,400 of incremental revenue from the
enrolment of additional three children has surpassed the traditional staffs’ total
incremental costs and $1,767 of the total incremental cost of food for the additional
children. In the presence of all these aspects, the total amount of the net benefit of
Fran would be $633 and Frank can only avail this benefit in case he takes the
decision of exercising the option (Demski 2013).
Answer to 5
To,
Frank
Date: 30.05.2019
Subject: Recommendation Letter
There is a major necessity to acquire understanding on the fact that it is
required for the managements of the companies to make decisions on location of the
facilities and enrolment decisions which requires the understanding related to the
strategic goals (Appelbaum et al. 2017). This aspect would provide major assistance
to understand the enrolment decision’s effects on the required number of staffs along
with the added food expenses. In case of the given two options, there is the
preparation of the monthly income statements. It can be seen from the calculation
that there would be the need of an additional staff for the service of nine children,
there would be the need of two additional staffs for the service of 12 children and
there would be a need of three additional staffs for the service of 14 children.
Remain in Current Location
Particulars 6 children 9 children

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Revenue $ 4,800.00 $ 7,200.00
Expenses:
Meals $ 415.68 $ 623.52
License $ 18.75 $ 18.75
Insurance $ 320.00 $ 320.00
Laundry $ 42.90 $ 42.90
Depreciation $ 265.00 $ 265.00
Rent $ - $ -
Utilities $ 50.00 $ 50.00
Employee $ - $ 1,558.80
Monthly net income $ 3,687.67 $ 4,321.03
Move to Larger Facility
Particulars 12 children 14 children
Revenue $ 9,600.00 $ 11,200.00
Expenses:
Meals $ 831.36 $ 969.92
License $ 18.75 $ 18.75
Insurance $ 416.67 $ 416.67
Laundry $ 42.90 $ 42.90
Depreciation $ - $ -
Rent $ 650.00 $ 650.00
Utilities $ 125.00 $ 125.00
Employee $ 3,117.60 $ 4,676.40
Monthly net income $ 4,397.72 $ 4,300.36
It can be said on the basis of the above calculation that it is required to
effectively select the reasonable course of action. The outcome of the above-
calculation indicates towards the fact that the occurrence of the most considerable
income in monthly income can be seen in the presence of six children. It is not
needed to consider the income difference among 9, 12 and 14 children in the
presence of a diminishing future point. In case Frank takes the decision of moving to
a larger facility through the accommodation of 12 children, $4,397.72 would be the
monthly income which is more than the other alterative. Thus, it is recommended for
the adoption of this alternative in order to ensure generating increased amount of
monthly income (Ahmed and Duellman 2013).
Part B: Journal Article Critique
Answer to 1
Managerial accounting is regarded as the mechanism to analyze the
companies’ cost and financial data for assisting in the decision-making process.
Large corporations around the world apply managerial accounting in their decision
making process. The presence of such application can be seen in the journal named
“Towards a new theory of innovation management: A case study comparing
Cannon, Inc. and Apple Computer Inc.”
Both Canon Inc. and Apple Computer Inc. are considered as the market
leaders in their respective industries which are photocopier industry and premium

6MANAGERIAL ACCOUNTING
computer manufacturer respectively. Success is regarded as a competitive situation
which has reliance of effective ground management and certain core competencies
of the companies. Companies are required to be innovative in their product offerings
as well as in cost management due to the massive technology changes. Effective
management is needed for fighting the hurdles in markets in order to be superior in
the industry (Butler and Ghosh 2015). It can be seen in the provided journal that the
processes of information creation and sharing have been given major emphasis
since it is essential in managerial accounting (Nonala and Kenney 1991). As per the
case of Canon, through the inclusion of employees from different departments, the
firm conducted certain feasibility study of their new product, a mini copier. The
strategy was to make effective decision in the presence of senior executive from
every department (Otley and Emmanuel 2013). Everyone knows about the struggle
of Steve Jobs for building Apple Mac PC and the success that came after it, but the
main reason for the success of the firm is their effective and efficient management.
As mentioned in the article, Apple has a strong management team and they
maintained a continuous interaction among them in order to make the management
stronger (Nonala and Kenney 1991). The application of effective management
accounting tools and techniques made them able in grabbing the market
opportunities in order to make their products more innovative as well as cost
effective. Moreover, it can also be seen that these companies have been working
with their executives, engineers and managers in order to make complete
harmonization so that collaboratively they can develop innovative products in their
respective industries (Weygandt et al. 2018).
It can be said on the basis of the above discussion that the effective and
efficient application of managerial accounting tools and techniques assists the
companies to improve their process of decision-making for the overall success of the
business.
Answer to 2
Managerial accounting as well as the process of management accounting is a
continuous organizational process that assists in bringing innovation in management
system s that effective business decisions can be made. The provided journal article
summarizes innovation in the management system of a company as the process of
creation of innovation along with effective sharing of that information. This is a
majorly true proposition because of its presence of many companies where the
analysis as well as use of different financial and non-financial information can be
seen in the management processes. Thus, it can be said that the managements of
the firms create and share this useful information for various purposes (Otley and
Emmanuel 2013).
Management executives stay at the top of the organizational structure and
they are involved in the use of financial and non-financial information the business
for the analysis of different business activities and then make business decisions on
the basis of the analysis. It is noteworthy to mention that business success largely
depends on the correct use of information and correct business decisions. Thus, the
presence of effective business information system is paramount for the companies
where effective decision making relies on the correct use of significant and efficient
decision along with the innovation of management information system (Mihăilă
2014).
In the provided journal article, major emphasis is provided on the information
system innovation (Nonala and Kenney 1991). Innovation needs to be there in the
information creation as well as sharing system because of the use of financial and

7MANAGERIAL ACCOUNTING
non-financial information by the management. It can be seen from the case study of
Apple Inc. in the provided journal article that the management executives of the
company worked together for the analysis of managerial issues in order to make
correct decisions. It has been possible to bring innovation in the information creation
and sharing process due to the effective interrelation among the managers,
executives and engineers. It provided them major assistance to solve the managerial
issues efficiently. For instance, the management of Apple Inc. utilized their effective
and efficient information creation and analysis system for making decision during the
development of Apple Mac Book (Greenberg and Wilner 2015).
The management team of Canon Inc. also utilized their management
information system for making effective business decisions. They have brought
innovation in the managerial level process of information creation. It can be seen that
the managerial approach of Canon Inc. to approach the organizational problems and
decision-making process is different from that of Apple Inc. They tried to solve the
issues in the presence of all managerial executives along with the assistance of their
efficiency information system. The use of different traditional management processes
can be seen by the making management decisions. For example, the use of certain
traditional managerial procedures could be seen by the management of Canon Inc.
along with the innovative technologically advanced processes for the development of
the mini copier (Bobryshev et al. 2015).
Thus, it can be seen from the above discussion that there is a major necessity
of innovation on the information creation as well sharing process in order to bring
improvement in the management processes and managerial decision-making
process.
Answer to 3
Management is considered as the backbone of every business because of the
fact that it assists in organizing the necessary components for smooth running of
business through the effective utilization of available resources so that the overall
business objectives can be achieved. Making decisions regarding the effective
management of organizational resources is considered as one of the most crucial
functions of the management. Effective decision-making perspective is considered
as the main pillar for organizational success. The presence of innovation in the
products and services helps the firms in competing with their competitors in the
highly competitive markets. Management is considered as the main part of the
business organizations which always try hard for the achievement of the long-term
as well as short-term business objectives and goals (Narayanaswamy 2017).
The significant of the information provided by the management information
system cannot be ignored the success of the decision-making process of the
companies. The effective management teams of the firms significantly contribute to
the success of the decision-making process of the firms so that the companies can
achieve their long and short-term business goals. The application of different types
of managerial tools and management decision-making processes can be seen within
the organizations in order to solve various types of organizational as well as
managerial problems (Songini, Gnan and Malmi 2013).
The provided journal article involves in the comparison of the case studies of
two companies that are Canon Inc. and Apple Inc. and both of these companies
belong to the technology industry (Nonala and Kenney 1991). Due to the continuous
changes in technology that brings different kinds of innovations, businesses
organization are entering into the market with innovative products and services in
each and every day which is making the competition more intense. In order to

8MANAGERIAL ACCOUNTING
ensure survival in this market along with to be successful, every company is needed
to ensure the adoption of activities that help them in bringing innovative products in
the market. They are needed to analyze their competitors for the purpose of
decision-making process so that the tough challenge can be effectively faced
(Baiman 2014).
For this reason, it is essential to ensure the presence of information creation
as well as sharing system in the organizational decision-making process. Innovation
in the information creation process refers to the creation of more significant financial
and non-financial information for effective decision-making process. At the same
time, information sharing system refers to the process to make all managerial
information available to the higher management executives having involvement in
the decision-making process as well as implementation of the decisions. The
information sharing system also consists of the process to collect information from
different segments and departments of the firms for making effective contribution
towards the decision-making process (Krstevski and Mancheski 2016).
It can be said based on the above discussion that it is not enough for the
companies to have a management information system for the decision-making
process unless there is innovation in the processes of information creation and
information sharing in efficient manner. Thus, the presence of improved and efficient
management information system assists the companies in making better decisions.

9MANAGERIAL ACCOUNTING
References
Ahmed, A.S. and Duellman, S., 2013. Managerial overconfidence and accounting
conservatism. Journal of Accounting Research, 51(1), pp.1-30.
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.
Baiman, S., 2014. Some ideas for further research in managerial accounting. Journal
of Management Accounting Research, 26(2), pp.119-121.
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
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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.
Crosson, S.V. and Needles, B.E., 2013. Managerial accounting. Cengage Learning.
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Business Media.
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Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI
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Cengage Learning.

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Weygandt, J.J., Kieso, D.E., Kimmel, P.D. and Aly, I.M., 2018. Managerial
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