Managerial Accounting.

Managerial Accounting
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Table of Contents
Part A...................................................................................................................................................................... 3
Part B......................................................................................................................................................................8
References............................................................................................................................................................11
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Part A
1. Cost
Cost is the monetary value that has been spent by every company in order to produce
services for their customers. It is one of the essential expenditures that must be made by the
company in order to run a business in an appropriate manner. Each production factor has an
associated cost (Kaplan and Atkinson, 2015).
Following there are different types of cost which are associated with the service based
company which are listed below:
1. Variable and fixed costs
2. Indirect and Direct costs
3. Period and Product costs
4. Opportunity and Incremental costs
5. Sunk costs
After considering the various different types of costs which are discussed in the stated
case, three types of costs are selected for further discussion which are mentioned
below:
a. Utility costs: Utility costs are all charges for utilities which have to be paid by the company
on the basis of usage. This cost is considered as a mixed cost in which both cost i.e. fixed
and variable are charged on a products or services based on actual usage (Haroun, 2015).
Some of the examples of utility costs are:
 Heat (gas)
 Water
 Telephone and internet service
 Sewer
The cost of utility follow the concept of accrual basis of accounting in which all costs which
are related to the utility are recorded on the basis of actual consumption.
b. Installation costs: The installation cost is part of the cost of the asset. But in installation
costs, there are still two component of costs are involved i.e. variable and fixed. For example,
Installation of Dryer and washer are the fixed costs whereas cost of improvement,
consumable material used in the teardown and the personnel costs in changing over period of
time is considered as variable costs (Schaltegger and Zvezdov, 2015).
c. Energy or Electricity costs: Energy costs are the costs which are incurred at the time of
using an electricity machine to manufacture some products or provide some services to the
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customers. Electricity costs are variable in nature and depend upon real consumption of
electricity. For example, the electricity costs depend upon the actual usage of Dryer and
Washer in washing the clothes (Klychova, et. al., 2015).
2. Decision
a. Relevant information to purchase the appliances
The costs of both appliances are:
For Dryer $380
For Washer $420
$800
Add: Installation cost $43.72
Delivery cost $35.00
$878.72
If Douglas and Pamela purchase the appliances they have to pay $878.72 and it also
provides benefits to them which are listed below:
1. It reduces the time and extra expenses.
2. One time investment and long-time benefit.
3. Reduces extra efforts of going here and there.
4. Safer, faster and easier to use.
b. Irrelevant information to purchase the appliances
While purchasing the new appliances following information are irrelevant which is mentioned
below:
1. Launder and dry clean the clothes from the Red Oak which charges $52 per month.
2. Self-service in which Franks wash the clothes to the Laundromat.
3. Purchasing laundry supplies in bulk from Mega Mart at a cost of $35 every quarter.
The above information is not useful while purchasing a new dryer and washer. The
information which influence the Franks decision is the price of the appliances and various
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advantage provide by the both appliances in the future is important for couple ( Sakao and
Lindahl, 2015).
3. Cost to launder clothes
For calculation 4.33 weeks per month is taken
(a) Launder clothes to Red Oak Laundry and Dry Cleaning
Cost to launder clothes = $52*4.33=$225.16
(b) Launder clothes to Laundromat
Cost to launder clothes = 3*2*$0.56*$8 = $26.88
Add: Purchasing laundry supplies (converted into weeks) $35/12 = $2.917
Total cost = $26.88 + $2.917 =$29.797
While doing calculation in (a) and (b) part, it can be concluded that (b) option is suitable for
the Franks because the cost is low as compare to (a) part. The Franks should launder their
clothes to Laundromat.
4. For 3 children
Franks charge a fee for $800 per month for each child = $800*3 =$2400
Cost of hiring new employees = $9*40 = $360
Remaining profit = $2400 -$360 = $2040
Yes, the Franks should hire the additional employee how manages the extra children in an
appropriate manner. For hiring the new employees the extra expenses of $360 will be
incurred by the Franks. They should appoint at least 2 employees if they have already 3
employees.
5. Letter to the Franks advising them on their space options.
1/1/2019
To Franks,
Re: Advice regarding whether they operate child care business at home or space rent
in town.
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After considering the all aspects of cost in detail manner, the accountant advice to the Franks
to operate their child care business at home. It is reasonable and cost saving to them. All the
calculations are mentioned below which specifies that they should operate their business
operations at home not in rent space.
The following details regarding whether they operate their child care business at home or at
rent space in town:
(a) Operate at home
Cost incurred by the Franks
Particulars Amount ($)
Annual fee charged by state 225
Insurance 3840
Utility cost (50*12) 600
Total cost 4665
Income earned by the Franks (from 6 children)
Particulars Amount ($)
Fees charged from 6 children ($800*6) 4800
Additional charge of $15 per hour for each child ($15*6) 90
Cost of the meals and snack ($3.20*6) 19.2
Total income 4909.2
(b) Operate the facility at rent space in town
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Calculation of cost (for 12 months)
Particulars Amount ($)
Space Cost ($650*12) 7800
Utilities Cost ($125*12) 1500
Additional Insurance
charges
5000
Total costs 14,300
Suggestion:
When the Franks operate their childcare services in the town they have incur $14,300 as an
expenses there. The total costs are increases due to space costs and additional insurance
charges which are high in town. If they charge fee to the parent about $900 then they can
compensate the expenses with this fee. So, it is beneficial to operate the child care services
in the home by doing some renovation in the home which could provide more space to
operate this service in an appropriate manner. They should accept 10 children for caring and
these children are supervised by 3 or 4 adult in a proper manner. They need to hire 5
employees which manage and take care the children in a proper manner (Sakao and Lindahl,
2015).
Regards,
(Sign)
Name of Accountant
Name of Company
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Part B
Question 1
The process of identifying, measuring, analyzing, interpreting and communicating information
to the managers of the organization is known as managerial accounting. The information
relating to managerial accounting and the data used in the managerial accounting helps the
managers of the firm for decision making (Cheng, et. al., 2015). The preparation of non-
financial accounts such as tax authorities and regulatory agencies are also included under
management accounting. The decisions taken by the managers are deeply affected by these
components; the components are briefly discussed below:
Risk management system:
The practices and preparations used to determine, managing, gauging and reporting risks for
attainment and achievement of the objectives and goals of the business. The determination of
risks or the barriers once done, it can gauge the risk (that is it can estimate the volume or
impact of the risk on the company), so that management according to that risk can be done
and it can be interpreted and communicated further to the managers for the process of
decision making (Weygandt, et. al., 2018). If the risks are identified on time and the data is
collected on the time it can let the company know about the barricades and thus a framework
can be prepared accordingly. Thus identification of risks in the business is a primary
component of the management accounting system. The identification of the problems
concerned within the drums of the machines associated with the identification of risks which
might disrupt the business and may be extraordinarily expensive within the long-term within
the case of Canon. Thus if the problem and risks of the canon are identified (Brewer,
Garrison, and Noreen, 2015). The framework and preparations can be done accordingly and
the disruption can be reduced or stopped (Collis and Hussey, 2017).
Performance management system:
It helps in decision making and manages the organization's performance. The organizational
goals are communicated to the employees individually, which allows the individual's tasks and
accountability towards the goals and achievement of objectives, thus this process also helps
in identifying and keeping track on the progress towards attainment of the goal (Gurcanli, Bilir,
and Sevim, 2015). This tool also helps in identifying the ability and performance of each and
every employee, which keeps a record and track of all the workers and employees in the
organization. The decision making is again and again practiced due to this tool. The manager
easily allocates their resources and subsequently track the results in the growth and
expansion of the organization. Canons performance was declining within
the early Seventies and it had been needed to bring one thing new the market to counter
growing threats from Xerox and conjointly at identical time long-faced matters of delivery one
thing which might be valuable for tiny offices and be more cost-effective (Tsai, et. al., 2014).
Each there was hardly any technology accessible thereto impact. This showed that the
management team of the corporate was thinking of the longer term performance and tried to
usher in one thing which might be able to alter the complete market structure for many years
to return within the kind of mini Copper copiers. This showed that the management leaders at
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canon were committed to making a brand new performing arts system that matches their
long-run goals and vision (Fisher and Krumwiede, 2015).
Strategic management:
The process that includes continuous monitoring, planning, analyses and assessment to meet
the organizational goals and objectives is known as the strategic management. The strategies
that are created and applied by the companies are to be done quickly and make decisions
according to them so that the customers are attracted and the competition is also faced
accordingly. To remain successful and achieve the goals and objectives on time the
organization has to make good and competitive strategies. The tactical decisions will also
help the organizations to maintain the qualitative and quantitative features and aspects of the
firm (Otley, 2016). The development of low price in MAC computers project undertaken by
Apple was the associate degree instance of operating toward the accomplishment of a
visionary goal and transportation the low price universal computers to the plenty. The success
of the project can be stapled right down to not solely strategic vision displayed by the leaders
of the corporate however by a high level of commitment shown by the team members
engaged within the style and development method (Dale and Plunkett, 2017).
Question 2
In this case, the end result of social interaction which had created new information
regarding business was the example of innovation. Just because of the increment in
the social transactions all this innovation was possible. The contribution of
management accounting in this process is as follows:
 It helps in identifying the risks before time and also helps in determining the barricades
of the firm.
 As it helps in identifying the issues to the earliest, the preparations and framework can
also be done accordingly, the management is able to easily make decisions.
 Economic trends are also included in these reports of management accounting which
would help the managers and the firm to get new and creative ideas for the firm
(Estrada and Romero, 2016).
 The management accounting system will be required in the new interactive process of
developing ideas. Thus a decision is only based on these inputs.
 The tech and new benchmarking would not be possible without the deep collaboration
of management accounting system. Hence the management accounting system helps
in giving innovative ideas and new idea generation (Cokins, Cherian, and Schwer,
2015).
 Whether the innovation involves the design of the merchandise as within the case of
the canon or the event of a completely new product as incontestable within the case of
Apple, the management accounting system remains concerned at every step.
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Question 3
Following points are useful for management accountants which help them in
improving their skills and knowledge and also improve the efficiency of the company
in an appropriate manner:
 Before the Silicon Valley revolution took place the Japanese were leading in the
world and a profitable and good existence was already taken by them in the product
line. The new ideas were given preference and a renovation in the innovation was
needed by analysing thoroughly whether they make a business sense or not. There
were good discipline and uniformity in the manpower. The example of Canon shows
that if the aim is to get a better idea than the existing one, then even the chaos can
also become beneficial, the MC project put in practice is an example of increment in
effective research through social interaction (Bhimani and Willcocks, 2014).
 However, it should be remembered that making chaos isn't the motive. This involves
putting in place of Associate in a Nursing setting within
which individuals will participate and it may be chaotic however an equivalent could
be a precursor to raised concepts. Concepts may be artistic and are available out of
arguments. Typically concepts may be a mixture of various concepts (Butler and
Ghosh, 2015). But the management and also the participants of the human
process would want to acknowledge the very fact that chaos can’t be allowed to
require precedence and the corporate management should have integrative ability to
convert these concepts into reality. Firms would want to figure wholeheartedly into
developing and giving the concepts a form. But if completely different
concepts square measure being worked upon by different groups then it should be
ensured they don’t overlap and if this not avoided an equivalent wouldn't end
in any kind of synergism (Maas, Schaltegger, and Crutzen, 2016).
 Even in chaotic situations, the leaders come up where the management of the firm is
under high pressure. The leader is not allowed and not advised to action an
autocratic manner but in a catalyst way. The innovative ideas become a mandatory
part for the leader to be done. Even in the chaotic situation, a leader has to take
decisions which are crucial and critical for the organization. Hence the understanding
of the exact situation is very important for companies to come out of chaos such as
Canon (Bromwich and Scapens, 2016).
 Companies would want to develop smaller however capable core teams which might
be needed to require half in intense social interactive sessions to bring out new
concepts and new meanings. They additionally ought to develop and demonstrate a
high level of commitment. Additionally, the most organization would even be needed
to self-organize. Self-organizing necessities terribly high in today's atmosphere as
their interactions would be a lot of emerging and that they would be ready to develop
new meanings from anything (Brands and Holtzblatt, 2015).
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