Holmes Institute HI5017: Managerial Accounting Case Studies Analysis

This assignment solution for HI5017 Managerial Accounting presents a comprehensive analysis of several case studies, focusing on cost concepts and their application in decision-making. The solution begins by defining and providing examples of different cost types, including fixed, sunk, and variable costs. It then analyzes relevant and irrelevant information in purchasing decisions, followed by detailed calculations of costs associated with various service options, such as self-service laundry, delivery laundry service, and purchasing new appliances. The assignment further explores a hiring decision, calculating the financial impact of employing an additional staff member. Finally, the solution offers strategic advice to a daycare facility regarding space options, considering revenue, expenses, and employee requirements for different operational scenarios. The solution includes a critique of a journal article, analyzing the role of management accounting in innovation processes within Canon Mini Copier and Apple Computer companies, providing examples of how accounting information enables effective business decision-making and achievement of business goals.

Managerial Accounting, Case Studies
MANAGERIAL ACCOUNTING, CASE STUDIES
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MANAGERIAL ACCOUNTING, CASE STUDIES 2
Question 1
List three different types of costs with one specific example of each cost.
Cost specific example
1. Fixed cost the license fee of $225 annually. The license fee will remain
constant no matter the number of activities taking place in
the childcare changes. It’s not affected by changes in
childcare. For example, an increase or decrease of children
enrolled will not affect the amount payable for the license
fee.
2. Sunk cost home renovation cost of $79500.this cost has been incurred
and cannot be recovered. This cost cannot be included in
future decisions because it’s impossible to recover it.
(Ferreira, Moulang, & Hendro, 2010 pp342-351).
3. Variable cost the total cost of the amount spent on food and snacks at the
rate of $ 3.20 per child will change with the change in the
number of children enrolled. When the number of children
enrolled increases, so does the cost of meals and snacks
and vice verse.
Question 2
Relevant and irrelevant information to the decision to purchase the appliances
with reasons
Relevant information
In case the franks make a decision to buy the appliance the following costs will be
relevant to consider for comparing the cost difference among the three options they
have.
 The cost of the appliances
 The additional cost of utilities
 The cost of installation of the new appliances
 Cost of delivery of the new appliances

MANAGERIAL ACCOUNTING, CASE STUDIES 3
The above costs will help the franks determine the total cost required for purchasing a
new appliance which will help to compare with the cost of the other two options. The
following costs are also relevant in a case where the franks need to compare the
options.
 Self-service laundry total cost which will include the cost of detergent.
 Delivery and pick-up cost if they decide to choose laundry service.
Irrelevant information
 The cost of the old appliance
The cost of the old appliance is a sunk cost and it’s irrelevant in this case because it has
already been incurred and cannot be used to make future decisions which are
purchasing a new appliance in this case, thus it’s irrelevant. ( Ferreira, Moulang,&
Hendro, 2010 pp342-351).
Question 3
The cost incurred by the couple to launder clothes with detailed calculations for each
option.
 Self-service laundry
Self-service laundry total cost will be equals to the summation of the following cost;
Cost of laundering clothes 416.00
Cost of driving 174.72
Cost of detergent 140.00
Total cost $730.72
Working notes
Cost of laundering clothes = $8.00 per week* 52 weeks = $416.00
Cost of driving to laundry and back = 6 miles per week * $0.56 per mile = $3.36 per
week * 52 weeks=$174.72.
3 miles is one way so we multiply by 2 to get 6 miles.
Cost of detergent = $35 per quarter * 4 quarters = $140.00
 Delivery laundry service
Monthly cost of delivery service $52.00 * 12 months = $624.00

MANAGERIAL ACCOUNTING, CASE STUDIES 4
 Purchase new appliances
The annual cost of appliances $109.84
Increase in an annual cost of energy (145 + 120) 265.00
The annual cost of detergent 140.00
Total cost annually $514.84
Working notes
Dryer 380.00 + washer 420.00 + delivery 35.00 + installation 43.72 = $ 878.72 total cost
$878.72 is the total cost of the appliance for 8 years; therefore we divide the total
amount by 8 to get the annual cost of the appliance.
878.72/8 =109.84 (the cost for one year since the appliance has 8 years existence)
Question 4
The Franks have a waiting list for their daycare. They can hire an employee for $9
per hour for 40 hours each week. With the additional employee, the Franks can
accept three additional children. Should the Franks hire the additional employee?
Show your detailed calculations.
 Additional cost
Additional employees cost = $9 per hour * 40 hours per week * 4.33 weeks = $1558.80
in a month
Additional cost of food and snacks = $3.20 per child per day * 3 children * 5 days per
week * 4.33 weeks per month = $207.84
Total = $1766.64
 Additional revenue
3 children * $800 per month = $2400.00 in a month
Therefore;
Revenue minus cost = profit / loss
2400.00 – 1760.64 = $633.36

MANAGERIAL ACCOUNTING, CASE STUDIES 5
Conclusion; additional revenue exceeds the additional cost by $633.36 which is a net
benefit to franks hence they should hire the additional employee.
Question 5
5. The Franks home can accommodate a maximum of nine children. They can
move the daycare from their home to rented space in town, which can
accommodate up to 14 children. Space will cost $650 per month and the utilities
will cost $125 per month. Additionally, insurance will now cost the Franks $5,000
per year. Per state regulations, each adult can supervise no more than three
children. As their accountant, prepare a letter to the Franks advising them on
their space options. Should they continue to operate the facility at home or
should they rent space in town? How many children should they accept? How
many employees will they need to hire? Show your detailed calculations for each
scenario. (3 marks)
Option 1, Remain in the current location
With 6 children with 9 children
Revenue $ 4800.00 $7200.00
Expenses
License 18.75 18.75
Insurance 320.00 320.00
Meals 415.68 623.52
Employee 00.00 1558.80
Utilities 50.00 50.00
Laundry 42.90 42.90
Depreciation 265.00 265.00
Total income per month $ 3687.67 $4321.03
Option 2, move to a bigger facility
With 12 children with 14 children
Revenue $ 9600.00 $11200.00

MANAGERIAL ACCOUNTING, CASE STUDIES 6
Expenses
License 18.75 18.75
Insurance 416.67 416.67
Meals 831.36 969.92
Employee 3117.60 4676.40
Utilities 125.00 125.00
Laundry 42.90 42.90
Depreciation 125.00 125.00
Total income per month $4397.72 $4300.36
Working notes
1. Revenue = $800 per child per month * 6 children * 12 months
2. Insurance = 5000 annually /12 months = $ 416.67
3. License = $225 annually / 12 months = $18.75
4. Meals = $3.20 * per child per day * number of children * 5 days / week * 4.33 weeks/
month
5. Laundry = option 2 (move to a bigger facility) $514.84/12 =42.90
6. Depreciation = ($79500/25)/12 months = $265.00
7. Employee = $9 hours * 40 hours * 4.33 weeks =1558.80
Part B: Journal Article Critique
Components of the management accounting system in each of the two
companies and their relevance in enabling decisions to be made efficiently and
effectively
Case study 1: The Canon Mini Copier

MANAGERIAL ACCOUNTING, CASE STUDIES 7
Planning
Planning is a fundamental management accounting function which involves
deciding before action. it involves deciding what you want to do when it’s going to be
done, how it’s to be done and who to do it. It lays down the firm's objectives and comes
up with various courses of action. Planning helps an organization to know how to attain
its goals and objectives.
In the case study of the canon mini copier planning enabled them to make
decision making effective and efficient. On the planning stage, the group did the quality
assessment and cost assessment. Quality assessment enabled them to make decisions
on what they required to achieve their target quality of micro copier. Cost assessment
helped them to know the required budget and whether it was favorable since their target
was a micro copier with quality features, smaller in size and at a lower cost making For
example, quality assessment projected the usage pattern for micro copiers which led to
a decision of repairing frequency of television sets in order to set quality standards of
charging, exposure, development, cleaning, and fusing and regulate the pricing.
Directing
To achieve a set plan there must be good coordination and proper timing.
Required recourses must be ready and authorization needs to be in place to direct
people work according to the set plan. (Smith 2017 p17) Directing is done by the
management to guide the firm towards the achievement of set goals and objectives.
Leaders should ensure a good working environment to encourage the success of the
company. For example, at the beginning when the canon was having a managerial
crisis it made it impossible for the company to deal with divers effectively, this is
because there was lack of flexible corporate structure hence lost direction and
coherence. Canon had restructured and started to prosper again.
Case study 2: Apple Computer and the development of the Macintosh12
Planning
Apple Computer Company’s goal was to manufacture a smaller computer with
excellent features. They needed a computer which would be affordable to the public.
For the group to achieve its goal it needed a plan in orders to know what to do, what
they need and who to do it. The engineers had to crystallize the problem and the
solution simultaneously, they needed a plan for the project which led to better decision
making which led to the success of the project.

MANAGERIAL ACCOUNTING, CASE STUDIES 8
Directing
The macintosh12 team had strict management of Steven jobs who always gave
them a sense of direction, although his decision was final and was not ready to accept
views from the team he actively participated in the project together with the
manufacturing engineers directing on the way forward to the achievement of their set
goal. Directing led to a good working environment which contributed to the success of
the company. Steven jobs role as a leader was more of directing, he made slogans
which encouraged the team to work towards the achievement of the set goal.
Question 2
Explain how management accounting contributes to this innovation process.
Include in your discussion two specific examples from each of the two
companies mentioned in the journal article.
According to Smith excellent application of management, accounting helps in
planning and constructing business activities in a systematic order, formulating effective
strategies and techniques to reach the set goals. It also helps the firm in making the
right financial decisions by making use of the right strategies. The Strengths and
sustainability of a business rely on management accounting. It gives factual information
related to the forecasted figures hence allowing the management to take the right cost
controlling measures. In addition, it provides timely feedback in relation to the present
operational activity, hence assisting in a re-evaluation of decisions being used thus
having better control over the business activities. (Smith 2017 p56)
For example,
Case study 1: The Canon Mini Copier
Management accounting played a major role in the innovation process of the
canon mini copier company through total cost management. Total cost management
refers to the cost of quality and quality-related outcome. For example; in this case, the
canon company was aiming at manufacturing a mini copier with quality characteristics
like the large copier machine but at a lower cost, thus management accounting
contributed to the process through the cost management group which helped in
considering the costs to ensure minimum cost where possible for them to make it more
profitable and affordable. The company wanted the copier to be priced at approximately
$ 1000. To achieve this they needed a budget to follow and better strategies of using
the available recourses economically.

MANAGERIAL ACCOUNTING, CASE STUDIES 9
Management accounting also contributed to the process because the cannon
had good management which worked together with the group throughout the processing
period giving direction and controlling the whole process hence leading to the success
of the project. When the company had a management crisis, it started to deteriorate
until it was restructured and things started to change thus proper management was very
important for the project. This is great evidence of how management can affect the
performance of activities of a company.
The company also practiced planning by having cost assessment group and
quality assessment group which had the responsibilities of coming up with Intel to help
the company asses and plan on budget of money required and recourses needed for
the project. Planning as a component of management accounting contributed a lot to
the canon project.
Case study 2: Apple Computer and the development of the Macintosh12
Apple Computer Company benefited from the contribution of management
accounting by using the principle of management accounting of directing. The apple
company had strong top management under the leadership of Steven jobs who was
working with the engineers and the whole group directing them to the achievement of
their set goal and adhere to the plan. Although the leadership of Steven jobs used
bureaucratic leadership he gave the Mac team a direction and his slogans directed the
team towards making a better computer and touch everyone’s life. Apple leadership
was not good since their leader did not accept idea contributions from his team; his
decision was always final, compared to the canon leadership which was cooperative.
Apple leadership was not good since their leader did not accept idea contributions from
his team; his decision was always final, compared to the canon leadership which was
cooperative.
the macintish12 group at Apple company also used planning to come up with the
innovation of a smaller affordable computers to public, Steven jobs made the engineers
come up with a crystallized plan and a solution to the problem, it’s through planning the
company made strategies got a sense of direction hence the success of the process.
It’s said that at the start the team had no idea of how the computer will look like thus
they needed a plan to strategize activities of the project.
Question 3
Four specific outcomes learned from the article’s research findings that will be useful for
management accountants in Australian companies to learn from, and justify your
answer

MANAGERIAL ACCOUNTING, CASE STUDIES 10
 Supportive management is key to innovation
Management should be supportive to the workers by providing everything needed
for the project on time, that’s it should be reliable. Leaders should always support their
employees and motivate them as a whole to encourage work to be done well. Also,
being part of the working team encourages workers to do better because as their leader
you become a role model to them. (Ward 2012 pp23-45)
According to Ward, during innovation, everyone in the team is usually dealing with
new things and hence they require support from the management and an encouraging
working environment for efficiency since everyone needs to think critically about
something new. During innovation management should avoid too many instructions and
a lot of supervision to give the workers free working space. Too close supervision may
piss off the workers and give the thought of being baby sited. For example, at canon,
management was very supportive of the development of the mini copier. the
management worked together with the team not by giving instructions but actively
participated in the project while still playing their roles as leaders till the success of their
project. At Apple, top management was at first with crisis due to the Mac project which
led to failure but later after restructuring the management, it became supportive and
started to do better. Steven jobs actively worked on the project although they were not
very united. Steven jobs played a good role in giving the team a sense of direction.
 Creating a vision gives a sense of direction
A vision creates the will and energy to make change happen. It inspires companies
and working teams to commit, persist and give their best. A vision is also a practical
guide for setting goals and objective, making a plan, coordinating and evaluating the
work on any project either large or small and also giving a guideline of making
decisions. (Ward 2012 pg 245)
A vision always reminds everyone in the team what they want to achieve and strive
for it. for example in the case study of the Mac team, Steven jobs played a major role by
creating a vision of ‘insanely great’ computer and the ability of the team to ‘make a dent
in the world’ that will touch everyone’s life. These visions enabled the team to work hard
by translating those visions to a real product. Vision encourages extreme efforts to work
and satisfy it. At canon, the vision of AK-1 copier machine led them through the project.
 The use of metaphors and analogies is important during an innovation
Use of metaphors creates an image that people pay attention to, while at the same
time effectively relaying a message that others understand. (Drury 2013 p67)

MANAGERIAL ACCOUNTING, CASE STUDIES 11
Metaphors and analogies are important during difficult times of the project to assist
them to conceptualize those hard moments. They help keep the team moving no matter
what happens on the process and inspire them to come up with a product that will
impact lives. For example, the Apple team was conceived of like a bicycle of personal
computers, the telephone of the 1980s, the Cuisinart and the crank less Volkswagen for
quality conscious.
 Setting a goal to achieve and slogans motivate the working team
Having a goal to achieve makes everyone work harder every day to achieve the set
goal, while a slogan motivates the working team to always work and not give up until
they achieve the set goal. For example, at canon, their slogan was ‘creating the AK-1
copiers’ this used to rally the team to corporate on the mini copier project. This slogan
appealed to their internal goal. The Mac slogan, however, had a universal goal of
furthering computer revolution at an affordable price to the public.

MANAGERIAL ACCOUNTING, CASE STUDIES 12
References
DRURY, C.M., 2013. Management and cost accounting. Springer.
Ferreira, A., Moulang, C. and Hendro, B., 2010. Environmental management accounting
and innovation: an exploratory analysis. Accounting, Auditing & Accountability Journal,
23(7), pp.920-948.
Ward, K., 2012. Strategic management accounting. Routledge.