Managerial Accounting: Cost Concepts and Decision Making Analysis

This report analyzes managerial accounting principles through case studies, focusing on cost concepts, decision-making, and strategic management. Part A examines cost types (fixed, variable, semi-variable) in a childcare business, evaluating options for appliance purchases and employee hiring, and analyzing the feasibility of renting space. Part B explores managerial accounting components (strategy, planning, and controlling) within Canon Inc. and Apple Inc., analyzing their innovation processes. The report demonstrates the application of cost analysis, financial calculations, and strategic recommendations to real-world business scenarios. The assignment provides detailed calculations and recommendations, including the evaluation of different laundering options, the impact of hiring additional employees, and the comparison of different accommodation scenarios for the childcare business. The analysis incorporates financial statements, net profit margins, and strategic insights to support decision-making.

Running head: MANAGERIAL ACCOUNTING
Managerial accounting
Name of the student
Name of the university
Student ID
Author note

MANAGERIAL ACCOUNTING
Table of Contents
Part A:........................................................................................................................................2
Answer to requirement 1:...........................................................................................................2
Answer to requirement 2:...........................................................................................................2
Answer to requirement 3:...........................................................................................................2
Answer to requirement 4:...........................................................................................................2
Answer to requirement 5:...........................................................................................................2
Part B:.........................................................................................................................................2
Answer to requirement 1:...........................................................................................................2
Answer to requirement 2:...........................................................................................................3
Answer to requirement 3:...........................................................................................................3
References and Bibliography list:..............................................................................................3

MANAGERIAL ACCOUNTING
Part A:
Answer to requirement 1:
There are three types of cost that is discussed in the case study of running the business
of child care. These costs consist of variable costs, semi variable cost and fixed cost. Types of
costs discussed in the case study are listed below:
Different types of costs Example from the case study
Fixed cost
Fixed costs are the costs that are incurred by the
business in a fixed amount and such costs are
independent of the level of output produced or
service provided (Elmassri et al. 2016). For
running the business, it is required to incur this
fixed cost.
The annual fee paid to the state by the couple to
maintain the license for running the business is a
fixed cost. Total amount of fixed cost paid for
annual fee is $ 225. In addition to this, the cost
incurred for insurance on annual basis is also the
fixed cost with an amount of $ 3480.
Variable cost
Variable costs are the cost that is incurred by the
business for the service provided or the output
produced (Albrecht et al. 2017). Such costs
vary with the change in the total number of
services provided or in the given case , it would
vary with the change in the number of children
for which the care is being taken
The utility cost for running the business is a
variable cost.
The cost of snack and meal per day is also
variable and such costs would increase with
increase in the number of children served.
Total salary paid to employees can also be
considered as variable cost.
Semi variable cost
Semi variable cost is the costs that remains fixed
for certain time and it starts increasing thereafter.
License fee in some respect can be considered as
semi variable cost because a fixed amount is
incurred when total of six children is provided
care and increases with the increase in number of

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children.
Energy cost incurred is also a semi variable cost
as it will increase after certain period of time.
Answer to requirement 2:
The decision to purchase the appliances is dependent upon the total amount of
operating expenses and total amount that is required to be invested initially. Total amount of
investment include the cost of dryer, cost of washer, delivery charges of appliance sand cost
of installation. Operating expenses include Laundering charges, laundry agency cost, energy
cost of dryer and washer along with the laundry charges and laundry supplies. Therefore, the
total outflow of cash is an important determinant when deciding about the purchase of
appliances. On other hand, the decision to purchase the appliances is not dependent upon the
information about the cost of old appliances or the license fee.
Answer to requirement 3:
The couple has three options of laundering the clothes and the determination of
feasible option that would result in incurring lowest outflow of cash is evaluated by analyzing
the revenue and cost figures. The option one is about rental service that would be received
from laundry service provider where the couple has to incur the monthly expense without
making any initial investment. A total annual expense to be incurred under this option is $
624. Now, opting for the Laundromat service is the second option available to the couple for
which they are required to incur an annual expense of $ 730.27. The third option is to
purchase new dryer and washer for which it is required to take into consideration wide
varieties of cost. Total investment that has to be incurred is $ 878.72 with the total monthly

MANAGERIAL ACCOUNTING
operating expense of $ 42.90 and such costs includes depreciation, energy cost for dryer and
washer and supply of laundry for Laundromat. The total cash outflow that would be made by
the couple under this option is $ 1384.41. Therefore, from the analysis of the figures relating
to the total outflow of cash, it is seen that the option 3 for purchasing the new dryer and
washer would have the maximum outflow of cash. Therefore, it would be viable for the
couple to chose option one that is seeking rental service from Red oak laundry and dry
cleaning.
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
Less: Depreciation $9.15
Total Cash Out Flow $624.00 $730.27
$1,384.4
1
Answer to requirement 4:
This requirement addresses the feasibility of hiring additional employees with the
help of detailed calculations. One additional employee can be hired by the couple for $ 9 per

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hour and 40 hours per week. Such analysis can be done by computing the total profits derived
by hiring additional employee and additional labor charges per month. The couple would be
able to serve three additional children by hiring an additional employee and the total amounts
of revenue generated per month by hiring additional employee comes to $ 2400. Now, it is
required to observe the figure concerning the labor charges per month which includes total
number of employee, labor charges per hour and labor hour per week. Total amount of labor
charged per week is coming to $ 1558.80. It can therefore be ascertained that the additional
revenue from hiring one additional employee is more than the additional labor charges per
month. Hence, the additional profit generated per month by hiring additional employee is $
841.20. Therefore, it is recommended to Fran to hire additional employee as it is generating
additional profit. However, it is also required to consider one factor that would increase the
total cost that is cost of license. This is so because the license fees are paid by the couple to
the state for a maximum of six children and hiring of additional employee would increase in
the total number of children taken care of to 9. This would also create an upward push on the
license fee paid on annual basis.
Amount
Additional Nos. of Children 3
Revenue per Child $800.00
Additional Revenue per Month
$2,400.0
0
Nos. of employee 1
Labor Hour per week 40
Labor Charges per hour $9.00
Additional Labour Charges per
month
$1,558.8
0
Additional Profit per month $841.20

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Answer to requirement 5:
The option of renting the space or continuing with the existing facility is evaluated by
the determination of net profit margin under both the cases. Under the current
accommodation, it is seen that the business is able to provide day care service to six children.
Total amount of net profit generated comes to $ 3564.30 with the total percentage of net
profit margin at 74.26%. Now, under the new accommodation, maximum of 14 children can
be taken care of and it is observed that with the increasing number of children being served,
the total amount of expenses incurred is increasing. In addition to this, the net profit margin is
decreasing continuously from 62.66% when six children are served to 35.32% when
maximum of 14 children are served. Therefore, when comparing the figures of expenses and
net profit margin, the couple under the prevailing accommodation is generating higher net
profit margin with lower amount of total expenses incurred. Hence, it would be feasible for
the couple not to move to rented space and continue their business of day care in their
existing home (Butler and Ghosh 2015). Since, it is viable to continue in their existing space;
the maximum of six children should be accepted and they are not required to hire any
additional employee.
Current
Accommodation
New
Accommodation
New
Accommodation
New
Accommodatio
n
New
Accommodation
New
Accommodatio
n
New
Accommodation
New
Accommodation
New
Accommodatio
n
New
Accommodatio
n
Nos. of Children 6 6 7 8 9 10 11 12 13 14
Revenue per Child per month $800.00 $800.00 $800.00 $800.00 $800.00 $800.00 $800.00 $800.00 $800.00 $800.00
Cost of Meals and Snacks per child p.m. $96.99 $96.99 $96.99 $96.99 $96.99 $96.99 $96.99 $96.99 $96.99 $96.99
Nos. of Employees Required 0 0 1 1 1 2 2 2 3 3
Salary per employee p.m. $1,558.80 $1,558.80 $1,558.80 $1,558.80 $1,558.80 $1,558.80 $1,558.80 $1,558.80 $1,558.80 $1,558.80
Total Revenue p.m. $4,800.00 $4,800.00 $5,600.00 $6,400.00 $7,200.00 $8,000.00 $8,800.00 $9,600.00 $10,400.00 $11,200.00
Total Cost of Meal & Snacks ($581.95) ($581.95) ($678.94) ($775.94) ($872.93) ($969.92) ($1,066.91) ($1,163.90) ($1,260.90) ($1,357.89)
License Fees per month ($18.75) ($18.75) ($18.75) ($18.75) ($18.75) ($18.75) ($18.75) ($18.75) ($18.75) ($18.75)
Insurance p.m. ($320.00) ($416.67) ($416.67) ($416.67) ($416.67) ($416.67) ($416.67) ($416.67) ($416.67) ($416.67)
Utility Cost p.m. ($50.00) ($125.00) ($125.00) ($125.00) ($125.00) ($125.00) ($125.00) ($125.00) ($125.00) ($125.00)
Depreciation of Building p.m. ($265.00)
Rent p.m. ($650.00) ($650.00) ($650.00) ($650.00) ($650.00) ($650.00) ($650.00) ($650.00) ($650.00)
Salary of Employee $0.00 $0.00 ($1,558.80) ($1,558.80) ($1,558.80) ($3,117.60) ($3,117.60) ($3,117.60) ($4,676.40) ($4,676.40)
Total Expenses ($1,235.70) ($1,792.37) ($3,448.16) ($3,545.15) ($3,642.14) ($5,297.94) ($5,394.93) ($5,491.92) ($7,147.71) ($7,244.70)
Net Profit per month $3,564.30 $3,007.63 $2,151.84 $2,854.85 $3,557.86 $2,702.06 $3,405.07 $4,108.08 $3,252.29 $3,955.30
Net Profit Margin 74.26% 62.66% 38.43% 44.61% 49.41% 33.78% 38.69% 42.79% 31.27% 35.32%

MANAGERIAL ACCOUNTING
Part B:
Answer to requirement 1:
The firms usually take into accounts strategy, planning and controlling in their
decision making process and these three components forms the part of managerial
accounting. Controlling is the process that helps in evaluation of the object and influencing
the outcome relating to cost and process management whether they are within or outside the
acceptable range. Planning is the components that occur at all the level and it intends to
maximize the profits for the action that is taken. Strategy development helps in creating a
relationship between strategic endeavors and day to day activities (Brewer et al. 2015).
This section demonstrate an understanding of the innovation process of the two
organizations that is canon Inc and Apple Inc by referring to then given case study. From the
analysis of the case study, it was ascertained that the entire paper copier market of Cannon
Inc was reconceptualized. The negative relationship between the reliability and cost for mini
copier was managed by the actualization of mini copier. It was required by the management
to make an improvement in the drum and cleaner durability. Therefore, it intended to develop
the mini copier that would be maintenance free which was done by treating the drum as
module that after making several numbers would be redundant (Nasseri et al. 2016). The
capability of Canon was enhanced due to development of such module.
Assessment of the cost group and quality in the planning stage can be regarded as
another component of management accounting. The process of planning was developed by
setting the standard of quality in terms of fusing, charging and cleaning. Cartridge was the net
technological development which became continuous and spread throughout. The task force
system helped in the planning development and product completion (Apostolou et al. 2015).

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Hence, the enhancement of organization’s capability resulted in bringing benefits and
knowledge based expansion.
The components of managerial accounting were also incorporated in the product
development process at Apple Inc. Apple intended to revolutionized the Mac computers
because of its higher price and its revolutionization was done by incorporating the Xerox parc
technology. The interaction between the software and hardware people was optimized with
an intention to make Mac self organizing (Shields 2015). However, due to lacking technology
and lacking coordination between the Apple member and Mac failed to reverberate some of
the innovations all the way through the company.
Producing the Mac in an inexpensive manner by Apple Inc was the controlling factor
that was to be done by setting low target price in a highly automated factory. Because of
complications in the product development process, the CEO of Apple was to perform critical
role and this helped in enhancing the process of decision making with the organization.
Development of Macintosh resulted from the innovation in the product and the innovations
were made in the base dimension of the product that made the computer with the help of
distinct deign and more compact. Hence, some of the important contributors in the
development process of the product were controlling and decision making.
Answer to requirement 2:
This section of the assignment demonstrates an understanding iof how the
management accounting contributes to the process of innovation. Management accounting
are described a a set of procedures that assist in decision making, planning and monitoring by
providing valuable insights. The control system and tool of management accounting
contributes to the success of process of innovation within an organization. Innovation has
become a way forward with the help of management accounting as it contributes to the

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uniqueness of the product, technological competences and competitive pressures (Baldenius
et al. 2015).
From the given case study of Apple and Canon Inc, it has been found that it is the
social interaction created by the team that helps in processing information with the help of
innovation. Development of mini copier by canon Inc and Macintosh by Apple Inc resulted
from the innovation that helped in enhancing the capability of the organizations.
The entire plain paper copier recapitalization was the innovation process at Canon
Inc. The entire project team was gathered outside the workplace that generated new solutions
by brainstorming the contradiction of Copper. Making the mini copier fundamentally
maintenance free was the innovation that arose due to evolvement of innovation resulted
from meeting up of people in a team. Development of photo receptor, toner fuser and
disposable apparatus set within the target cost was another innovation.
For the Apple Inc, development of Macintosh computers due to the incorporation of
new features and ideas due to constant interaction between the team members can be
regarded as one kind of innovation. Innovation accounted for the telephone transformative
role by rethinking on the personal computers features and basing their dimension in the form
of telephone book.
Answer to requirement 3:
In this section, the findings generated from the case study are demonstrated along
with its importance to the management accountants of Australian companies. It was found
that the innovation at both the organizations was quite different. At the Apple Inc, venture
capital creation and constant flow of entrepreneurs are the factors determining the innovation
success and growth. On other hand, for the Japanese firm where the market is considered to
be highly competitive, the constant flow of innovation helps in ensuring growth (Nonala and

MANAGERIAL ACCOUNTING
Kenney 1991). Therefore, the firms are required to create an environment of transmitting new
ideas in an economy that is rapidly changing.
It has been found that new information emerged due to creation of chaos by the
creation of such environment with the help of an involved and careful management. The
innovation process provided the raw material for the theoretical project and the process of
innovation was reconceptualized with the help of such raw material because the deduction or
induction did not form the base of human based activity. Therefore, emergence or synthesis
forms the basis of such emphasis. Moreover, it was also analyzed by evaluating the case of
Canon Inc that the spin offs resulted in revitalization of the new product lines that helped in
the creation of mini copier. The company propelled forward because of the powerful stimulus
due to the transformative capability of the company (Nonala and Kenney 1991).
Management accountants now a day are expected to play the role of information
provider and decision makers resulting from the innovation development process and
growing complexities. Management accounts should be able to generate and create new ideas
that help in transmitting of such information thought the firm. Functioning of the accounts are
made effective by the chaos introduction in the research and development division. In order
to avoid the integrative capabilities of the company, accountants should not be overwhelmed
with the chaos (Phillips 2019).
Management accountants should be aware of the facts that is derived from the case
study that the communication of syntactic information created which the particular channel
creates is not consistent with the semantic information. The boundaries between different
departments of the corporation should be well understood. The role of leader should be well
understood by them and creation of information that acts as the catalyst should b attempted to
be maximized. It is also to be accounted by the management accountants that the use of

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analogies and metaphor helps in the creation of understanding and conceptualization (Nonala
and Kenney 1991). Therefore, analysis of the case study generates an useful insights into the
works of management accountants for Australian companies.