HI5017 Managerial Accounting Case Study: Costing, Hiring & Location

This document presents a comprehensive solution to a managerial accounting case study, focusing on costing methods, decision-making processes, and strategic analysis. The solution covers various aspects, including the identification of relevant and irrelevant information for decision-making, cost computations for laundry alternatives, and the evaluation of hiring additional employees. It further analyzes the option of choosing between a rental place and an existing home place, determining the optimal number of children to serve, and assessing the financial implications of each choice. Additionally, the document includes a critique of a journal article, examining the management accounting systems in two companies, the innovation process, and key outcomes. Desklib offers a wide range of resources, including past papers and solved assignments, to support students in their academic endeavors.

HI5017
Managerial Accounting

Contents
PART-A......................................................................................................................................................3
Case study...............................................................................................................................................3
1. Types of costing and examples for at least three costing of business...................................................3
2. Identify the information relevant to the decision and information which are irrelevant to make
decision to buy appliance........................................................................................................................4
3. Cost to be incurred by Couple for the laundry and computation..........................................................4
1. Purchase of the Appliance (alternative 1)........................................................................................4
2. Self-Delivery service laundry (Given alternative-2)........................................................................6
3. Delivery laundry service (alternative 3)..........................................................................................6
4. Frank decision to hire additional employees? Computation.................................................................7
5. Option to take rental place or existing home place? Number of children to be served and additional
employees to be hired?............................................................................................................................8

Existing current location..........................................................................................................................8
Option B: Move to a larger facility........................................................................................................10
Part B: Journal Article Critique.................................................................................................................12
1. Given parts of the management accounting system in two companies and its relevance.......................12
2. Innovation process in firm described in article accompanied with the innovation that needs to be
organized to transmit new information and how MAS contributes to innovation process.....................14
3. 4 specific outcomes and lesson learned for the journal articles (Two outcomes)...............................15
References.................................................................................................................................................17

PART-A
Case study
1. Types of costing and examples for at least three costing of business
In organization, there are several cost incurred to operate the business effectively. However,
below are the following type of costing given as below (Biondi, Gulluscio, Rossi, A., and
D'Alessio, 2017).
Fixed cost: - This is related to the annual licensing fees charged on the business. It is fixed and
does not change with the changes in the production unit. The annual cost is $ 225 for the given
year.
Incremental fixed cost- This is the cost which is kept fixed but changes with the changes in time
and does not vary with the changes in the time. The incremental cost is related to $ 120 which
was incurred for the washer.
Variable cost: - This cost incurred on the production unit and vary accordingly. However, this
cost changes with the changes in the production unit. This could related to the changes in the rate
of the mileage which will be changed with the changes in the total derived unit in process
(Biondi, Gulluscio, Rossi, A., and D'Alessio, 2017).
2. Identify the information relevant to the decision and information which are irrelevant to make
decision to buy appliance
It is analyzed that there are following cost information which are used to assess the decision
making related to buying the appliance. However, cost related to investment, return on capital
employed and other factors are considered for the same.
 Initial capital investment to buy new appliance
 Cost related to the installation of the appliance
 Other operating cost

It is found that each and every alternative will have different total cost and operating cost. For
instance, self-delivery option will be having higher self-drive cost related to the time and
expenses incurred on the petrol (Chenhall, and Moers, 2015).
Irrelevant information
In the given scenario, there are several information which are considered irrelevant for the
selection of the particular option, such as cost related to the existing appliance, cost incurred for
the detergent and other delivery alternative cost. The qualitative intents of the last appliance will
be irrelevant to opt for the new option.
3. Cost to be incurred by Couple for the laundry and computation
1. Purchase of the Appliance (alternative 1)
Particular Detailed computation $
Incremental annual energy
cost
120+145 265
Depreciation SLM Charged depreciation
Depreciation cot of the
appliance (SLM)
Washer 420.00
Dryer 380.00
Installation 43.72
Delivery 35.00
Total cost (related to
appliance) 878.72.
109.84

Life term of the appliance 8
years
Annual depreciation charge =
$878.72/8 = 109.84
Detergent cost Annually 140
Total Cost annual $514.84

2. Self-Delivery service laundry (Given alternative-2)
Computation of the self-Delivery service laundry (Given alternative-2)
Particular Costing $
Self-service driving (6 miles a week*.56 per
mile *52 weeks)
174.72
Cloths laundering cost (8 per week * total 52
weeks = 416.00)
416
Detergent cost ($35 per quarter *4 = 140.00) 140
Total cost 730
3. Delivery laundry service (alternative 3)
The estimation of the delivery laundry service in altenative-3 is given as below.
Particular Detailed $
Cost of pickup and delivery charges 52 per month *12 624.00
Total cost 624.00

The total cost of the appliance to be incurred in the process would be $514.84,
The total operating cost to be charged in the process would be $730.72.
The total pickup and delivery cost for the appliance to be incurred in the process $624.00.
Therefore, it is inferred that the option incurring low cost is selected by Frank.
4. Frank decision to hire additional employees? Computation
It reveals the incremental analysis related to the hiring of the employees if more children are kept
in process.
Particular Detailed computation Amount
Revenue increased 3*$800 $2400
Reduced by
Additional employee costing $9.00 / hour * 40 hrs* 4.33
wks
$1558.80
Food cost $3.20*3*5*4.33 207.84
INCREMENTAL Cost $1,766.64
Contribution $633.36

It is found that Frank would be able to generate incremental revenue of $ 2400 when the
additional employees are taken.
The incremental cost of hiring employees would be $1,766.64.
Therefore, additional profit would be $633.36.
Decision
Therefore, it is inferred that Frank should hire additional employees as it will increase the overall
profit.
5. Option to take rental place or existing home place? Number of children to be served and
additional employees to be hired?
Existing current location
This shows the costing of the 6 children and 9 children to be served by Frank in his process.
Particular 6 children 9 children
Revenue (@ 800 per child) 4800 7200
Less: Expenses
Meals cost
($3.20 per child*5 days a week* no of child* 4.33 weeks)
415.68 623.52
License costs
($225.00/12)
18.75 18.75
Insurance costs 416.67 416.67

(5,000/12)
Cost of laundry ( alternative 1)
(514.64/12)
42.90 42.90
Depreciation Expenses
($79,500/25 years) = $3,180.00/12 = $265.00
265.00 265.00
Utilities expenses 50.00 50.00
Rent expenses 0.00 0.00
Employee costs 0.00 1,558.80
Total costs
Net income 3,687.67 4,321.03
If 6 children are accepted then profit would be $3,687.67
Incremental revenue generated by Frank would be $2400 if additional employees are hired.
Costing of additional employees would be $1,766.64.
If the additional employees are hired then the profit would be $633.36.

Therefore, Frank should accept the offer of hiring additional employees.
If 9 children are served then additional employee costing $ 1766 would be incurred and I will
result to profit of $2400
Option B: Move to a larger facility
This option include serving higher number of children by taking the big place.
Particular 12 children 14 children
Revenue (@ 800 per child) 9,600 11,200
Less: Expenses
Meals cost
($3.20 per child*5 days a week* no of child* 4.33 weeks)
831.36 969.92
License costs
($225.00/12)
18.75 18.75
Insurance costs
(5,000/12)
416.67 416.67
Cost of laundry ( alternative 1)
(514.64/12)
42.90 42.90
Depreciation Expenses 0.00 0.00

Utilities expenses 125.00 125.00
Rent expenses 650.00 650.00
Employee costs
($9/hour x 40 hours/week x 4.33 weeks/month=1,558.80*2 and
*3)
3,117.60 4,676.40
Total costs 5,202.28 6,899.64
Net income 4,397.72 4,300.36
It is found that if 12 children are served then profit would be $ 4397.
If children are kept 14 then profit will reduced to $4,300.36.
Therefore, it is inferred that only 12 children should be served by Frank if he wants to have
higher profit (Collis, and Hussey, 2017).
Part B: Journal Article Critique
1. Given parts of the management accounting system in two companies and its relevance
Management accounting includes the provision and preparation of information related to statics
and finance to the managers of the business. This includes the internal systems that are used by
an organization to evaluate and measure the management process. This is not regulated by the
law and helps in internal decision making. Both non-monetary and monetary information is
included in management accounting. This information will help the managers to take managerial
decisions. Periodic reports are the result of managerial accounting. These reports are confidential
and internally used by business managers. These reports help the company to run the company in