HI5017 Management Accounting: Case Study, Analysis, and Critique

This report presents an analysis of a management accounting case study, focusing on cost concepts, relevant and irrelevant information for decision-making, and the evaluation of different laundering options, including purchasing appliances, self-service laundry, and delivery services. Detailed calculations are provided for each scenario. Furthermore, the report explores the decision of whether to operate a facility at home or rent a space in town, considering factors such as the number of children to accept and the required number of employees, with calculations for each option. The second part of the report critiques a journal article, identifying the components of the management accounting system and discussing the importance of effective decision-making. The report also discusses the role of management accounting in the innovation process and provides outcomes from the article.

MANAGEMENT ACOUNTING
HI5017

Management Accounting System 1
Table of Contents
Introduction.................................................................................................................................................2
Part A: Case study analysis.........................................................................................................................3
Considering the cost that is discussed in this unit and lists any three (3) types of costs and provide one
specific example of each cost from the case............................................................................................3
2. Based on the information provided, what information is relevant to the decision to purchase the
appliances? What information is irrelevant to the decision to purchase the appliances? Why?...............4
3. What could it cost the couple to launder clothes? Show your detailed calculations for each option....5
. Alternative-1 Purchase of Appliance.................................................................................................5
2. Self-service laundry (alternative 2)..................................................................................................7
3. Delivery laundry service (alternative 3)..........................................................................................7
5. 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..................................................................................................................8
Remain in the current Location...............................................................................................................9
Option B: Move to a larger facility........................................................................................................10
Part b of the case study (Journal Article Critique).....................................................................................12
Risk management system......................................................................................................................12
Performance management system..........................................................................................................13
Strategic management system................................................................................................................14
2. The article is describing the process of innovation in the business unit as a procedure of creation of
information and a firm requires managing them to transmit the new data. Explain how the management
accounting helps in this innovation procedure...........................................................................................14
3. Provide four particular outcomes or learning from the article. Two outcomes of both:.....................15
References.................................................................................................................................................17

Management Accounting System 2
Introduction
The aim of the study is to analyze the relevance of management accounting in a business
organization. Management in the human and business organization can be defined as the set of
people work altogether so that the desired goals can be achieved. It is considered that
management accounting a based on many things like identification of the procedure, calculation,
and measurement, accumulation, and analysis, preparations, interpretation, and also the
communication of the information and data used by the top level of management. It helps them
to plan, estimate and control the organization in an effective and efficient way. The management
accounting system comprises of taking out the data and information from the existing business,
the analysis takes place after that on the same and at last follow up of the decision making that is
suitable for the resources and manpower of the business organization for the long term (Drury,
2006).
Part A: Case study analysis
Considering the cost that is discussed in this unit and lists any three (3) types of costs and
provide one specific example of each cost from the case.
In this case, there have been given many types of cost that involved such as sunk cost, fixed
costs, the variable cost, and incremental cost. The different types of cost that we have discussed
are shown in the below table:
Particular Description
Fixed cost The fixe cost would be the annual license cost. It will not
change with the changes in the volume and it would be fixed to
$225 for a year.
Fixed costs The fixe cost would be the annual insurance cost. It will not
change with the changes in the volume and it would be fixed to
$3840 for a year.

Management Accounting System 3
Fixed cost/Incremental This cost would be energy cost which will increase by $120
(washer) which is an incremental fixed cost. It increases only
once in a year.
Variable costs This cost changes with the changes in the production unit. For
instance, the cost of laundry will change by $52/per month and
it would increase on a per month basis.
Variable costs There will be another example, for instance, the cost of mileage
would increase by 0.56/mile with the change in the production
work.
2. Based on the information provided, what information is relevant to the decision to
purchase the appliances? What information is irrelevant to the decision to purchase the
appliances? Why?
Information and data that is important for the decision of appliances based on the data provided.
The cost that is important in the decision making of the appliances is as follows:
The below-written cost if there needs to buy long term appliances for investing that is decided by
frank
 there is a requirement of initial investment for the purchase of appliances
 there is a particular cost that is needed so that the delivery of the appliances can be made
 there is an installation cost linked with the appliance
 the cost linked to the use of utilities of the appliances

Management Accounting System 4
The following written costs can be considered as important if the writer rank makes a decision on
the same alternatives (Horngren, 2014)
 The cost linked with the laundry services pick and the cost linked with the delivery are the same
 The cost was related to the self-service like laundering cost, mileage cost, cost of detergents and
chemicals used in the laundering (Atkinson, Kaplan, Matsumura, and Young, 2016).
In the present scenario, the below-written costs can be called as irrelevant in making the
decisions and solving the issues:
 The cost and value of the already existing appliances
 The cost of the chemicals and the detergents is irrelevant if Frank make a decision to opt the
alternative for pick and delivery.
In this case, some of the cost is not properly addressed because of the fact that these costs are
related to the spending of time in the Laundromat also the time needed from the Laundromat and
driving to Laundromat. The cost which is discussed above can be an opportunity cost and very
crucial in nature as it is very relevant in making the final decision. The qualitative characteristics
of the cost are defined as the ease of the pickup services of the clothes that are required by the
company and also the delivery which is helpful for the company (M.Datar, and Horngren, 2012).
3. What could it cost the couple to launder clothes? Show your detailed calculations for
each option.
There is below-given analysis to evaluate the available option.
. Alternative-1 Purchase of Appliance
Particular $
Incremental annual energy costs if the appliance is purchased
(120.00+145.00)
265.00
Depreciation cot of the appliance (SLM) 109.84.

Management Accounting System 5
Washer 420.00
Dryer 380.00
Installation 43.72
Delivery 35.00
Total cost (related to the appliance ) 878.72.
Life term of the appliance 8 years
Annual depreciation charge = $878.72/8 = 109.84
Detergent cost (annual) 140.00
Total cost (annual) 514.84

Management Accounting System 6
2. Self-service laundry (alternative 2)
There are below given cosign which are required to be made for the self-service laundry:
$
Driving costs for self-service 6 miles a week*.56 per mile
*52 weeks
174.72
Clothes laundering cost at self-service 8 per week * total 52 weeks =
416.00
416.00
Detergent costs $35 per quarter *4 = 140.00 140.00
Total costs related to self-service 730.72
3. Delivery laundry service (alternative 3)
The below-given cost has been given for the pickup laundry delivery services.
$
Cost of pickup of laundry and its
delivery
52 per month *12 624.00

Management Accounting System 7
The total annual cost of pickup and
delivery
624.00
 It is found that Frank could generate a revenue of $2400 if he adds more additional employees.
 The incremental cost would be $1,766.64.
 Still, the incremental profit would be $633.36.
 Therefore, Frank should accept the project due to its profitability
5. 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.
Remain in the current Location
Option- Providing services to 6 or 9 children through the set process.
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 18.75 18.75

Management Accounting System 8
($225.00/12)
Insurance costs
(5,000/12)
416.67 416.67
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 considered profit would be -$3,687.67 and operating income would be $633.36
to $4,321.03.
Incremental revenue would be to $2400 if additional employees are taken
Additional cost for hiring employees= $1,766.64.

Management Accounting System 9
The additional profit which Frank would have- $633.36.
Frank would accept the project. As for 9 children, Frank would hire one additional employee
and would generate $2400 turnover.
The additional cost would be= $1,766.64. therefore, the project should be accepted.
Option B: Move to a larger facility
This includes area covering more space to provide services to a larger number of children
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) 42.90 42.90

Management Accounting System 10
(514.64/12)
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
If 12 children are accepted then total revenue would be $4,397.72.
If 14 children are accepted then total revenue would get reduced to $4,300.36.
Therefore, Frank should hire only 2 additional employees to serve only 12 children to have
maximum profit.
It is analyzed that if more than 12 children are served then it will increase the variable cost of the
business with a maximum rate and would result in the loss to Frank.

Management Accounting System 11
Part b of the case study (Journal Article Critique)
Identifying the parts and components of the management accounting system in both the
companies and discussing the importance of making the decisions effectively and efficiently
The management accounting system is accompanied with the process of taking out the data and
information from the existing business. This step analysis takes place first after that on the same
and at last, follow up of the decision making that is suitable for the resources and manpower of
the business organization for the long term is done. The management accounting system of both
the companies Apple and Canon consists of the main three components that are
Risk management system
In practical words, the risk management can effectively address the practices, growth, and
development of the framework that perform activities for the gauging of, determination of and
also to the management of risk. It has the potential to decrease the efficiency in the operations
and also to make sure that the business can achieve the set goals and objectives (Drury, 2010).
It is necessary for the running business systems to identify the possible disruptions taking place n
the management accounting system. Once it’s able to find the disruptions, the further need is to
collect the data and information. It is the responsibility of the organization to identify the data
and information when collected effectively. The next step is to analyze the collected data in the
best way they can that helps in the growth and development of the company. This is the way by
which the company fined all alternatives to the issues. There is a need to identify the problems
and issues involved in the techniques that, directly and indirectly, related to the risk that can
affect the business in the long run. In the case of the canon, the risk can be very bigger that can
affect the business for a longer period of time.
Performance management system
The performance management system is an inbuilt part of the management accounting system
that assists in the measurement of the real performance of the period. It also helps in settling
effective differentiation among the actual performance and targeted goals of the company. Due
to this the professionals and the managers of the company find out the deficiency present in the