Management Accounting Assignment: Case Studies and Analysis Report

This management accounting assignment presents three case studies, providing practical applications of financial concepts. Case Study 1 focuses on creating revenue, production, and direct materials budgets for a manufacturing company. Case Study 2 delves into process costing using the weighted average method, calculating equivalent units and cost per unit in a knitting and finishing department. Finally, Case Study 3 analyzes a budget hotel, outlining goals, vision, mission, and strategies for success in the competitive hospitality industry, including revenue management, customer satisfaction, and cost control. The assignment includes references to relevant accounting literature.

1
By student name
Professor
University
Date: 25 September 2017.
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Contents
Case Study 1…………..……………………..........……………………………..……………………...3
Case Study 2…………..……………………..........……………………………..……………………...5
Case Study 3…………..……………………..........……………………………..……………………...7
Refrences.....………………………………………………………………....................................8
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Case Study 1
In the given case study, Cattesloe Ltd. is a manufacturing company and is selling two of its products:
Thing one and thing two. (Alexander, 2016) The data has been given for 2015 financial year in order to
create the respective budgets which are as follows:
1. Revenue Budget:
Particulars Units Selling Price ($) Final Revenue ($)
Thing One 60,000 165 9,900,000
Thing Two 40,000 250 10,000,000
Total 19,900,000
Preparation of Revenue Budget (in dollars)
2. Production Budget:
Particulars ThingOne ThingTwo
Units to be sold during the year 60,000 40,000
Add: Inventory at end 25,000 9,000
Total requirement for the year 85,000 49,000
Less: Inventory at beginning 20,000 8,000
Total Units to be produced 65,000 41,000
Preparation of Production Budget (in units)
3. And 4 Direct Materials Purchase Budget in units and in dollars:
Particulars A B C Total
Thingone 260,000 130,000 390,000
(65000*4)
(65000*2)
Thingtwo 205,000 123,000 41,000 369,000
(41000*5)
(41000*3)
(41000*1)
Total 465,000 253,000 41,000 759,000
Target inventory at end 36,000 32,000 7,000 75,000
Total requirements 501,000 285,000 48,000 834,000
Target inventory at beginning (32,000) (29,000) (6,000) (67,000)
Direct material purchased (in quantity) 469,000 256,000 42,000 767,000
Purchase cost (per unit) 12 5 3
Total purchase costs (in dollars) 5,628,000 1,280,000 126,000 7,034,000
Direct Material
Direct Materials Purchases Budget (in Quantities and in dollars)
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4. Direct Manufacturing labour budget (in dollars):
Particulars
Budgeted
Production
(Units)
Direct
manufacturing
labour hrs per unit Total Hrs.
Hourly
wage rate
($) Total ($)
Thingone 65,000 2 130,000 12 1,560,000
Thingtwo 41,000 3 123,000 16 1,968,000
Total 3,528,000
Direct Manufacturing Labour Budget (in dollars)
5. Budgeted Finished Goods Inventory as on 31st December, 2015 (in dollars):
Amount ($) Total ($) Amount ($) Total ($)
A 4*12 48 5*12 60
B 2*5 10 3*5 15
C 0*3 - 1*3 3
Direct manufacturing labour cost 2*12 24 3*16 48
Manufacturing overhead cost per unit 2*20 40 3*20 60
Budgeted Manufacturing cost per unit 122 186
Budgeted Finished Goods inventory 25000*122 3,050,000 9000*186 1,674,000
Cattesloe Ltd.
Budgeted Finished Goods Inventory as on 31st December, 2015
Thingone Thingtwo
Particulars
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Case Study 2:
In the given case study, Asaya Clothing Pty Ltd. is a manufacturing convern which manugactures winter
clothing. It has got 2 departments namely Knitting and Finishing department and three types of costs are
being incurred, the direct material is added at the end of the process and transferred in costs and the
conversion costs are being incurred evening during the process. (Abbott & Kantor, 2017) The company
uses weighted average method of process costing while accounting for the same From the data gien for
jUne 2014, below are the calculations available.
Particulars Unit Amount ($) Particulars Unit Amount ($)
To Opening Work in progress 75 105,000 By Finishing Department 150 275,934
To Direct Material 135 37,500 (150*(1035.71+250+553.85))
To Transferred in cost 142,500 By Closing Work in progress 60 87,066
To conversion cost 78,000 (60*1035.71)+(60*75%*553.85)
363,000 363,000
Process 1 (Knitting Department)
% of completion Equivalent units % of completion Equivalent units % of completion Equivalent units
75 Opening Work in Progress
135 Units Introduced
Units Introduced & Completed 150 100 150 100 150 100 150
Closing Stock 60 100 60 - - 75 45
210 210 200 210 100 150 175 195
Costs
Opening Work in Progress 75,000 - 30,000
During June 142,500 37,500 78,000
Total Cost 217,500 37,500 108,000
Cost per unit 1,035.71 250.00 553.85
Inputs Particulars Output Direct Material Conversion CostsTransferred in costs
Statement of equivalent units & cost per unit
1. The equivalent units of transferred in costs are 210, for direct material, it is 150 and for
conversion costs it is 195 as can be seen from the statement of equivalent uniuts and cost per
unit table above. (Belton, 2017)
2. The total cost to assign and account for transferred in cost is $ 217500, for direct materials it is $
37500 and for conversion costs, it is $ 108000, and the cost per equivalent unit being $1035.71,
$250 and $553.85 respectively as can be seen from table above.
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3. The total costs of units completed comes out to $ 275934 and the cost of units lying in the
closing inventory comes out to $ 87066. This can be seen in the table 1 (Process 1- Knitting
department account) (Bromwich & Scapens, 2016)
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Case Study 3
In the given case, since the appointment is in the position of assistant management accountant of a
budget hotel, it becomes important to set out the goals, vision, mission and the strategy to take the
business forward in the competing yet growing market of hospitability industry. In the present market,
the business model needs to be chosen wisely so that the costs are met and revenues estimated are
flowing to avoid the loss situation. (Bromwich & Scapens, 2016) FDI’s are making huge investment in
the hotel industry and the company should make use of it to the best advantage and should make use of
leveraging. The short term vision of the company should be build a reputation in the market and
growing the customer base. The same can be done only by focusing on the customer centric model
where there is high level of customer satisfaction at competitive pricing. Besides all this, the company
should make use of the low interest rates and strategic revenue management strategies to increase
revenue. (Das, 2017) The company’s mission should be stay long in the maket and for that goodwill
alongwith customers need to be build and growth needs to be there in terms of opening the new outlets
of the company at various locations. Currently, as per the analysis the hotel industry spends the
maximum unallocated budget in the overhead and the advertisments which are not helping to the same
extent in building the customers as expected. Instead discount and promotion startegies through brand
loyalty are working on positive footing for the industry and therefore the company should invest more
on the same. The other critical factor is that the food and beverages industry is flourishing and it is the
one which is being most profitable in the recent era and therefore the same should be focused on.
There is huge focus and shift of business and customer base from offline to online business. The
company should make use of the same and make avaialbel the online products and services
conveniently in order to buily on the customer base. Though the mismatch is expected to be there in the
long run in the demand and supply of the hotel industry and and its products but ultimately it is the
quality which matters and not the quantity. (Heminway, 2017) The pricing should also be based and
made basis the above factors. Efforts should be made and strategies to be implemented immediately to
bring down the overheads which are not contributing directly to the revenue generation. This will not
only help the hotels to increase the top line but will considerably impact the bottom line in a positive
way. Besides all this, new models of revenue management can be tested out. Further, there should be a
strategy and internal control in place so that the limited resources available are optimally utilised and
allocated. All in all, it is always that in the hotel industry that “customer is always right” and hence, the
efforts of the company should also be in the same direction. (Murray & Markey Towler, 2017)‐
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References
Abbott, M. & Kantor, A., 2017. Fair Value Measurement and Mandated Accounting Changes: The Case of
the Victorian Rail Track Corporation. Australian accounting Review.
Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp.
411-431.
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat
International ltd.
Bromwich, M. & Scapens, R., 2016. Management Accounting Research: 25 years on. Management
Accounting Research, Volume 31, pp. 1-9.
Das, P., 2017. Financing Pattern and Utilization of Fixed Assets - A Study. Asian Journal of Social Science
Studies, 2(2), pp. 10-17.
Heminway, J., 2017. Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and
Organic Documents. SSRN, pp. 1-35.
Murray, C. & Markey Towler, B., 2017. A Theory of Return-Seeking Firms.‐ SSRN, pp. 1-14.
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