Managerial Accounting Assignment: Case Study and Article Critique

This managerial accounting assignment presents a case study analysis of a childcare business, "Nanna's House," focusing on revenue processes, cost analysis (variable, fixed, and semi-variable), and decision-making regarding laundry services and business expansion. The assignment requires evaluating different alternatives for cleaning soiled clothes, calculating associated costs, and determining the most economical option. It also includes an analysis of the financial implications of hiring an employee and expanding the business. Furthermore, the assignment involves a critique of a journal article comparing Canon Inc. and Apple Computer Inc., examining how management accounting systems support innovation and decision-making within these organizations. The analysis covers aspects like people, input devices, and the importance of management accounting in strategic planning and business growth.

Managerial Accounting
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Table of Contents
Introduction....................................................................................................................................3
Part A: Case Study Analysis.......................................................................................................4
1)..................................................................................................................................................4
2)..................................................................................................................................................6
3)..................................................................................................................................................7
4)..................................................................................................................................................9
5)................................................................................................................................................11
Part B: Journal Article Critique..................................................................................................14
1.................................................................................................................................................14
2.................................................................................................................................................16
3.................................................................................................................................................18
Conclusion....................................................................................................................................19
References...................................................................................................................................20
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Introduction
Mr. Douglas age 57 and Mrs. Pamela Frank age 52 who had worked for the rail board
company for 30 years have started a child care business in their house in Oville, Taxes
called as the Nanna’s House. The case study presented here deals with the revenue
process of the business as how the business is going to earn the revenues what are the
costs that needs to be expensed and what are the possible ways for the business to
grow and prosper. The case study wants to review the alternatives given and analyse
the best revenue among them. Also, the case study wants the use of management
accounting system to for analysing different aspects of the business.
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Part A: Case Study Analysis
1)
Cost
Producing or developing any goods or service requires lot of efforts and expenses on
regular basis. No product or service get manufactures without expending money and
efforts by manufacturer or service provider. Expenses are monetary or non-monetary
depending upon the need of the product. Right from transforming raw material to ready
to sale finished goods every business need fund and that expensed funds are called
cost (Appelbaum, Kogan, Vasarhelyi, and Yan, 2017).
Types of cost
 Variable cost
The cost which gets vary with the change in output is called variable cost. They are
recurring in nature as variable cost is not the one-time cost. These costs represent the
daily expenses incurred to generate or to provide a good or service by the business. As
the output increases these costs would also increase and when the output reduces
these costs also gets reduces. As in this case study the expenses of $3.20 on meal by
the franks represents the variable cost.
 Fixed cost
The cost which would not change with the change in the output is fixed cost. these costs
are non-recurring in nature as these costs are also called as one-time cost. even when
production increases or decreases these costs would remain constant. These costs are
mainly in large amount as compared to the variable costs which are comparably in
smaller amount. As given in given case cost of house, washing machine and dryer
would constitute the fixed cost. (Brewer, Garrison and Noreen, 2015).
 Semi variable cost
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There is another type of cost which do not change over a period of time but changes
after a level of production or after a particular point of time. When production reaches to
another scale or it would not possible to increase the output with given resources then
only some factors of production changes which leads to increase the cost. as provided
in this case insurance needed to for the house which accommodate 9 children is only
$3480 but when they move to the rented house which can accommodate 14 children
only then the insurance cost increases to $5000. (Butler and Ghosh, 2015).
As seen from the above discussion there are a number of types of costs that would
incur to run a business. As in this particular case right from renovating the house, meals
for the children, expenses of washing soiled clothes, license fee, insurance expenses,
daily utility expenses franks are regularly spending some sort of money in order to run
the business successfully.
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2)
Relevant information
Here the case study wanted to list out all such relevant information required to analyse
whether the machine has to buy or not. The laundry machine and the dryer worn out
due to getting old in the initial week of the business which creates difficulty for the
couple in cleaning the soiled clothes of children. Laundry and cleaning were never a
necessity before but after getting indulge in the business where small children gets dirty
when playing in soil. Franks have to deal with all possible alternatives before reaching
on any conclusion. The very first alternative the company has is to take the services of
Red Oak laundry and dry cleaning who provides pick up and delivery service along with
dry cleaning and laundering service in $52 per week. The other option available with the
franks is to take the soiled clothes to the laundromat’s and get the clothes cleaned at $8
per week excluding cost of detergent and pick-up and delivery charges. The last
alternative is to buy new machine and dryer with some additional cost.
Irrelevant information
The case study provides many information regarding the business revenue structure.
The amount charged by the franks from the parents as fees to take care of the children,
the cost of purchasing and renovating the new house in $79500, useful life of the house
for the purpose of depreciation. Also, there are many such information given in the case
study which are totally irrelevant in deciding whether or not to buy the new machines.
The licence fee required to start the business at $225 and insurance fees $3840 are
also irrelevant. These cost plays no role in determining whether to buy the machines or
not. All these things are totally irrelevant in determining whether or not to buy the
machines. Total population in the area is relevant to revenue but not for buying the
machines.
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3)
Although the business has many alternatives to clean and dry the soiled clothes but the
business has to choose only one best alternative among all which provides minimum
cost to the company. All business need is to analyse all the alternatives using the
methods of management accounting to calculate cost of each alternative and after
analysing all the alternatives the business can able to determine which option is best.
(Di Vaio and Varriale, 2018).
Option 1: launder from Red Oak laundry and dry cleaning
In option 1 Red Oak Company provides cleaning and drying facility of clothes including
pickup and delivery charges at $52 per month to franks, yearly calculations of total
expenses are as under: -
Details Calculation Amount (per year)
cost of cleaning including pickup and
delivery $52*12 $624
Red Oak laundry and drying company provides cleaning facility to the business at a cost
of & 624 for the year.
Option 2: laundry from the laundromat
Another option with the franks has to take the soiled clothes to laundromat who provides
cleaning and drying facility at a nominal cost of $8 per week. But franks has to take the
clothes to the laundromat by themselves and also the cost of detergent and laundry
sheets also has to bear by the franks themselves. Details of total cost in this option is
calculated as under: -
Details Calculation
Amount (per
year)
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cost of laundry and dry cleaning 8*4.33*12 $415.68
cost of fuel Working note no.1 $174.58
cost of detergent and laundry sheets 35*4 $140
total cost $730.26
(working Note no 1: - franks has to take the soiled clothes to laundromat by themselves
every week which is 3 miles away (one side) which cost them fuel charges @ $0.56 per
mile so total cost for 1 week is 3*2*0.56=$3.36 per week. Total cost for the year is to be
calculated as follows = 3.36*4.33*12= $174.58 per year.)
The second option is comparatively more costlier than the first option as total cost of
cleaning and drying in the second option is $730.26 for a year.
Option 3: Buy the laundry machine and the dry cleaner
Another alternative the franks have is to buy a new set of washer and dryer with a cost
of $420 and $380 respectively. The new machines require additional cost of delivering
and installing at $35 and $43.72 respectively. The life of the machines is to be taken as
8 years and the business is using straight line depreciation. The description of total cost
of machines is given below
Details Amount
Washer cost 420
Dryer cost 380
Installation cost 43.72
Delivery cost 35
Total cost $878.72
Yearly expenses for washing and dry cleaning the clothes under third alternative are
given below
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details Calculations
Amount (per
year)
cost of machines 878.72/8 109.84
energy used by washer - 120
energy used by dryer - 145
total cost $374.84
As the business calculated the cost from all the three options available now it can
identify the best alternative among all the other. Business has to choose the most
economical option under the others and that option is number 3 the business has to buy
a new set of machines with some additional cost, option 3 is the most economical
among all the given options as it cost only $374.84 per year whereas the other options
are much higher than this.
4)
The franks wanted to expand the business by introducing one employee who can
accommodate 3 new children. The wages they offer to the new employee is $9 per hour
for 40 hours in a week. Total additional revenue generated by this offer is described as
below:
Details Calculation
Amount (per
year)
Additional revenue 800*3*12 28800
Less: cost of employee 9 *40 *4.33 *12 (18705.6)
Less: cost of meals and snacks Working Note no. 2 (2494.08)
Total additional profit $7600.32
Working note no.2- employee has to work for 40 days in a week for 8 hours a day which
decodes that a week is to be considered to be of 5 days. Cost of meal for 1 day to one
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child is $3.20 and now the business has additional 3 children. So, the total cost of meal
and snacks for 3 children for a year is calculated as 3*3.20*5*4.33*12 = $2494.08.
Franks will generate an additional profit of $7600.32 for a year as shown by the above
calculations. So, the proposal is beneficial for the business. So, franks have to employ
the new employee in the business.
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5)
Cost per children
Particular Amount Year
Space cost 650 7800
Utility cost 125 1500
Insurance 416.6667 5000
Total 1191.667 14300
Per children 99.30 1191.6
Meals and snack 19.2 230.4
Total per children 118.50 1422.0
Employees needed
Particular Amount
Total children 14
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Handle children 3
Per working member 5
Frank Profit per children
Particular Amount
Charges from parents 800
Cost 118.5056
Profit 681.4944
Employee cost
Particular Amount
Per hour 9
per week cost 360
per month 1440
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