Managerial Accounting Case Study Analysis: Childcare Business

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MANAGERIAL ACCOUNTING
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Contents
INTRODUCTION..............................................................................................................3
PART A: Case study analysis..........................................................................................4
1. Describe various costs included in business and specify any three costs with an
example............................................................................................................................4
2. Describe relevant and irrelevant information regarding a decision of purchase of an
appliance..........................................................................................................................8
3. Calculate the cost of laundering of clothes from both two options...............................9
4. Advised to hire an additional employee. Comment....................................................12
5. Discuss that business is to continue from the same owned house or taking a new
house on rent. Make a comment with calculation..........................................................15
PART B: Journal Article Critique....................................................................................17
1. Discuss management accounting systems and its components and discussion on
each company regarding management accounting system within their organization.. . .17
2. Describes innovation process of each company as a process that creates
information..................................................................................................................... 19
3. Specify the outcomes that useful for an Australian accountant obtained from the
given article.................................................................................................................... 21
Conclusion..................................................................................................................... 23
References.....................................................................................................................24
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INTRODUCTION
This report basically consists of two parts, to analyze each part it is required to make a
proper understanding of each part thereafter proving advised reading the business of
Douglas and Pamela Frank. A couple of the business runs a business of child care
through the use of various costs in which some costs are relevant regarding the
decision for purchasing new assets and some are irrelevant. Following part is
considered this fact and show relevant cost. the business owner also needs to advised
on three points as it faced a situation of hiring an additional employee, changes it
business operations place to a rented house and to hire new company (Red Oak) in
order to take a service of laundering of clothes. All these are studied in the below part
then after study on the management accounting systems used by Apple and Canon
company within its business through the use of innovations process that will help the
management accountant of an Australian company. Hence this part is to basically
based on management accounting systems and its uses within.
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PART A: Case study analysis
This part contained the detail information of the business of the couple whose business
is child care.
1. Describe various costs included in business and specify any three costs with
an example.
The business of the couple is run through the various costs that are included in
business and all these costs are to be considered important due to each cost have their
own importance in their places like insurance cost and license cost. This cost is
necessary included because to run the business certificate from the state government is
nectary and for this fee for this has been paid. To show all cost at a glance see the
below table that clearly shown each cost (Chapman, and Sisodia, 2015).
S.no. List of expenses (cost) Amount ($)
1 Annual License Fees 225
2 Annual Cost of insurance 3840
3 Overtime cost 15
4 Cost of meal and snack 3.2
5 Renovation cost 79500
6 Utility cost 50
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7 Cost of old appliances 440
8 Laundry expenses 52
9 Cost of washer 420
10 Cost of dryer 380
11 Delivery charged 35
12 Addition cost required for accessories 43.72
13 The purchasing cost of detergent and
fabric sheet
35
Noted points:
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 Cost regarding snacks and meals is charged according to the number of children on a
daily basis.
 The renovation cost is paid for one year.
 Cost of fabric and detergent is shown for a quarter.
 OT (overtime) expenditures are charged on the per/child.
Following are the costs that are based on the number of children so all of the following
costs are important and these costs are called as a variable cost because of changing
nature (not fixed).
The above-said costs are variable costs and these costs are treated or considered as
the most important rather than rest of cost because these costs are based or depend
upon the number of children. If the number of children is increasing these costs are also
increase and vice-versa.
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detergent and
fabric sheet
overtime
expenditure
meal and
snacks

2. Describe relevant and irrelevant information regarding a decision of purchase
of an appliance.
The relevant costs that affect the decision regarding purchasing or new appliance for
the business are as follows:
Cost of new appliance included washer and dryer = $ 420 and $ 380
Delivery cost or charged = $ 52
Extra cost of installation = $ 43.72
All the above costs are relevant because each cost is related to the decision of
purchasing a new appliance. If the business wants to purchase a new appliance then it
also requires paying two other costs which are necessary for the purpose of using such
appliance (Johansson, and Kriström, 2018). Hence all the above costs are considered
relevant in reference to taking a decision of purchasing new assets (appliances).
While all other costs except relevant cost are treated as irrelevant as there is no link
between the purchase and cost due to these costs not affect the decision in any manner
(negative or positive).
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3. Calculate the cost of laundering of clothes from both two options.
There are two options are available for the business owner. In order to accept the best
suitable option in the interest of business, the calculation is made and then decide the
best option among the available option.
To analyze each option, one by one option is taken and calculates as per the
information provided (Damiani, and Aranđelović, 2018).
The first option is that owner of a business providing a self-service.
Particular Amount ($)
Laundering cost per week 8
Laundering cost in 1 month 32
Traveling charge in one way (one mile) 1
Total Distance covered 6
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Total cost 107.52
The above laundering costs is not a final cost of self-service, it is a cost for convert
week into the month. The given cost is provided for a week but as the all calculation is
made for a month so it is necessary to convert this cost also in a month. This is because
it helps in comparing the two costs that have been obtained from both options.
From the second option is that the owner is going to hire a company (Red Oak
Company) for the purpose of taking service reading laundering of clothes of children.
The cost of hiring another company is $ 52.
Options laundering cost Amount (in $)
1 Self-services 107.52
2 Hire a new company 52
It is clear as the calculation made that option first is very expensive as it requires high
cost while the other option of hiring a new company, the cost of this is low. So it is
advised to the busyness owner to accept the second option (hiring of a new company)
because of the clear reason for being fewer amounts is needed to make payment. A
second option is accepted it will ultimately or indirectly help in increasing profits of the
business.
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4. Advised to hire an additional employee. Comment
In this section, it is been analyzed recruitment of new additional employee is making a
benefit to the business in terms of profitability or not. According to the given information,
it is said that as the hire of one employee it will lead to accepting three extra children in
their business. To justify this statement in terms of profit, showing calculations below
whether this is tore or false and then give advice to the busyness owner regarding the
hiring of the employee (Holton, 2016).
 Calculate the cost of a new employee:
Particulars Amount ($)
New employee cost ( per hour) 9
A working hour in 1 week ( an hour) 40
In one month (4 weeks) 4
Total cost 1,440
 Calculate income earned over the accept of extra children
Particulars Amount ($)
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Fees (for 1 child/ month) 800
Fess (for 3 children) 3
Total cost 2,400
 Following table showing the difference between the cost of new employee and
Fees charged from the parents.
Particulars Amount ($)
Total cost as per the fees charged 2,400
Total cost as per the cost of new employee 1,440
Difference (Profit/loss) 960
All the above calculation made in the fourth part of this task shown the cost for new
employee and fees charged against the parents of their children.
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The difference table displayed the net result calculated from the above two tables of
cost and income. The cost of a new employee is $1440 which is less than the income
earned from the hiring of the new employee as the income is genre by $2400. To
compare both then the business owner is able to make a proper analysis of the
statement and it enables the business owner to accept this option of hiring. Therefore, it
is advised to the business owner (Douglas and Pamela Frank) to accept or hire a new
employee because of increasing profitability (Harvey, 2015).
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