Managerial Accounting Case Study and Journal Article Analysis

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Managerial Accounting
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Table of Contents
Introduction:..................................................................................................................... 3
Part A: Case Study Analysis............................................................................................4
1................................................................................................................................... 4
2................................................................................................................................... 6
3................................................................................................................................... 7
4..................................................................................................................................12
5..................................................................................................................................15
Part-B Journal Article Critique........................................................................................18
1..................................................................................................................................18
2..................................................................................................................................20
3..................................................................................................................................22
Conclusion..................................................................................................................... 23
References:....................................................................................................................24
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Introduction:
The following assignment provides an understanding of
managerial accounting to the users. It is prepared to develop
an understanding of cost concepts, and demonstrate the
practical approach to be used with the conceptual theories
for creating the solution for a service- based company. The
information about the child care service center is provided in
the file through which the costing knowledge is being utilized
in the project. Different costing decisions, the types of cost
and the materiality of the cost is discussed and examined to
support the owners of the service- based company as
required in the assignment. Apart from this, there is a
second section of the assignment in which a critical
evaluation of a journal article is performed to analyze the
practical use of accounting information in the actually
existing companies. The article is named “Towards a new
theory of innovation management: A case study comparing
Canon, Inc. and Apple Computer, Inc.”. The article has been
studied and the resultant important information regarding the
role of management accounting in decision making, planning
achievement, the formation of strategies, and innovation
management are systematically allocated as per the
requirements in the project. Thus, the project basically
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covers the management accounting concepts in two
segments in the project; a case study and an analysis of a
journal article.
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Part A: Case Study Analysis
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Cost and different types of cost:
The cost factor plays a vital role in the process of
management accounting. It helps the management in taking
a decision regarding different issues faced by them in the
process of product or service management. The managerial
accounting creates a basis for the performance of various
calculations like; formation of strategies and budgets,
forecasting of activities, project evaluation and others
(Shields, 2015). Costs are determined by the cost
accountants of the firm on the basis of standard cost
practices and organizational environment. These cost
defines their importance while evaluating any goods or
service of the enterprise and thus supports the decision-
making process. The costs are mainly classified into; fixed,
variable and semi-variable costs. These are explained below
with the examples from the provided case study.
Different types of costs and their respective examples:
 Variable costs
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Those expenses in the business which remain constant in
the per unit calculation but varies in total or can say changes
with the change in the production of the organization are
termed as variable cost or expenses of the enterprise. These
costs are important as they are directly deductible from
revenues in the process of contribution calculations
(Shcherbakov, 2016).
In the given case study, the costs related to the meals and
snacks can be classified as variable costs. As the cost is $
3.20 per child per day which is constant in per unit measure
but it will change with the increase or decrease in the
number of children in the child care center. To elaborate it
will become $ 6.40 (3.20 * 2) for 2 children and $ 9.60 (3.20 *
3) for 3 children.
 Semi-variable costs:
The expenses which contain the properties of both the fixed
costs and variable cost are stated as semi-variable costs. In
this type of cost, the expenses are fixed up to a particular
level of quantity of services or goods but after that level is
surpassed these expenses increases or varies which defines
the presence of variability factor in such costs (Chen, et. al.,
2015).
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To understand as per the given scenario; the state has fixed
a yearly permit expense amounting to $ 225 to use the state
permit for operating child care services business. This is an
illustration semi-variable cost as the state has defined that
the permit is granted for 1 year but for the maximum of six
children in the center. Therefore, if the company wishes to
increase their number of children in the center they will have
to pay addition permit charges for another six children.
Fixed costs:
The expenses which remain the same throughout the year
and don't change with change in the production of the firm
are called fixed costs or expenses. These expenses vary in
terms of per unit calculation but are constant in total
(Berman, et. al., 2016). Such costs are incurred to the firm
even when there is no production in the firm that is why
these are irrelevant in the process of relevant decision
making or opportunity costing.
As per the case study, there is a yearly cost of insurance for
$ 3480 which is the fixed cost because insurance charges
are to be paid by the owners irrespective of the children
taking services in the child care center.
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2
The case study contains various information regarding the
costs and structure of the business. However, all the
information may not be relevant for a particular case or
scenario. Here, the information which is relevant and
irrelevant for the evaluation of the decision-making process
of purchase of appliances is being discussed.
Relevant information for the appliance purchase
decision:
Relevant information for a case is defined as that information
which is essential to perform the particular task or
calculation. In the assignment, a case study has been
provided and the issue is regarding the purchase of
appliances (Kambanou, and Lindahl, 2016). In this process,
the relevant information is contained in the last segment of
the study. As stated that in the first week of operations, the
washer and dryer had stopped working. The use of the
appliance and their cost which is $ 440 is the first information
to grab the attention of the issue. Further, the details about
the other alternative of using laundry services have been
provided which is the basis of decision making as it gives
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birth to the alternatives to be chosen from. The alternatives
include:
 The nearby company, Red Oak Laundry and Dry
Cleaning, can launder clothing for the Franks, for $52
per month including pick-up and delivery.
Other information in this alternative is that the clothes can be
carried to the laundromat once a week, which is three miles
away (one way) and the applicable mileage rate is
$0.56/mile. Or the clothes can be laundered by them which
will cost them $ 8 per week exclusive of detergent costs.
Also in order to use laundromat the purchase of laundry
supplies in bulk from MegaMart would cost $35 every
quarter.
 Or the Franks can purchase a washer and dryer
costing them $ 420 and $ 380 respectively. This
option will also cost $ 43.72 for the additional
accessories and installation of both the appliances.
Other information regarding the depreciation calculation in
the purchase option is considered relevant which states that
the appliance will be delivered by the store at a total cost of
$ 35 with free installation and the useful life of the appliance
is expected to be 8 years. As per the manufacturer of the
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appliances, they will increase energy costs in the company
which is $ 120 per year for the washer and $ 145 per year
for the dryer.
Irrelevant information for the appliance purchase
decision:
All other information present in the case study, except for
those provided in the above segment is irrelevant in the
appliance purchase decision. It includes; the cost of meals,
insurance, permits charges, their ages, previous job, and all
the things are irrelevant for this decision. As known,
irrelevant information is of no use in the process of decision
making for that particular situation here, purchase of the
appliances.
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3
The Franks have two alternatives which are as follows:
Option 1:
Laundering of Clothes:
Option 1st
Costs Amount (Per month)
For pick-up and Deliver 52
Launders cost 32
Detergent 11.66
Total 95.66
Amount of 8 years 9183.36
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