Managerial Accounting Case Study Analysis: Spring 2024

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Managerial accounting
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Table of Contents
Introduction.................................................................................................................................................3
Part a Case study analysis............................................................................................................................4
1. Consider the different types of costs discussed in this unit. List any three (3) types of costs and
provide one specific example of each cost from the case.........................................................................4
2. Based on the information provided, what information is relevant to the decision to purchase the
appliances................................................................................................................................................6
3. What could it cost the couple to launder clothes? Show your detailed calculations for each option....7
4. Should the Franks hire the additional employee? Show your detailed calculations...........................10
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................................................................................................................11
Part B.........................................................................................................................................................13
1. Identify the components of the management accounting system in each of the two companies, and
discuss their relevance in enabling decisions to be made efficiently and effectively. Include examples in
your answer...........................................................................................................................................13
2. Explain how management accounting contributes to this innovation process. Include in your
discussion two (2) specific examples from each of the two companies mentioned in the journal article
...............................................................................................................................................................15
3. Provide four (4) specific outcomes or lessons learned from the article’s research findings that will be
useful for management accountants in Australian companies to learn from, and justify your answer [i.e.
provide 2 outcomes from each company...............................................................................................17
Conclusions...............................................................................................................................................18
References.................................................................................................................................................19
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Introduction
There are many changes which replace traditional accounting and give rise to new accounting
system , a new accounting system not only focus on the financial data but also focus on the cost
of the product, the internal controls of the company , the reporting system, the innovation of
products and much more.
Managerial accounting and cost accounting are the part of new accounting system. Managerial
accounting is the one which focus on the internal controls of the company internal controls of the
company how one can improve the management procedures to optimize the resources of organist
ions. It involves the formulation of strategies, risk management, the innovation of new products,
etc.
When two or more alternatives are available one should use relevant costing method to use the
best alternative method. It includes the comparison of all the alternatives, one should consider all
the information which is not common but relevant to the alternatives and ignore the information
which is common as it does not make any difference in the decagons making.
Also product innovation is explained under. In this process a new product is introduced, it may
be of many types as the innovation in the existing or the new innovation with the new
technologies.
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Part a Case study analysis
1. Consider the different types of costs discussed in this unit. List any three (3) types of
costs and provide one specific example of each cost from the case.
Types of cost as per cost accounting are as follows:
Material cost: cost of material used in producing goods or rending services. It is proportionate to
the number of quantity produce.
Labour cost: the cost incurred on payment of permanent or temporary workers for producing
goods is labour cost
Overhead cost: cost of overhead are overhead cost for example cost of indirect material,
administrative expenses. It is semi variable and it changes with the number of production units.
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types of cost
on the basis of expenses
material cost
labour cost
overhead cost
on the basis of control
controllable cost
uncontrollable cost
on the basis of
operation
preliminary cost
cost of production
marketing and selling cost
cost of reseach and
development
on the basis of behaviour
direct cost
indirect cost
other
opportunity cost
sunk cost

Controllable cost: the cost which can be influenced by the manager or any other person is
controllable cost (Shields, 2015).
Uncontrollable cost: The costs which are independent in nature are Uncontrollable cost.
Preliminary cost: cost which incurred before start production, example cost of production trial
Cost of production: the sum of cost of material and labour and overhead are aggregately known
as cost of production.
Cost of selling: the cost promoting goods to attract customer are under this head. Exemplar
packing cost, cost of advertisement
Cost of research and development: the cost of research of new product, innovation is included in
this cost (Vohs, et. al., 2014).
Direct cost: it involves expenses which are directly related to the production.
Indirect cost: the cost which is not traceable is indirect costs.
Opportunity cost: the cost sacrificed to accept the other alternatives are opportunity cost.
Sunk cost: the cost which cannot be altered and which is irrecoverable is sunk cost.
The examples of cost in the given case are as follower
Fixed cost: the cost of licensed fees paid to state got is a fixed cost, this fees is paid annually
irrespective of the students are enrolled or not.
Variable cost: the salary paid to the employee to handle the students is variable cost, as we
increase the enrolled students we have to hire an extra employee.
Sunk cost: the cost of purchase of building is a sunk cost, as it cost incurred in the past now it
does not make any influence in future.
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2. Based on the information provided, what information is relevant to the decision to
purchase the appliances
For the manager the most important task is to take the right decision at the right time. For
making the right decision the two or more alternatives should be there. The manager should
study each and every information relevant to make decision to make decisions the manager can
tale help of accountant, financial management, and other staff members.
Relevant information includes all the future costs and revenue which are different in each
alternative. The cost and revenuers which are common in each alternative available are not
relevant in making decisions.
The decision is of 5 types which every manager should take.
 Outsourcing: outsourcing refers to buy a service or product from outside than purchase it
or producer it. If we outsource the service outside the country is known as off shoring. It
involves a decision which involves cost comparison of different alternatives. In this the relevant
information is variable cost fixed coast or sometimes opportunity cost.
 Scarce outsource decision: There are the resources available to company for
manufacturing goods but they are limited, the main decision id=s to how to utilize the available
resources in best optimized way (Vohs, et. al., 2014).
 Sales mix decision : what should be the combination of the goods produced and what
should be the sales proportionate also the one of the critical decision talent by the management
 Special order decision: another is to accept the decision available or not. Whether to
accept order will be beneficial to organization or not.
 Product line and segment decision: the decision of choosing an innovation of product
within the same line of business or should be different segment.
Relevant cost
The cost which influences our decision is relevant cost. It includes the following steps:
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o Sunk cost should be eliminated
o The cost which is same in each alternative should be eliminated.
o The remaining cost should be compared (Werding, 2014).
Analysis
As per the case study following information is relevant:
 Cost of assets: for doing the laundry by itself the assets should be purchased for washing
clothes... The dryer and washer should be installed. It includes the cost of dryer and washer. Also
includes the installation charges. It includes one more influencing decision as where to buy it
from, whether to form a mart or from a store. If we buy it from a mart, the installation charges
will be free. So to make the right decision costing of each alternative should be studied. In this
the life of assets should also be taken into consideration. As it also helpful in making
depreciation.
 Variable Cost: the cost of detergent and bed sheets will be variable in laundry. As the
number of clothes we washed, the amount of detergent will be used proportionately and the
number of bed sheets will be used in ratio (Werding, 2014).
 Cost of delivery or pick up : the another important decision is to whether the delivery will
be done by laundry agents as they are charging pick up or deliver, or the pickup should be done
by a couple or should buy a washer and dryer and eliminate the cost.
3. What could it cost the couple to launder clothes? Show your detailed calculations for
each option.
The couple has three options
The comparative statement is below
Particulars Case 1 Case2 Case3
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Cost of laundry $52 $34.64 0
Cost of pick up 0 $4.85 0
Cost of assets $8.70
Cost of detergent $11.67
Net cost $52 $39.41 $20.37
 The first option cost the only cost of laundry including pick up
 The second include the cost of pick up mileage and cost of laundry
Cost of mileage $.56*2*4.33 $4.85 per month
Cost of laundry $8*4.33 $34.34
The cost of assets
Cost of washer $420
Cost of dryer $380
Cost of accessories $35
Total Cost of appliances $835
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Life of asserts 8 year
per month cost $8.70
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4. Should the Franks hire the additional employee? Show your detailed calculations.
Calculation of option by incremental method:
Income from additional
students
800*3 2400
Cost of utilities 3.20*3*30 288
Cost incurred on extra
employee
$9*40*4.33 1558.8
Net profit 553.2
The company can go with the extra employee as it is giving benefits
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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.
The letter by an accountant to Mr. Franks giving advice on whether to rent an extra space or not
Mr. Franks
As per the details given by you. I had gone through all the calculations. Your idea of moving in
an extra space will give you enrolment of extra students but also give you the cost of extra
utilities per student and also the cost of extra employee. Because one employee can handle only
3 students. Also the cost of insurance and rent will be addition. So here is my detailed report
representing all the calculation of above cost and revenue for your better understanding
Particulars Calculation Amount
Rent $650 $650
Utilities $125 $125
Meals 3.20*6*30 $576
Extra insurance $417
Cost of extra employee $1558.8*2 $3117.6
Income from students 800*6 4800
Net profit (85.6)
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As per calculation detailed above, the couple will suffer a loss of $85.6 so they cannot move to
the additional space
Regards
Accountant
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