Managerial Accounting Case Study: Child Care Business

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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)................................................................................................................................ 10
5)................................................................................................................................ 12
Part B: Journal Article Critique.......................................................................................14
1..................................................................................................................................14
2..................................................................................................................................16
3..................................................................................................................................17
Conclusion..................................................................................................................... 19
References.....................................................................................................................20
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Introduction
In this case study, it discusses the child care business, after working in rail Board
Company for 30 years. In this business, the owner is Douglas at age 57, and Pamela
Frank at the age of 52, in the small town of Ovilla, Taxes. The main case is to find the
cost of the appliances, and there is having two options to use one of two with a suitable
organisation. This project shows the importance of management accounting system in
the process of innovation management of the company. It identifies the key components
and shows the growth and decision assistance of management accounting system.
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Part A: Case Study Analysis
1)
Cost
In Managerial accounting, the cost is the main part of finding the value of the product;
the cost determines the value of the product to make the finished goods from the raw
material, the cost is can calculate from the money has taken to make the products or
services (Business dictionary, 2019).
Types of cost
 Product and Period Costs
Product and Period Costs is the cost incurred from the firm’s accounting system with
direct and indirect costs. The cost of the period cost charged from the current value
from the inventory system. The cost also included in the part of the expenses, that will
manage for helping the cost to make the minimum cost, it is not showing that many
expenses, but it affects more to the selling price.
 Controllable and uncontrollable cost
In the organisation, the cost is controllable and uncontrollable in the budgetary system
of the organisation. The budget set for the individual part of the firm, and they will gate
the minimum cost in the process, and they will show the higher cost in the product
which set for the process (Shaikh, S., 2019). It can control or accountable for costs they
cannot control.
 Budgeting system
Budgeting system is the type of cost, that will cover the entire individual budget of the
specific part, the budget set from all the previous method (Shaikh, S., 2019). They will
gate the huge cost to maintain the budget, and that all affects the budgets and financial
performance of the organisation.
As per the case, there are also costs incurred to start or run the business such as, the
first cost for the business is an annual fee of the state charges that is compulsory for all
the business that has to pay for getting the licence. As per the business the government
is having the cost of insurance that has to pay early basis. The cost of each child is also
the type of cost to maintain and take the specific cost for the child.
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2)
Relevant information
In this case, the relevant information is the Douglas, and Pamela Frank is worked for rail
board for 30 years, after a long time they decided to start the child care business. They
had made all the requirements and possibilities in the business, and they understand
the cost of the child’s and after studying all the things and then they set the charge of
the specific child. There are many costs incurred in the business that all are relevant
such as state charge, insurance, meals and snakes for the children. The business is
confused between the washer and dryer stooped working, they have two options to
make the solutions, one is to purchase the new washer and dryer, and on the other
hand, they will solve from the laundry system. It will discuss all the cost of the washer
and dryer, as per the business it will make the solution, as per the need of the business.
Irrelevant information
In this case, there is having many types of irrelevant information, which is not useful for
the business such as, the place of the business no need of information, to define the
cost of the firm. There is no requirement of the square foot addition, and that built in
1964. The Frank’s has purchased the house of $79500, and the useful life of the house
is 25 year. In this case, it defines the facility to the children like there is having open
space to play for the children or to read, and for the other activities. There is having
another section, for sleeping for the children, and it can be used for another thing. The
house is having a small kitchen, two bathrooms and a small laundry area.
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3)
In this case, there is having two appliances that are useful for Frank’s business, such 1st
is launder clothes and second is the purchase of washer and dryer for the long run and
it will gate the minimum cost for the month if there is having money to spend in the
business (Averkamp, 2019).
Appliance 1st Cost of Launder clothes
In this also there is having two ways of the work system that has done in the system for
the suitability that has explained below:
Launder 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
As per the option 1st, there is having total monthly cost is 95.66, the amount is
calculated for the 8 years because it will compare with the purchase of inventory, and
the inventory will survive 8 years, the amount or expenses of the 8 years calculated is
9183.36, the amount derived from the launderer is pick-up and delivery of the cloths.
Option 2 Amount (Per month)
From Frank carrying 13.44
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Launders cost 32
Detergent 11.66
Total 57.1
Amount of 8 years 5481.6
As per the second option, Frank’s is doing pick-up and delivery, and the cost is less
from the options 1st. The cost has come in the eight years is 5481.6.
Working Notes
Cost of miles as per month
Miles (two way) 6
per mile 0.56
total per week 3.36
Weeks in month 4
Month 13.44
Landers Cost
Per week 8
Weeks in month 4
Month calculation 32
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Detergent cost
Per quarter 35
Months in quarter 3
Months calculation 11.66667
Appliances 2nd Purchase of washer and dryer
Purchase of Washer and dryer
Particular Amount
Washer cost 420
Dryer cost 380
installation cost 43.72
delivery cost 35
installing appliances -
Washer energy cost 960
Dryer energy cost 1160
Total cost 2998.72
Working notes
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Washer energy cost
Per year 120
Months 12
Per month 10
Eight years cost 960
Dryer energy cost
Per year 145
Months 12
Per month 12.08333
Eight years cost 1160
The second appliance is purchasing of washer and dryer, the cost of washer and dryer
is 2999.72, as per the calculation the Frank’s has got less cost as compared to the 1st
appliance is working with the Launder. From purchasing the inventory, it will gate the
minimum cost. But it takes the fund in one time.
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4)
Cost of per children
Cost per children
Particular Day Year Month
State charges 225 18.75
Insurance charges 3840 320
Franks Utility cost 600 50
Meals and snack 19.2 7008 584
Total 11673 972.75
Per children 1945.5 162.125
In the business, there is having the cost of per child with all the particles, including state
charges and insurance.
Frank’s profit
Frank Profit per children
Particular Amount
Charges from parents 800
Cost 162.125
Profit 637.875
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Employee Cost
Employee cost
Particular Amount
Per hour 9
per week cost 360
per month 1440
Comparison as per children and employee
Particular children Amount
employee cost -1440
Extra children charges from parents 9 7200
cost of children 9 -1459.13
Profit 4300.875
Per children 477.875
Effects on profit
Effects upon profit
Particular children Amount
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employee cost -1440
Extra children charges from parents 3 2400
cost of children -162.125
Profit 797.875
Per children 265.9583
As per all calculations, the most things is for the business is to hire the employee to
earn the maximum profit, the business will gate the large profit, the mental pressure
also minimised of the Frank’s. After hiring the employee then the business will earn after
all minimising the cost per child they will earn $265.95, that is good for the business.
The business is having that type of opportunity; then they should grab that opportunity
and implement the employee.
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