Managerial Accounting Analysis: Nanna's House Childcare Business

This report provides a managerial accounting analysis of Nanna's House, a childcare business. It begins by defining different types of costs, including fixed, variable, and semi-variable costs, relevant to the business. The report then evaluates the best option for purchasing appliances, comparing costs and making financial recommendations. Further, it includes detailed calculations for hiring additional employees, assessing the impact on net profit, and determining the optimal number of employees to hire based on state regulations and financial projections. The report also explores the application of management accounting systems within Canon and Apple, highlighting cost reliability and quality control systems. It discusses the process of information creation and its contribution to innovation, along with specific outcomes and lessons learned from research articles, to provide insights into effective financial management and strategic decision-making for business growth.

Managerial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1. Distinct types of costs .............................................................................................................1
2. Best option to purchase the appliances by making sound decision ........................................2
3) Detailed calculation for each option........................................................................................3
4 Calculations in context to hire additional employees...............................................................4
5. Calculations which shows that how much employees are needed to be hire .........................4
PART B............................................................................................................................................5
1. Management accounting system in Canon and Apple computer ............................................5
2. Process of information creation and innovation contribution..................................................6
3. Specific outcomes or lessons from article research.................................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES ...............................................................................................................................9

INTRODUCTION
Managerial accounting is the process of preparing documents & reports which provide
helps the management to take better decisions in context to the growth of company. It involves
collecting, analysing and reporting the information about the operations and finance of a
business. These reports are generally directed to the managers of a business rather than external
parties. To better understand this concept chosen business is Nanna's House which is started by
Douglas and Pamela and it basically a child care business. There are various topics has covered
in this report such as: to discuss different types of costs, to calculate the cost of couple to launder
clothes, identify the components of the management accounting system. Apart from this, report
also discuss about how management accounting contributes to the innovation process and
specific outcomes learned from the article's research findings.
PART 1
1. Distinct types of costs
As cost is defined as the cash amount or the cash equivalent given up for an asset. To
identify the cost of an unit is important so that final price of a product can be analysed. There are
different types of costs which are involves to manufacture the goods. The cost is consider as the
expenditure for the business and it is important for an organisation to minimize this so that
higher profits can be generated. According to the case scenario Douglas & Pamela has decided to
start child care business which is known as Nanna's House. There are different types of cost
arises while running a business and these are as mention below:
Fixed cost: It is that cost which does not change as production volume increase or
decrease with a revenant range and it remain fix for a particular period of time. To reduce the
fixed cost is not easy as compare to the variable cost reason being it does not based upon volume
or operations. As per the case study, Douglas & Pamela has to bear different types of fixed cost
which involves: annual fee of $225 to maintain the licence and insurance is required at a cost of f
$3,840 annually. As the license cost will not change if number of children's increase. To run the
business they have to pay the cost for license (Tsekrekos and Wojakowski, 2012).
Variable cost: It is that cost which can vary with the changes of production volume and
if production increase variable cost will also rise and if production decrease it will also reduce. It
is the sum of marginal cost over all units produced. The variable cost involves labour, raw
1

material, distribution cost etc. In the case scenario, the variable cost as: food expenses &frank
changes that can be change if production increase or decrease. Nanna's House has charge $800 as
frank fees from each children that involves full day care of child. If children's want to spend
extra time in child care then they charge $15 per hour form each child. As Douglas & Pamela
provides the facility of food and snacks and for that purpose they charge $3.20 per child.
Semi variable cost: It involves the features of fixed cost as well as variable cost and in
this costs are fixed for a certain level of production and become variable after this production
level has exceeded. If company does not produce any product than fixed cost will incurred.
According to the case scenario, the variable cost is appliance cost which is $440. However the
delivery charges are also semi variable that is $52 per month. As the corporation has option to
get delivery of launder clothes and for that purpose it can accept laundromat services which
includes mileage rate $0.56 per mile. As per the demand & supply it can change (Liang and Nan,
2014).
2. Best option to purchase the appliances by making sound decision
For an organisation it is important to take sound decisions so that it can earn more profits.
To run a business it is required to take better those decisions which meet the objectives of
business. It is important for Douglas & Pamela to determines the financial performance of
organisation so that it can know about income and expenditure related to the business. The
owner's of Nanna's House want to make best purchase option so it it necessary for them to take
effective decision. The old appliance cost is $440 and as per the scenario there are alternatives
available for them and they can use it for the business growth. As the purchase cost of appliances
are $878.72.
1
laundry form Red Oak Laundry and Dry
Cleaning
$52 per
month
$
2 6 miles for 4.33 weeks (6*4.33) 25.98 0.56 per mile 14.5488
$8 Per week cost of laundry 34.64
Cost of detergent or fabric sheer per
month (35/3)
11.66666666
67
Total cost of alternative per month 60.85546666
2

67
$
3 Cost of washer and dryer (420+380) 800
Additional accessories for both appliances 43.72
Delivering cost 35
Total cost of appliances 878.72
Annual depreciation 109.84
Per month depreciation
9.153333333
3
Incremental cost (120+145)
22.08333333
33
Total cost
31.23666666
67
3) Detailed calculation for each option
1 6 miles for 4.33 weeks (6*4.33) 25.98 0.56 per mile 14.5488
$8 Per week cost of laundry 34.64
Cost of detergent or fabric sheer per
month (35/3)
11.66666666
67
Total cost of alternative per month
60.85546666
67
$
2 Cost of washer and dryer (420+380) 800
3

Additional accessories for both appliances 43.72
Delivering cost 35
Total cost of appliances 878.72
Annual depreciation 109.84
Per month depreciation
9.153333333
3
Incremental cost (120+145)
22.08333333
33
31.23666666
67
As from the above table it has been analysed that cost of one option is 60.85 and the cost
of another option is 31.23. So second option is better because the cost is less which is helpful to
earn more profits. So they can purchase washer and dryer for the cost minimisation.
4 Calculations in context to hire additional employees
Income statement for month $
Revenue
Fees from each child 800*6 4800
Expenses
State and annual fees 225/12 18.75
Insurance charges 3840/12 320
Cost of meals and snacks 6*3.2*30 576
Depreciation (79500/25)/12 265
Utility cost 50
Total cost 1229.75
Net profit 3570.25
4

If an additional employee is hired
Revenue
Fees from each child 800*9 7200
Expenses
State and annual fees 225/12 18.75
Insurance charges 3840/12 320
Cost of meals and snacks 6*3.2*30 576
Depreciation (79500/25)/12 265
Utility cost 50
Salary to additional employee 40*9*4.33 1558.8
Total cost 2788.55
Net profit 4411.45
As from the above calculations it has been analysed that net profit is $3570.25 if
additional employee does not get hire. If additional employee get hired than the net profit is
$4411.45 it means this is increasing. So it will be beneficial for Franks to hire the additional
employee so that it can earn higher profits which is useful for business growth (Liang and Nan,
2014).
5. Calculations which shows that how much employees are needed to be hire
Fees from each child 800*14 11200
Expenses
State and annual fees 225/12 19
Rented space cost 650
Insurance charges 5000/12 417
Cost of meals and snacks 6*3.2*30 576
Utility cost 125
Salary to additional employee 1558.8 * 3 4676
5

Total cost 6463
Net profit 4737
In case when Franks hire the employees then net profit will be $4737 and it shows that
profits are increasing when it hire three employees and as per the state regulations an adult can
supervise not more than three children's. As Franks can accommodate a maximum of nine
children. As profits are rising when they hire three more employees so that they can take rent
space where they can accommodate up to 14 children. So Franks should emphasis towards space
option and they should accept all 14 children and this regard additional three employees are
required (Lavia López and Hiebl, 2014).
PART B
1. Management accounting system in Canon and Apple computer
Management accounting system is used by the organisation to make financial reports. On
the basis of information management takes the decisions which is useful in context to the growth
of firm. The financial reports which are made under this system provide the information about
the financial position of corporation. It is the process of recognising, gathering, summarising and
measuring the information to take better decisions which is required for business growth.
Cost reliability improvement system: It is emphasis towards cost that involves cost of
spares, manufacturing, repair & warranty cost which is expenses for the corporation. As an
instance, Canon has launched new product that is mini copier at low cost (Kravet, 2014). It is
requited for the company to analyse the consumer and market demand to manufacture the
product. In this regard there are various cost will include such as cost of labours, material,
innovative technology etc. So it is essential for the organisation to take corrective actions in
order to minimize the cost. Apart from this Apple has launched Macintosh computer that is
cheaper than others and the main aim is to minimize the cost of production. To increase the
profits it is require to launch a new product at lower cost so that maximum number of consumers
can attract towards the company. So it is important for both organisations to take effective
decisions in order to minimize the cost of production so that profitability of firm can be enhanced
and it can achieve the goals (Hilton and Platt, 2013).
6

Quality control system: To enhance the quality of products is important for an
organisation in order to capture more market share. As an example, Canon is a multinational
company and its management has emphasis to enhance the quality of mini Canon so that more
consumers can attract the towards the company and it is helpful to maximize the sales. Where as
Apple has emphasis to produce better quality of Macintosh computer which can fulfil the
expectations of consumer. To maintain the quality company can use total quality management
system so that best quality products can be produce and this decision is helpful for the company
to enhance the efficiency and effectiveness (Eker and Aytaç, 2016).
2. Process of information creation and innovation contribution
As innovation has emphasis to introduce new product or service which emphasis to
provide value to the consumers. As per the case scenario Canon & Apple has launched new
product that contains features which can attract the consumers. According to the case, process of
information is focuses to bring out new things that is based upon human activity not on
deduction & induction. They focuses on synthesis which helps to produce innovative products.
As MC revitalized a number of other product line in Mac & Canon became upon which Apple
rests. It is important for innovating industry to develop an environment that beneficial to
information creation & for the purpose structure is defines and transmit the new created
information.
In Canon, management has introduced new product which is Mini Copier & Apple has
thought to innovate Macintosh that is helpful to provide new information to the organisation in
order to manufacture new product. The American Industries creation is limited for upper level
management to implement the new ideas. The information has communicated to the middle level
management to provide relevant information (Dimi, 2015). Management accounting provides
help in innovation procedure and through it manager of firm can take better decisions in context
to the growth of company. As an instance, the manager of Canon can analyse the market
conditions and demand of consumers. So that better decisions can be taken in context to the
innovative product and it is helpful in context to the growth of business. As management
accounting is helpful in order to maintain the records of stock, raw material as well as financial
transactions which is helpful to measure the cost of corporation. So it contribute in context to the
innovation process of Canon.
7

As the management of Apple can also implement management accounting for the
innovation process and can determines the prices of its products & cost of company which
involves profits and expenditures. By using inventory management software the inventory can be
managed. Apart from this management accounting is also beneficial to provide information in
context to the future profits which is very important (Cadez and Guilding, 2012).
3. Specific outcomes or lessons from article research
To manage the accounts of company management accountants can make proper records
about the financial position of Australian corporations. With the help of this better decisions can
be taken in context to the growth of business entity. To analyse the future income and expenses
accountant can make budgets which is very useful for the organisation. The necessary outcomes
are mention as below:
As the Canon has emphasis to make innovation in its products by using management
accounting. It is beneficial to take better decisions which is beneficial for the business of firm
and it is useful to provide important information about the financial position of corporation. The
management of company has introduced new product which is Mini Copier that is innovative
product and can attract the consumers by providing quality products. The cost among distinct
divisions is require to be assign in order to achieve the objectives by formulating reasonable
price of products.
As Apple company has uses management accounting to get best results and for that
management accountant can analyse the financial reports and provide the essential information
about the organisation and on the basis of it better decisions can be taken which is helpful for
betterment of business. It is helpful for the firm to take useful decisions in context to the
profitability of business (Ahmed and Wang, 2013).
CONCLUSION
As from the above report, it has been analysed that managerial accounting provide
information about the financial position of company. There are different types of cost which
incurs while producing a product and it is required for the organisation to take better decisions to
minimize the cost so that profits can be maximize. Additional employees can be hire so that they
work efficiently and help the firm to earn maximum profits. As the management accounting
systems are beneficial to take efficient and effective decisions. The management accounting
8

contributes towards the innovation process and it is helpful to capture more market share. While
preparing accounts of Australian companies it is necessary for management accountant to
provide relevant information about the financial position of business.
9