Semester 1 Managerial Accounting: Cost Analysis and Decision-Making

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Managerial accounting
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Contents
Introduction...................................................................................................................... 3
Part A............................................................................................................................... 4
1 Different types of cost used. Explain any three types of cost with examples?..............4
2 Discuss the relevant and irrelevant information for the decision of purchasing
appliances?......................................................................................................................5
3 What could it cost the couple to launder clothes? Show calculations?.........................6
4 Provide the information regarding the hire of an additional employee?........................8
5 The decision regarding the business continues in a rented house or owned house?. 10
Part B............................................................................................................................. 13
1 Identifying components of the management accounting system in both companies
Canon Inc. and Apple Inc.?............................................................................................13
2 Explanation of management accounting how it will contribute to the innovation
process?.........................................................................................................................14
3 Find the outcomes from the article?............................................................................15
Conclusion..................................................................................................................... 16
References.....................................................................................................................17
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Introduction
In this report, there is a discussion was made on two part i.e. Part A and part B. In Part
A, there is a discussion is made on the business of Douglas and Pamela Frank for
operating their business in the field of day care of children. In their business, the
variable cost is seen and study on these costs and provided the results which cost are
necessary for the business which helps in taking the decision regarding the purchase of
new appliances like washer and dryer. In this part, it is also been seen that the business
is able to hire more employee for the pu[pose of taking their business on the rented
house and also be analyzed that the business is profitable or not if they the operation of
the business is done other house. In the other part i.e. Part B, there is a brief discussion
on the point of a management accounting system that how this will be used by the
Canon and Apple Company in their business activities. Also, evaluate the innovation
process within the organization so that companies will able to make great profits. So
now start a discussion in brief in below.
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Part A
1 Different types of cost used. Explain any three types of cost with examples?
There are many different types of cost are used in the business of the couple Douglas
and Pamela Frank. These costs are helping the couple in order to run their business for
caring the children. The costs are included in the business of the couple are as follows:
Annual License fees = $ 225
Annual Cost of insurance = $3,840
The cost charged against the caring of the children (Fees) = $ 800 per month for each
child
Overtime cost = $ 15/hour per child
Cost of meal and snack = $ 3.20 per child per day
Renovation cost = $ 79,500
Utility cost = $ 50 per month
Cost of old appliances = $ 440
Laundry expenses = $ 52 per month
Purchasing cost of detergent and fabric sheet = $ 35 each quarter
Cost of washer = $ 420
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Cost of dryer = $ 380
Delivery charged (washer and dryer) = $ 35
Addition cost required for accessories = $ 43.72
All of the above costs are important in somewhat nature but mainly three cost impact
the business as they have a high potential capacity in order to make business success
or flop. Such costs are fees that charge by the business owner from for taking caring of
the children, cost of snacks and meals provided to the children and annual insurance
and license cost. All of these costs are necessary in order to run their business in long
terms or it can be say that these costs are the necessary cost because in the absence
of these costs the business cannot run (Baldwin, 2015)
For example in the reference of fees charged, the fees are the important part in the
business because as the fees increase or decrease it directly affect the business same
as increase their business in the same field or stop at a certain point. As per according
to the cost of snacks and meals, this cost also increases or decrease because of this
cost is based on the number of children present in the house. Laundry expense or cost,
this cost not be constant throughout the period of business because it also depends on
the number of children. So from the above, it is interpreted that all the above cost that
discussed is variable cost and is based on the number of children.
2 Discuss the relevant and irrelevant information for the decision of purchasing
appliances?
In the above case study, it has been seen that various cost is inserted in the business of
the couple in order to run their business. In the business of the couple, all of the above
costs are not relevant regarding the purchase of appliances i.e. washer and dryer. As
per the question, the main or relevant costs for the decision talking regarding the
purchase of appliance (washer and dryer) are cost of old and cost of new washer and
dryer which is $ 420 and $ 380 respectively, additional charged for purchasing the
accessories of the appliance is $ 43.72 and delivery charge which cost is $ 35. So from
the above three costs that are related with the purchase of appliance are relevant for
taking the decision regarding the purchase of new appliance because of if a new
appliance is purchased then it also includes the cost of two other like delivery charge
and accessories. Rest all the other costs that discussed in the above part are irrelevant
for taking the decision for purchasing new appliances because there is no direct or
indirect connection in relation to the purchasing of the appliance. The cost of a new
appliance is much higher than the cost of the old appliance; it is increased by $ 438.72
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(the difference between the sum of all cost regarding the purchase of new appliance
and the cost of old appliances).
The other cost which does not impact on the purchasing of the appliance is such as
annual insurance and license fees, fees charged from the children, renovation, utility
cost, laundry expenses, and other costs. These costs are not based on the decision of
purchasing so these costs are irrelevant for the purpose of making a decision regarding
the purchasing of the new appliance by the owner of the business.
3 What could it cost the couple to launder clothes? Show calculations?
The expenses incurred in the process of launder the clothes are as follow:
 If the clothes are processed by the business owner then the cost is,
Cost of laundering $ 8 per week
Cost of laundering in a month = $ 32
Traveling charge = 0.56 per mile in one way
Distance for one way = 3 mile
The total cost of laundering of clothes = cost of per mile * one way * reverse *total cost
in a month.
= 0.56 * 3 (2) * 32
 Cost of laundering by the other Red Oak Company is $ 52.
Particular Amount ($)
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Cost of laundering (per week) 8
Cost of laundering in a month 32
Traveling charge in one may (one mile) 0.56
Total Distance (in a mile) 6
The total cost of laundering of clothes 107.52
According to the above table, the cost incurred by the business owner is $107.52 and
the cost by the Red Oak company for laundering is just only $ 52 which is much less in
comparison with the cost of self-service and the does not include the cost of detergent
and fabric sheet. So it can be expected that the cost of self-service is going high with
the cost of the other company that offers their services (Kerr, 2019).
So the decision of providing self-service is should be a drop by a couple of business
because of the incurring of high cost which directly affects their business profitability
and also increases their expenses list.
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4 Provide the information regarding the hire of an additional employee?
Here, the business owner is facing the problems regarding the hire of a new employee
is right or not. So for this problem, a calculation is made to show that help the business
owner in order to get complete knowledge about the hiring of new additional employee
decision is right or not. Below there is a calculation made on the hiring of a new
employee (Kogan, et. al., 2015).
Calculation regarding the hire of new employee
Particulars Amount ($)
Cost of new employee ( per hour) 9
Work in a week (hour) 40
In one month (4 weeks) 4
Total cost 1440
Calculation of fees charged by the children
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Particulars Amount ($)
Fees for one child per month 800
Fess for 3 children 3
Total cost 2400
Calculation of differences
Particulars Amount ($)
Total cost as per the fees charged 2400
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Total cost as per the cost of new
employee 1440
Difference 960
From the above table of calculation. It is clear that the business owner should take the
decision regarding the hiring of a new employee because it gets a benefit of $ 960 after
meeting the expense of a new employee.
The cost of hiring a new employee is $ 1440 and the fees charged by the children is $
2400. So from this two costs, the fees charged are higher than the cost of new
employee and it will generate extra income to the business owner in terms of money
and also make a decision in future regarding the expanding of their business.
5 The decision regarding the business continues in a rented house or owned
house?
As the detail provided regarding the accommodation facility for the owned house is up
to 6 children, but it has a capacity of 9 children at a time. The owner of the house is to
compare the decision regarding taking the house on rent or operate their business in
the same house (owned house). Following are the calculation which helps the business
owner regarding the decision taken for the business operates from a rented house or
owned house.
Expenses list Amount ($)
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Cost of 1 employee 1,440
Cost of 3 employee 4,320
Cost of a rented house 650
Utility cost 125
The extra cost of insurance 97
Total 5,192
Annual insurance cost is 5,000 for the rented house and owned house
insurance cost is 3,480
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The difference in insurance cost (monthly) 96.66 or 97
As per the above table, the cost of operating their business from the rented house is $
5,192, while the income is just only $ 6400. But in case of operating business in the
same house then the cost is less due to no extra cost included in business like rent of
the house, insurance cost and cost of 5 new employee which would be hired in addition
for taking caring of the extra 8 children. So it is advisable to the business owner that the
business should be operated from their owned house because if they operate their
business from the rented house then it will make create a loss due to not sufficient
income.
The owner should need to hire an additional employee is five because one employee is
capable to take care of children for three so for the 14 children 5 employees are needed
by the business owner in order to take 14 children in the house. While the capacity of
accepting children is 14 so the business owner can accept up to 14 children. As the
hiring of 5 employees on 14 children, the business will directly face a loss of one
children fees because of one employee is hired for 3 children so s employee take care
of 15 children but as per the given only 14 children are accepted by the business
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