Managerial Accounting Analysis: Cost, Decision Making, and Employees

This report delves into the principles of managerial accounting, using the case of Nanna's House, a childcare organization, to illustrate key concepts. It begins by defining and differentiating between fixed, variable, and semi-variable costs, providing examples from the case study. The report then analyzes the best alternative for purchasing appliances, considering relevant costs like washer and dryer costs, delivery charges, and depreciation, while excluding irrelevant costs. Further, the report calculates the costs associated with different laundry options, recommending the purchase of new appliances as the most cost-effective solution. It also includes the calculation of profit and loss scenarios with and without hiring an additional employee, and the impact on the overall capacity and profitability of the business. The report provides the number of employees which is needed to be hired to maximize the profit. The report provides an analysis of the managerial accounting system in Canon Inc. and Apple computer Inc. The report also explores the contribution of management accounting to the innovation process and draws specific lessons from the article research.

Managerial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1. Types of cost discussed in the given case................................................................................1
2. Best alternative to purchase appliance.....................................................................................2
3. Cost that couple has to incur to launder cloths........................................................................3
4. Calculation of Franks additional employee.............................................................................4
5.) The number of employee which is needed to be hired...........................................................5
PART 2............................................................................................................................................7
1. Management accounting system in Canon Inc. and Apple computer Inc...............................7
2. Contribution of management accounting to innovation process.............................................7
3. Specific lessons from article research......................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Managerial accounting is the process where all the activities help the business to increase
their efficiency or effectiveness in order to achieve their goals or objectives (Bushman, 2014). It
is also called cost accounting which helps the business to reduce their cost in order to increase
the productivity which further helps in increasing profit margin of the business. Managerial
accounting contains various information which helps in building various strategy and take
effective decision in order to increase their efficiency. Nanna’s House is selected for the better
understanding of this concept. It is child care organization which provides various services. This
report include the various topics such as different type of cost and it’s components. Managerial
accounting contributes in the innovative process. With the help of various learning this research
collects various findings.
PART 1
1. Types of cost discussed in the given case
Cost is the value is spending by the individual or organization in order to produce
something or get something in return. In the business point of view, cost is the monetary value of
material, effort, resources, utilities and time which are consumed by someone. Along with this, it
includes the various risks as well as opportunity in the order to increase production or profit
margin. Basically this report finds the three different types of cost and it will be discussed
below:
Fixed cost: It is the cost which is fixed for the whole period of production and it does not
matter weather production is having or not. It is a cost which is incurred by the business and it
will not change if number of units increased or decreased. These costs are tending to remain
constant at every level of production. It will be classified as an operating cost because without
this cost business will not able to perform well (Chen, Gores and Nasev, 2013). This cost
basically used for the break even analysis to identify the price of goods or services. From the
given case study, it has been analysis that child care business established by Douglas and Pamela
and they required to perform their operation function. Company required have to bear fixed cost
such as annual insurance of $ 3840, washer & dyer is $ 420 and $ 380 respectively. Cost of
delivery of the appliances is to be fixed at $35 and installation cost is $43.72. Along with this,
cost of mileage was stated at $ 0.56 per mile after the fixed price which is applicable to 6 mile in
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a two way journey. These are the fixed cost of the company which they have to occur weather
they get profit or not. This is the basic cost which business has to bear to run their operational
functions.
Variable Cost: This is the cost which can vary according to the productions level and it
will depend upon the demand of product. Variable cost can be controllable but fixed cost not
because it does not matter that how much unit they produce they only have to pay weather it is
less or high in numbers. It is the cost which incurred by organization and it will change in the
different proportion of the product or services produced by a company. As per the given case
study, Child home care have to bear various variable cost such as monthly charges of child care
service which provided by them of $ 800 per month per child and it can vary as per the number
of children increased to avail this service. Variable cost also includes the cost per hour which
individual has to pay if they come after 4 PM and additional charges also apply $ 15 per hour. In
addition, Douglas and Pamela also provide the snacks and meal at a cost of $ 3.20 per child.
Along with this, cost of laundry also included as a variable cost and it will be charged on the
weekly bases and it is about $ 8.
Semi Variable: It is the cost which incurred by organisation and it will be the combination
of both cost such as variable and fixed cost (Cheng, Luo and Yue, 2013). It is the mixture of cost
where one cost id fixed for the certain level but this it become variable and business has to incur
those even with zero level production. One of the part of cost is variable and another one is fixed
whereas it is changes as per the proportionate change in the level of production. According to the
given case study, it has been observed that, child care services provided by the Nanna's House
and they have to bear various semi variable costs to hire a new employee in order to increase
their efficiency which further increase the productivity or profitability of the business. In the
Nanna’s House single employee can handle the maximum number of 3 children and if the
number of children they wanted to increase then have to hire 2 more employee and if they want
to expand their capacity for 14 children then have to hire 3 new employees which can be
considered as a semi variable cost.
2. Best alternative to purchase appliance
With the help of case study, it provide the various information which help the organization
and top management people to take effective decision in order to achieve their business goals &
objectives. At the time of taking decision it is important to consider some elements which help
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the individual to build strategy in order to achieve their goals. Relevant information is very
important as highlights the various points which should be kept in mind while taking any
decision. As per the given case study, company has to purchase appliances which further help the
Nanna's House to launder the cloths.
This appliance will be used as assets of the company and it will be used to provide the
laundry service for the children who will be availing this service of child care and the relevant
information is important which helps in taking decision. Life of the assets also provides the
important information (Dworkis, 2013). Along with this, rate of depreciation and it’s method
through which it is going to depreciate it also helps important to record and then build strategy
after all the analysis of this. In the organization, detergent is the irrelevant cost which is required
by the machine to perform their operational activities. Relevant cost is washer which is about $
420 and the cost of dryer is $ 380 along with delivery charges. Cost of asset which is charged by
shop is $ 35 and its life is about 8 year which is considered as relevant information for the
business. Laundry supply cost is about $ 35 per quarter and it will be stated as irrelevant cost.
3. Cost that couple has to incur to launder cloths
As per the above case study of Nanna's Homes which provide child care service and it has
three options such as launder the cloth by itself or taking laundry service through Read Oak
Laundry and Dry cleaning to launder their cloths by purchasing new appliance. Below mention
calculation is about the cost which incurred in all the available options and it will be mentioned
below:
Option 1: Self Service of laundry
1.
laundry form Red Oak Laundry and Dry
Cleaning
Per Month
@ $ 52
Option 2: Delivery laundry service
6 miles for 4.33 weeks (6*4.33) 25.98 0.56 per mile 14.55
$8 Per week cost of laundry 34.64
Cost of detergent or fabric sheer per month (35/3) 11.67
Total cost of appliance per month
60.86
Option 3: Purchasing of new appliance
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Particulars Amount
Washer and dryer cost(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 9.15
Incremental cost (120+145) 22.08
31.24
From the above calculation it has been interpreted that in the available three options,
option 3 is best for the company where company have to purchase a new appliance for the
launder its cloths. If they take service from Red Oak Laundry and Dry Cleaning the cost of
laundry is about $ 52 per months and option 1 is taking about $ 60.55 cost. Third option incur the
total cost of laundering cloths is $ 31.24. It is beneficial for the organization to choose the option
3 because it save the $ 30 per month on its laundry (Edition, 2012). So company choose the last
option which provides low cost which automatically increases the productivity and then
profitability of the company. It further helps the Nanna’s House to achieve their business goals
and objectives.
4. Calculation of Franks additional employee
Below mentioned calculation is about profit and loss of the company when they hire no
employee and they have to take cares about 6 children and it will be represented below:
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
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Total cost 1229.75
Net profit 3570.25
Calculation of profit and loss if company hire an additional employee to increase their
efficiency or productivity and now total number of children they can be handle now is 9:
Income statement for month $
Revenue
Fees from each child 800*9 7200
Expenses
State and annual fees 3.125*9 28.13
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 2797.93
Net profit 4402.08
From the above calculation it has been interoperated that total revenue generated by the
company if there is no additional worker is hired then it is stated at $ 4800 and then total cost
incurred is $ 1229.75. One month earning from the child care business is $ 3570.25 and if
company hire an additional worker then it will increase the capacity of business which generate
more revenue for the business and achieve high production or profitability (Figge and Hahn,
2013). When company provide their services to the 9 children in this case total revenue of the
business is $ 7200 and total cost incurred by them is $ 2797.93. Total net profit of the company
is $ 4402.08.
5.) The number of employee which is needed to be hired
Capacity of 9 children:
If an additional employee is hired
Revenue
Fees from each child 800*9 7200
Expenses
State and annual fees 3.125*9 28.125
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Insurance charges 3840/12 320
Cost of meals and snacks 9*3.2*30 864
Depreciation (79500/25)/12 265
Utility cost 50
Salary to additional employee 40*9*4.33 1558.8
Total cost 3085.92
Net profit 4114.08
If an additional employee is hired
Revenue
Fees from each child 800*14 11200
Expenses
Rent 650
State and annual fees 3.125*14 43.75
Insurance charges 5000/12 416.67
Cost of meals and snacks 14*3.2*30 1344
Depreciation (79500/25)/12 265
Utility cost 125
Salary to additional employee 40*14*4.33 2424.8
Total cost 5269.22
Net profit 5930.78
From the above calculation, it has been concluded that if company works according to
achieve their capacity of 9 children then the total cost of one month is about $ 3085 and total
revenue of the company is $ 7200 in result net profit of the child care business was $ 4114.08. If
company works in a rented place then capacity of 14 children provide the total revenue is $
11200 and total cost of the services is $ 5269.22. A total profit is $5930.78 and it will be
generated by the Douglas and Pamela. So company go with the second option and work at a
capacity of 14 children.
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PART 2
1. Management accounting system in Canon Inc. and Apple computer Inc.
Canon Inc. and Apple Computer Inc. use the management accounting which helps the
organization to maintain their accounts in order to innovate new product. There are various
accounting system followed by the organization in order to increase their efficiency and it will be
discussed below:
Price optimisation system: This system used by the both companies such as Canon as well
as Apple where it provides the optimization of cost (Glaser, Lopez, De Silanes and Sautner,
2013). Organization sells the latest developed product in order to achieve competitive advantage
among the market. In Canon Inc. They launched affordable price product after optimizing its cost
with the help of price optimisation system. Company select the price which is more suitable for
the consumers in order to meet their goals and objectives. Along with this, Apply Inc. Also use
the price optimization system to sell their newly introduced product Macintosh computer.
Quality control system: This system used by the both organization where they have to
maintain the quality standards of their products in order to increase their consumer base. Along
with increase their revenue which happens due to increase in production level. In apple Inc. it
implemented this system to enhance their quality of products at lower price. In the Canon Inc.
This system helps in reducing the cost and reducing the weight of its copier machine through
enhancing their quality of the product (Iacob and Ţaicu, 2012).
2. Contribution of management accounting to innovation process
Innovation is the process which helps the organisation to increase competitive advantage in
order to achieve their organizational goals & objectives. It further helps in increasing their brand
image and improves their financial position which affects the profitability also. Innovation
process help the business to develop new ideas which can be implement with the help of
production process (Modell, 2014). It reduces the cost of production and enhances its
profitability which further helps in achieving their organization goals and objectives. As per
given case study, Canon introduced a new PPC in 1969 with the help of innovative technology.
By using management accounting System Company identify the problem and build strategy to
resolve the issues then company launch its new copier machine which is cost effective and
lighter in weight.
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Canon introduce their new lighter copier machine with the help of new technology, effective
budget and management accounting system provide the high level of management. This machine
was very effective in various ways which included various features such as lightweight, easy
installation, clear copies and cost effective (Parker, 2012).
Apple Computer Inc. Also use the management accounting system which helps the manager
to innovate new technology and it decide to work on Macintosh project. This system help the
manager to build effective strategy or budget which further helps the management to take
effective decision in order to achieve their organization goals & objectives.
Management accounting system help the organization to support their innovation process
with the help of identifying different problems through allocating cost and produce their new
innovative Mac computer. Company examine and estimate the targeted customers in the year of
1979 which can attract more customers with the help of new innovative product (Ponisciakova,
Gogolova and Ivankova, 2015).
3. Specific lessons from article research
With the help of available article it has been analysis that financial information help the
business or management to build effective strategy in order to achieve their business goals &
objectives. This information helps the business to determine loss or profit which generated from
their operational functions. Below mention points are important for the management accounting:
Canon
Management accounting system useful for the Canon organization because it helps the
manager to distribute work among the different departments. It will help the manager to increase
their productivity or profit margin in order to achieve organisational goals & objectives
(Tsekrekos, Shackleton and Wojakowski, 2012).
Cost accounting system helps the manager to develop new innovative mini copier at
affordable price which increase the interest of customers. Financial information system of Canon
has helped managers to take quick and effective decision on the basis of available information.
Apple Computer
According to the case study, management accounting system is consider one of the best
system for management which help the manager to identify the problem. Along with this,
provide the effective solutions in order to resolve it and become capable to achieve their goals &
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objectives. Which further helps in increasing productivity or profitability of the company and
provide market growth to expand their business in global market.
Accounting system helps the manager to build effective strategy and accurate budget
information which further helps in identifying problems through previous year’s budget.
Managers of Apple Company analyse the problem that maximum number of consumers not able
to afford their product due to high price of product (Zubac, 2012). So company decided to reduce
the cost of their products in order to increase the demand in the market.
CONCLUSION
From the above discussion, it has been concluded that managerial accounting helps the
organization to increase their productivity automatically increase the profit margin. With the help
of different accounting system manger of the company build various strategies in order to resolve
problems. In additional, management system helps the organization to innovate new products in
order to increase their customer base and profit margin. This report also includes various
alternative which helps in decision making process.
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