Managerial Accounting: Cost Analysis for Nanna's House Childcare

This report delves into the principles of managerial accounting, using the case study of Nanna's House, a childcare business. It analyzes various cost types, including fixed, variable, and semi-variable costs, and their impact on decision-making. The report evaluates the best alternatives for purchasing appliances, analyzes laundry costs, and determines the optimal number of employees to hire. Furthermore, it explores the application of management accounting systems in companies like Apple and Canon, examining how these systems contribute to cost improvement, quality control, and innovation processes. The report provides a comprehensive understanding of how managerial accounting principles can be applied to make informed business decisions and achieve organizational goals, offering insights into financial statement analysis and cost management strategies. The report is structured in two parts: the first focusing on the specific case of Nanna's House and the second on broader applications of management accounting in different industries.

Managerial
Accounting

Table of Contents
INTRODUCTION..............................................................................................................1
PART 1.............................................................................................................................1
1. Types of cost which is discussed in given case...................................................1
2. Best alternative to purchase appliance ..............................................................3
3. The cost that couple launder clothes ..................................................................4
4. Should frank hire additional employee................................................................5
5. The number of employee which need to hire .....................................................6
PART B ........................................................................................................................... 7
1. Management accounting system in Apple computer and Canon ........................7
2. Management accounting contribute to the innovation process..........................10
3. Specific lessons from article research ..............................................................11
CONCLUSION............................................................................................................... 12
REFERENCE................................................................................................................. 13

INTRODUCTION
Managerial accounting refers to a study of accounts which is prepared by the
manager of the organisation in order to make better economic business decisions. It is a
profession which contains partnership in management decision. Moreover,
management accounting is essential tool for firm's manager as it helps to prepare
accounts, collect financial information and built financial statement that is used to make
effective business. Every enterprise whether small, medium or large size uses
management accounting to keep proper records of financial transaction which gives true
and fair views in company (Alkordi, Al-Nimer and Dabaghia, 2017). The present report
will discuss about Nanna's house that is a child care business run by Douglas and
Pamela. They provide child care facility business at their home and charging some fixed
amounts for take caring. The main aim of this report is to understand cost and
accounting concept that help to make decision in order to achieve organisation's goals.
This report will discuss about cost of organisation, relevancy of information and launder
cost which affects organisation business.
PART 1
1. Types of cost which is discussed in given case
Accounting is the study of financial information which is recoded, collected and
presented by manager of the business enterprises. The main object is to understand the
financial data and use it optimally which helps to increase the profitability. Cost means
amount of money which is spent on manufacturing and creating a good or services.
Cost is the monetary value containing expenditure for rendering services, products, raw
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material and employees who are working in business industry (Christensen, Nikolaev
and Wittenberg‐Moerman, 2016).
In this case, Douglas and Pamela are the managers of organisation who has
determined different types of cost such as-
Fixed cost: The cost which occurs on regular basis and remain constant is
known as fixed cost. It contains rent, salary and administrative cost within business
organisation. As given in case scenario, annual insurance is fixed cost $3840, the
overall cost of washer and dryer is $420 and $380 which will not change. Moreover, the
total cost of delivery the appliance is $35 that is fixed and the cost of installation is also
fixed $43.72 which will not vary regardless the activity of couple. The cost of mileage at
a rate of $0.56 per mile cannot vary with the total mile driven because it is given in case
which is fixed for 6 miles (two way).
Variable cost: The variable expenses covers cost of raw material, labour,
packaging, finished goods that cab be change proportionately. In the discussed case
the variable cost of meal and snacks expenses that can be change after increasing and
decreasing the number of children. The meal charges in Nanna's house are $ 800 per
month for each child. It provides full day caring services if any person wants extra time
to take care of child than they have to pay more fees as decided $ 15 per hour.
Additionally, Douglas and Pamela provide meals and snacks services two time that help
to increase customer loyalty. The meal and snacks cost is $ 3.20 per child that can vary
with the change in number of children. The utility cost $50 that can be vary according to
the member in daycare. The cost of laundry which they can launder themselves at a
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cost of $8 per week that has chances to be change with the number of weeks
laundering (Duellman, Hurwitz and Sun, 2015).
Semi variable cost: This is the mix cost which are arises by for certain level of
production and can be variable after the production increases as expected. If business
organisation does not manufacture any product, then cost of products will be same. As
per Nanna's house case scenario, the semi variable costs are defined as the hiring the
number of employee which is fixed up to three number of student. Such as if 4 child
increase then the frank need to hire 2 employees. In case of increasing the children up
to 14 then need to hire 3 employees to take care of children, so it will be consider in
semi variable cost (Huber, 2015) .
2. Best alternative to purchase appliance
Every person should analysis the cost of product and services and do compare
with other which help to select the best option. According to case study the cost of
purchasing washer and dryer is relevant that will help to make important decision
regarding purchasing new appliances. And the cost of cleaning agent is irrelevant which
can be avoided while purchasing appliances. So In case of Nanna's house, the married
couple Douglas and Pamela want to select the best appliances so they analysis the cost
of appliances and get the best option. As they have three option such as to get laundry
from Red oak whose cost is $52 per month, to get delivery laundry services whose cost
is $60.8554 and to purchase new appliance whose cost will be $31.236 which is less
than above mentioned two option. So organisation should purchase new appliances
(Endenich and Trapp, 2018).
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3. The cost that couple launder clothes
The couple has two option to get laundry clothes like laundry from Red oak and
dry cleaning and they can launder the clothes by itself. Both costs are defined as-
Option:1 To launder the clothes by them self (Laundromat)
Delivery laundry service
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)
11.6666666
667
Total cost of appliance per month
60.8554666
667
Option:2 To launder the cloth from Red Oak
Option:3
In case of Purchase new appliance
Particulars $
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
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Per month Depreciation
9.15333333
33
Incremental cost (120+145)
22.0833333
333
31.2366666
667
4. Should frank hire additional employee
The cost of organisation in case of 6 children
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
If an additional employee is hired
Revenue
Fees from each child 800*9 7200
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Expenses
State and annual fees 3.125*9 28.125
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 2797.925
Net profit 4402.075
If the organisation hires an additional employee then it will get high profit than
previous as shown in above calculation. Because by hiring an additional employee the
fees from children will be increases and the utility cost will be decreased (Kholis and
Maksum, 2017).
5. The number of employee which need to hire
In case 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 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 2797.925
Net profit 4402.075
If In case of 14 children at rented place
Fees from each child 800*14 11200
Expenses
State and annual fees 3.125*14 44
Rented space cost 650
Insurance charges 5000/12 417
Cost of meals and snacks 14*3.2*30 650
Utility cost 125
Salary to additional employee 1558.8 * 3 4676
Total cost 7256
Net profit 3944
According to above calculation Frank should adopt first option that means they
should operate the day care facility at rented place that will be favourable. As by rented
its profit will be $3944 which is less than home place $4402.75. moreover, it need to
hire 3 employees to take care the 14 children.
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PART B
1. Management accounting system in Apple computer and Canon
Management accounting system are helpful to make planning for future in order
to achieve the organisation goals. Business concern uses financial information to take
the correct action. Accounting system help to maintain all records of transaction and use
it properly. It contains the internal and external information which help to make budget,
financial statement and management report in order to check the ability of business
organisation (Maas, Schaltegger and Crutzen, 2016). Additionally, this is the procedure
of defining, collecting, studying and improving the performance of business firm. For
instance, Canon and Apple computer uses different management accounting system
that help to make effective business decision and also help to set the prices of products
and services. Different types of management accounting system are described as-
Cost reliability improvement system: This system is used by Cannon and
Apple computer in order to improve the cost of manufactured product. For instance,
Canon has introduced PPC in 1969 by using original technology. By 1982, its demand
was levelling off and appear for fice market saturation. Then Canon has introduced new
product that was small copier or mini copier which can be use in offices as well as at
home easily. This mini copier was very effective such as light weight and compact which
gives a clear copy at less than 50 ponds which was less costly. The manager of Canon
has state that it might be required for service and can be maintain simply. This product
was feasible because it is not expensive, no extra maintenance required and will be
useful for customer to acquire mini copier (Mora and Walker, 2015).
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The Apple computer company also focused cost of product and features of
computer. Such as Apple thought to entire the Mac project with new features by 1988.
This project will help to attract the customer by providing the best quality and features.
Moreover, the cost of product is high because it maintain the quality of products.
Quality control system: This system helped Canon and Apple computer to
manufacture the best quality of products as customer wants. It mainly considers quality
which need to maintain by manufactures. As Canon and Apple computer bring new
innovation to produce new product like mini copier and Mac project. For instance,
Canon provide a best quality of mini copier which does not need to spend extra
expenses.
The Apple computer is well known company who thought about entire Mac
project which is of best quality and will attract the customer by providing the new
innovative products. Moreover, both company uses quality control system which help to
maintain the best quality.
This is useful system such as by maintaining the quality the number of customer
will increase and profitability of the company will also be increased (Nica, 2017).
Job order costing system: This system is used to delegate and gather the
producing cost of particular unit of output. For Example, Canon organisation used this
system to match the flow of cost to physical flow of products as assign the assign the
task accurately among employees.
The Apple's manager prepares the budget after thinking about new innovation
process. The research and development department of Apple company visits the
market and get information what features customer wants and then make assign the
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work between employee. They assign the work according to their specialisation
accomplish the target.
This is beneficial system which help to allocate the work and provide them
training and development which help to increase the productivity. Such as companies
are delegate the work in different depart which help to perform better and speedily
(Pavlatos and Kostakis, 2015).
Price optimisation system: Canon as well as Apple computer company are
using this system to set the prices of innovated products. For instance, the manager of
Canon has decided to set the prices of mini copier which should not be more expensive.
That means the prices of product should be affordable for customers which can be
easily acquired. So Canon set the reasonable price and uses this prices optimally (Pratt,
2016).
The Apple computer keeps high prices of product along with better quality that
help to attract the customer. The manager of Apple set the price policy and uses it
properly which in order to maximize the production.
This is beneficial system which is used by both company to use the prices of
product. This system also helps to understand the buying power of customer and make
policies further.
The components which is described in given case
Balance scorecard: This is most important component of Management
accounting system which is used by to make strategy and innovate product. For
instance, Apple company innovate and upgrade own business activities by innovating
new products. In other words, it help Apple company in their work such as customer
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