MAA262-Management Accounting Report Writing – Accounting and Finance Assignment Help

Assignment Task

Task

Description:

Your response should respond to all questions.and the words limit includes headings, tables, references, and appendices. Note that an executive summary, contents page, and cover page are not required. Regarding the formatting of the assignment, there is no specific requirement regarding font, font size, and line spacing; there are no minimum amount of words. If you are not using spreadsheets, numbers should be rounded to two decimal places; you are recommended to use Microsoft Excel for crunching the numbers and calculations for supporting your arguments. If you are not familiar with the software, you should use this assignment as an opportunity for getting used to spreadsheets. If you have any concerns regarding your tables contributing to the word limit, you can paste the tables as images in the assignment.

Learning Outcomes:

ULO1: Explain the roles of management accounting and strategy within organisations, and their impacts on organisational structures, delegations and control.

ULO2: Prepare detailed budgets and forecasts for management purposes, explain and evaluate the budgeting process and its role in the management of organisations.

ULO3: Select and apply appropriate quantitative techniques to interpret costing information for business planning and control.

ULO4: Select and apply the principles and procedures to analyse and manage an organisation’s cash flow and working capital requirements.

ULO5: Communicate management accounting concepts and use appropriate technology to provide information to relevant stakeholders.

ULO6: Apply local and international codes of ethics for professional accounting in addressing business issues to inform responsible and sustainable decision making.

Question 1:

The board of BMC has advised the manager of the Clothing Retail Division to consider acquiring a competitor located in Sydney for improving the conglomerate’s clothing retail market share. BMC has always used return on investment (ROI) for evaluating the performance of its divisions; the manager of any division that reports an annual increase in their ROI is given a bonus, but the managers of divisions where the ROI declines must provide a very convincing explanation as to why they should get a bonus. Where ROI has declined, the bonus is limited to only 50 per cent of the bonus that is paid to the divisions that report an increase in ROI.Some managers are petitioning the board of BMC for changing the divisions’ performance evaluation from ROI to a residual income (RI), using the conglomerate’s required annual rate of return of 15 percent.

The following data relate to the most recent financial year:

a) Calculate the ROI for the Clothing Retail Division and the competitor before the acquisition; calculate the ROI for the entire division after merger and acquisition (i.e., combing the Clothing Retail Division with the competitor). Explain why the manager of the Clothing Retail Division may be reluctant to acquire the competitor. Provide calculations based on the compensation plan discussed above.

b) If division managers were evaluated based on divisional RI, would the manager of the Clothing Retail Division be more motivated to acquire the competitor? Provide calculations to support your answer.

Question 2:

The Dairy Division of BMC, located in the city of Colac, operates at capacity, and considers applying ABC analysis to three product lines within its division: full cream milk, skim milk, and almond milk. The manager of this division identifies four activities, and their activity cost allocation rates as follows:

Required:

a) Using the division-wide allocation rate, calculate and identify which product line has the highest gross margin in dollars and in percentage (i.e., gross profit/revenue). 

b) Using ABC, calculate and determine the profitability (i.e., gross profit/revenue) of the three product lines (i.e., specify the highest, the middle, and the lowest profitable product line).

c) The division expects that, in the year 2022, there will be no freezing activity because the division wants to sell the products as fresh as possible. The division wants to manufacture the products at a smaller batch each time so there is an increase of set up activities for every product line as below.

Question 3:

When planning the next year, the manager of the Dairy Division of BMC is considering whether to manufacture rennet, an enzyme used to coagulate milk which is an ingredient for the cheese production line, or outsource this ingredient with Dangke Enterprises, located in South Sulawesi, Indonesia. If the Dairy Division buys the rennet from Dangke Enterprises, it can use the facilities previously used to manufacture rennetto manufacture enzymes for another division of BMC.

The manager of the division is considering three options for 2023:

i. Manufacture the rennet for the Dairy Division of BMC in Colac and do not manufacture enzymes for another division of BMC.

ii. Outsource the manufacture of rennet with Dangke Enterprises and do not manufacture enzymes for another division of BMC.

iii. Outsource the manufacture of rennet with Dangke Enterprises and use the facilities in Colac to manufacture enzymes for another division of BMC. The Dairy Division of BMC has the following costs for 250,000 bottles of rennet in 2022:

The mixed overhead of $25,000 consists of material handling and set-up costs; total material handling and setup costs equal fixed costs of $5,000 plus variable costs of $200 per batch. In 2022, the Dairy Division produced 250,000 bottles of rennet in 100 batches of 2,500 units each. When planning for 2023, the manager of the Dairy Division of BMC has the following estimates:

• Dangke Enterprises offers to sell the rennet to the Dairy Division for $0.50 per bottle.
• If the Dairy Division does not outsource the manufacture of rennet, it will produce 250,000 bottles of rennet, in 200 batches of 1,250 bottles each. The fixed and variable costs are expected to remain the same, except for the mixed overhead. Regarding the mixed overhead, the variable costs per batch are expected to decrease from $200 to $100.
• If BMC outsources the manufacture of rennet with Dangke Enterprises and uses the facilities in Colac to manufacture enzymes for another division, the expected additional future operating profit of manufacturing enzymes for another division of BMC is $30,000 per year.

Required

a) What is the cost per bottle of rennet manufactured by the Dairy Division of BMC in 2022?

b) How much will the Dairy Division of BMC save or lose by manufacturing the rennet in 2023?

c) Which of the three options should be the manager of the Dairy Division of BMC pick 2023? Provide calculations to support your answer.

Question 4:

You have been assigned for reviewing the actual and budgeted figures of the variable manufacturing overhead of the Furniture Division of BMC. The manager of the division argues there are no evident issues with the direct labour cost budget because the static-budget variance is often favourable, which proves the budgeting process works quite well. The manager also argues the employees at the production line of standard chairs are always highly efficient because of the consistently favourable efficiency variances.

Your analysis is for a specific month of the year, comparing the budgeted and actual figures. For the specific month of the year, each standard chair is budgeted to take 6 labour-hours. The budgeted hourly wage is $30. The budgeted number of standard chairs to be manufactured in this given month is 90.

Actual direct labour costs in the given month were $16,000 for 100 standard chairs started and completed. There was no opening or closing stock. Actual direct manufacturing labour-hours for this given month were

Required:

a) Calculate the static-budget variance, the flexible-budget variance, the sales-volume variance, and the pricing and efficiency variances for the given month for direct labour costs. 

b) Explain whether the management is correct or not regarding having a good budgeting process due to often having a favourable static-budget variance and a consistently favourable efficiency variance. Use your calculations for supporting your argument. 

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