ACC5213 Management Accounting with a Strategic Perspective
Assignment (weighting 30%)
S2 2016 Due date: 3rd October 2016
This Assignment is designed to give you an opportunity to:
1. integrate traditional, contemporary and advanced theoretical and technical management accounting knowledge for planning, control and evaluation, as well as decisions making;
2. critically apply traditional, contemporary and advanced theoretical and technical accounting knowledge and skills to solve emerging and/or advanced management accounting problems that require planning, control and evaluation, as well as decisions making from a strategic perspective; and
3. demonstrate information literacy and numeracy skills required by accountants to access relevant data from research and business literature sources and use contemporary and advanced analytical techniques.
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Scenario
You are a management accountant at Mirror Tools Limited (Mirror Tools) and report to Marshall Singh, who is the chief financial officer. Mirror Tools manufactures 20 different types of power tools.
Marshall has asked you to examine the use of Activity Based Costing (ABC) to gain a better understanding into the costs of the company’s products. He has asked you to carry out a pilot study on three products from the hand-held tools division.
The following products have been selected for the pilot study:
Rotary hammer.
Finishing grinder.
Cordless drill.
Marshall has advised you that he has some concerns about the existing allocation of costs. His concerns are:
1. In analysing the data collected, Marshall notes that the company’s traditional costing system allocates manufacturing overheads to products on the basis of direct labour hours. The company also treats selling and administrative overheads as a lump sum, below the manufacturing margin line. Marshall is concerned because:
a) He suspects many of the overhead costs are not directly related to labour hours and that there are other relevant cost drivers.
b) He also suspects that some products require more selling and administrative overheads than others.
2. Marshall is also concerned that the combined effects of these distortions are leading to an inaccurate picture of the profitability of individual products
To prepare for the pilot study, you have gathered the following information from the company’s financial and manufacturing systems.
Required:
1. Calculate the profitability of the three products in the pilot study, using the traditional method of cost allocation. (Show workings)
2. Calculate the profitability of the three products using ABC. (Show workings)
3. Prepare a briefing note to Marshall that summarises how the ABC information may be used to improve managerial decision-making (activity-based management (ABM)). (300-500 words, fully referenced)
4. Identify and explain key practical issues that may be faced by Mirror Tools in implementing ABC for all of its products. (300-500 words, fully referenced)
The bibliography in not included in the word count.
(Adapted from Chartered Accountants Program, Management Accounting & Applied Finance, 2015) Notes for Students:
1. Submission is electronic via the link on studydesk. Acceptable file types are office Word documents. Although you may use excel or a similar spreadsheet function to do parts of your assignment if you wish, this must be incorporated into a Word document for submission, and all workings should be shown. Submission of excel spreadsheets will NOT be accepted.
2. Ensure that you include your last name and your student number in naming your file and that you include a header or footer within your document giving you full name and student number.
3. The policy statement on cheating and plagiarism is a cornerstone of academic integrity at USQ. All students are responsible for familiarizing themselves with the policy, seeking further advice if necessary and complying with it at all times.
4. If you use any material, for example textbooks, journal articles, websites etc. to support your answer, you are to use the Harvard Style of referencing in your answer for both in-text and bibliography referencing.
Referencing: The Harvard (AGPS) style - USQ Library's referencing guide at http://www.usq.edu.au/library/referencing
5. No extensions will be granted after the due date and time for the assessment has passed. Extensions will only be granted in extenuating circumstances. Crashing of computers, too busy with other assignments, heavy workload, and such reasons are not considered extenuating circumstances.
6. Style and format should be 12p font; 1.5 line spacing; and 2cm margins all round
7. Feedback will be provided to each student via a completed marking criteria sheet (a copy of which you will find on the course studydesk). General feedback will be provided to all students via the relevant course forum.