Advanced Diploma Of Accounting Assessment Answer

Advanced Diploma of Accounting

Answering Assessment Questions

Each Assessment Booklet contains blank spaces for following assessment items:

• Short Answer Questions

When submitting Assessment Booklets for marking, please ensure that the entire booklet is completed.

Short Answer Questions

Using the space/s provided, please complete your answers making sure to: 

• Please restrict your answers to no more than 300 words per question
• Please include any calculations that you used to reach your answer

Referencing Your Answers

Students undertaking the course must exhibit a range of skills in order to be confirmed as competent in their course. These skills include:

• Understanding a question.
• Possessing knowledge about the issue, which in some assessments includes locating information from references.
• Providing an answer, this shows personal understanding.

Please make sure that all assessments are documented in a way that exhibits your personal study and/or research. To that end would you please acknowledge all material and sources used in the presentation of your assessment whether they are books, articles, reports, Internet searches, or any other document or personal communication. For example if:

• An idea is sourced; reference it e.g. (Bagra 2010).
• You are directly quoting, wrap it in quote marks e.g. “Tom Horner sat in a corner” (Peters 2007 page 7).
• You are quoting from the internet include quote marks and the web reference e.g. “ban on conflicted remuneration structures including commissions” accessed on the 28^th of December 2012.

Please note that no more than 5% of direct quoting which is referenced is deemed to be acceptable and no amount of direct quoting without referencing is deemed acceptable. Any direct quoting should form only a small portion of any answer and the answer should demonstrate the student understands and can interpret the question and provide an appropriate answer. 

Whilst this will require more work for you I hope you will understand that we are trying to maintain high standards and support your progression into further qualifications.

Note: If you are submitting handwritten assessments all questions must be completed in blue or black pen. If assessments are received in pencil or with illegible handwriting, a resubmission will be required.

Short Answer Question 1:

What are the recent changes in the management accounting environment that have, in part, made traditional management accounting systems inadequate for the modern business environment?

Short Answer Question 2:

XYZ Pty Ltd manufactures a wide range of products and has adopted many aspects of Advanced Manufacturing Technology (AMT). A factory-wide direct labour hour rate has traditionally been used to absorb all production overheads into product costs.

Provide three reasons why a direct labour hour rate might not be appropriate for a company such as XYZ Pty Ltd.

Short Answer Question 3:

Suggest a suitable cost driver for each of the following overhead costs.

• machine set-up costs
• short-run variable overhead costs
• materials receiving costs
• materials handling costs
• quality control costs

Short Answer Question 4:

Your production director has stated: ‘Now that we are using ABC we have completely accurate product unit costs that will help us to make better decisions and improve our ability to control costs in the future.’

Discuss whether or not you agree with this statement.

Short Answer Question 5:

What responsibilities would a management accountant of a medium sized manufacturing operation have with regard to data protection and security?

Short Answer Question 6:

Adelphi Ltd is a large multinational company with annual revenue of approximately $20 billion. During a particular period, a variance report revealed an unfavourable labour rate variance of $38,500. Should this variance be investigated? Give reasons for your answer.

Short Answer Question 7:

Identify reasons why a calculated variance, such as those listed below, might not be worthy of further investigation because of the likelihood that its cause is outside the control of management.

• Materials price variance
• Labour rate variance
• Labour efficiency variance
• Selling price variance

Short Answer Question 8:

Identify 3 useful non-financial performance measures for each of the following business activities:

• a company selling household goods to consumers online
• a hotel

Ensure that each of the measures provided are relevant to the specific business activity, rather than appropriate for any business activity.

Short Answer Question 9:

Birstall Ltd. makes high-tech electronic components. Customers place orders online or by phone, and then Birstall delivers the components to its customers. Birstall. has just carried out a customer account profitability analysis and has identified various customer groups that are less profitable than others. However, Birstall is reluctant to stop selling to the less profitable customer groups altogether and would prefer to increase their profitability.

How could Birstall increase the profitability of the less profitable customer groups?

Short Answer Question 10:

You are a senior management accountant working for a petrochemicals company. There has been a fire at a chemical plant. There were no injuries but there has been some damage to assets, and there have been unconfirmed reports of serious air and ground pollution. Your manager has asked you to prepare an estimate of the cost of the damage for the board, but has given you a hint that the board is expecting the cost to be small.

What are the individual, organisational and professional influences that might affect the way that you approach this work?

Case Study Information

Customer Profitability at Allegro Pty Ltd

Managers at Allegro Pty Ltd have been using various teams to collect activity-based data since 2010. Each team has consisted of one or more management accountants working closely with department managers. The teams typically work for 3-6 months on data collection and developing spreadsheets. To date the teams have mainly focused on product costing. Recently two teams have been set up to collect data to improve the company’s understanding of customer-related costs and profitability. One team has looked at distribution costs and the second at order related costs.  

Only 3 customers were included in the analysis. These 3 customers represent 10% of total sales. The company has approximately 250 customers in total. Finally the teams only considered labour related costs and direct costs for the cost pools.

The first objective for each team was to estimate the total annual overhead cost and annual volume for each cost driver. As the company only focused on three customers the data was quickly estimated.  The second objective was to estimate the percentage of each cost driver per customer.

Collecting Data

The management accept that a ‘cost sampling’ or snapshot’ approach is the best way to identify key activities and their costs.  This technique helps the department to develop estimates of how much time is devoted to different activities. Then by using an average hourly rate for all staff managers will be able to estimate the total annual cost of an activity. The decision to use an average hourly rate for all staff will save time.

Managers decided that between 4 to 8 activities should to be identified by each team.  The possibility of identifying 20-30 activities was considered but this was rejected because there was very little time to do the work. For the whole exercise it was felt that the information must not take too long to collect and interpret.

Most of the managers involved with the new teams have little experience of collecting data regarding activities and cost drivers. With some activities several cost drivers were discussed. This confused some managers who felt unclear why a cost driver was rejected or accepted. The management accountants believed these problems would not affect the accuracy of the data. 

Activity Based Costing Data

Team 1: Order related overheads

(Data based on 3 sample customers)

Team 2: Distribution costs

(Data based on 3 sample customers)

Customer sales and activity analysis

The following table summarises the percentage of each cost driver per customer. 

Case Study Questions:

Using the Allegro Client Briefing Report.

In preparation for an Activity Based Costing (ABC) project review meeting Harry Wren, the CFO of Allegro, has asked you to prepare a briefing paper on the ABC data collected by two Allegro teams. Specifically the CFO wants you to:

1. Calculate the profit for each of the three sample customers analysed, based on the collected ABC data
2. Provide recommendations the company should consider to improve the profitability of each of the three sample customers.
3. The CFO is considering extending the ABC analysis to all customer-related revenues and costs and wants you to provide reasons, for consideration by the project review team, why such data is needed and how it can be used to help the company compete more profitable.