HA2011 Role Of Strategic Planning In Management Accounting Assessment Answer

*Note: Students are required to form and self-enrol into groups – a maximum of 4 students per group. You will not be able to submit your group assignment unless you are OFFICIALLY enrolled into a designated group in Blackboard (even if it is a solo-group of 1). Submit the group assignment as a single document, including the Holmes official COVER SHEET. Once formed, the group membership should not be changed for the duration of the trimester.

For help with any group assignment matters, please address your email to bbhelpdesk@holmes.edu.au ensuring that your full details (Name, student ID, unit name and number) are included.

Purpose:

Assignment Specifications

This assignment aims at developing your understanding of management accounting concepts to plan and control business operations. Specifically, you are to critically evaluate the use of Activity-based Costing (ABC) for decision-making and achievement of business goals. You also will use budgets as a planning tool by preparing a master budget for a company.

This assignment is to be completed by a group of 3 - 4 students. You are to self-enrol in to a group. Individual assignments will NOT be accepted, unless approved by the Unit Coordinator.

Instructions with Question 1 of the assignment.

1. You are to refer to the management accounting literature in Question 1, particularly to use relevant academic journal articles from the following Accounting and Management Accounting Journals:

Accounting, Auditing and Accountability Journal; Journal of Management Accounting Research Journal of Applied Management Accounting Research

2. You can access these journals in ProQuest Database by clicking on the above links. Log in details for ProQuest are - Username: Holmes2004; Password: Holmes. These journals can also be accessed via the ProQuest Database link available via the Student Login page in the Holmes website.

You can also use Google Scholar. Don’t use Google.

3. You are to select a minimum of three (3) relevant journal articles, and follow the revised Harvard approach to referencing (on pg. 1 - 2), which include providing the hyperlink to the full text of the cited reference source.

The Assignment Structure should be as the following:

From the management accounting literature:

1. Discuss the role of strategic planning in adding value to an organisation’s products/services. (4 marks)
2. Explain how Activity-based Costing (ABC) can support strategic planning and the value adding processes. Include examples of the type of information and reports the management accountant can provide. (4 marks)
3. Based on your literature findings (from Part (b)), state two key lessons that would inform contemporary organisations about the use of ABC to support strategic planning and the value adding initiatives. (2 marks)

Question 2 This question is not related to Question 1.[20 marks]

This assignment MUST be done in groups of three or four students. Individual assignments will NOT be accepted, unless approved by the Unit Coordinator. The groups are to be formed at your discretion in your respective campuses. Group conflicts must be resolved by members.

The table below needs to be used on the cover sheet of your assignment. The assignment will be marked STRICTLY based on the order in which you list student ID’s. The details below are just examples. You must fill in your respective group details.

An example only:

Students are REQUIRED to use the budget templates as illustrated in the Lecture Slides on BUDGETING Topic (Topic 7). Any supplementary working done to support the amounts in the budgets should be provided.

PREPARATION OF OPERATING AND FINANCIAL BUDGETS

Rosy Hearts produces cupcakes for resale at large grocery stores throughout Australia. The company is currently in the process of establishing a master budget on a quarterly basis for the next financial year, which ends June 30. Last year quarterly sales were as follows (1 unit = 1 batch):

First quarter 60,AAA units Second quarter 75,BBB units Third quarter 96,CCC units Fourth quarter 80,DDD units

See further instructions about last year quarterly sales figures in the table below:

First quarter 60,AAA units becomes 60,037 units. AAA is the last three digits of Member 1’s ID. Second quarter 75,BBB units becomes 75,094 units. BBB is the last three digits of Member 2’s ID. Third quarter 96,CCC units becomes 96,216 units. CCC is the last three digits of Member 3’s ID. Fourth quarter 80,DDD units become 80,104 units. DDD is the last three digits of Member 4’s ID.

NOTE that if your group has three members only, then use the value of 80,000 units for the fourth quarter. For solo group, if approved, do contact the Unit Coordinator via email (LKanainabogi@holmes.edu.au) who will provide you with the last year quarterly sales figures to use.

PREPARATION OF OPERATING AND FINANCIAL BUDGETS (Continued)

Unit sales are expected to increase 25 percent, and each unit is expected to sell for $8. The management prefers to maintain ending finished goods inventory equal to 10 percent of next quarter’s sales. Assume finished goods inventory at the end of the fourth quarter budget period is estimated to be 9,000 units.

Direct Materials Purchases Budget Information

Each unit of product requires 1.5 pounds of direct materials per unit, and the cost of direct materials is $2 per pound. Management prefers to maintain ending raw materials inventory equal to 30 percent of next quarter’s materials needed in production. Assume raw materials inventory at the end of the fourth quarter budget period is estimated to be 41,000 pounds.

Direct Labor Budget Information

Each unit of product requires 0.20 direct labor hours at a cost of $12 per hour.

Manufacturing Overhead Budget Information

Variable overhead costs are:

Fixed overhead costs each quarter are:

Rosy Hearts estimates that all selling and administrative costs are fixed. Quarterly selling and administrative cost estimates for the coming year are:

Rosy Hearts has the following information pertaining to the capital expenditures and cash budgets.

Capital Expenditures

The company plans to purchase selling and administrative equipment totalling $20,000 and production equipment totalling $28,000. Both will be purchased at the end of the fourth quarter and will not affect depreciation expense for the coming year.

Cash Budget

All sales are on credit. The company expects to collect 70 percent of sales in the quarter of sale, 25 percent of sales in the quarter following the sale, and 5 percent will not be collected (bad debt). Accounts receivable at the end of last year totalled $200,000, all of which will be collected in the first quarter of this coming year.

All direct materials purchases are on credit. The company expects to pay 80 percent of purchases in the quarter of purchase and 20 percent the following quarter. Accounts payable at the end of last year totalled $50,000, all of which will be paid in the first quarter of this coming year.

The cash balance at the end of last year totalled $20,000.

The company does not have an overdraft facility with their bank.

Assume Rosy Hearts will collect 25 percent of fourth quarter budgeted sales in full next year (this represents accounts receivable at the end of the fourth quarter). The following account balances are expected at the end of the fourth quarter:

• Property, plant, and equipment (net): $320,000
• Ordinary Shares: $450,000

Retained earnings at the end of last year totalled $56,180, and no cash dividends are anticipated for the budget period ending June 30.

Required:

With the information provided, assist Rosy Hearts in setting up their ‘Master Budget’. To do this, you will need

to prepare the following budgets for coming year:

1. Sales Budget
2. Production Budget
3. Direct Materials Purchases Budget
4. Direct Labour Budget
5. Manufacturing Overhead Budget
6. Ending Finished Goods Inventory Budget
7. Selling & Administration Expenses Budget
8. Expected Cash Collections
9. Expected Cash Disbursements for Materials
10. Cash Budget
11. Budgeted Income Statement
12. Budgeted Balance Sheet*
13. Review the cash budget for Rosy Hearts. Comment on the company’s cash position in the coming year,

and provide one recommendation to resolve one issue you have raised.

*For the balance sheet as at June 30th, there will be a difference between the final totals. This is due to calculations based on rounded off amounts. To balance the totals, simply close off this difference to the Retained Earnings account.

(NOTE - SHOW ALL OF YOUR WORKINGS)