HI5017 Management Accounting Case Studies Of SoulSpace Electronics Assessment Answer

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Question :

Assessment Details and Submission Guidelines
TrimesterT1 2019
Unit CodeHI5017
Unit TitleManagerial Accounting
Assessment TypeIndividual Assignment
Assessment TitleManagement Accounting Case Studies
Purpose of the assessment (with ULO Mapping)Students are required to develop their understanding of cost concepts, and demonstrate their ability to apply their knowledge of cost concepts to a service-based company. Additionally, students are to critically evaluate a journal article to analyse the practical use of accounting information to real-life companies’ decision-making and achievement of business goals (ULO 1, 5, 6, 7, and 8)
Weight30% of the total assessments
Total Marks30
Word limitNot more than 3,000 words. Please use “word count” and include in assignment.
Submission Guidelines
  • All work must be submitted on Blackboard by the due date along with a completed Assignment Cover Page.
  • The assignment must be in MS Word format, no spacing, 12-pt Arial font and 2 cm margins on all four sides of your page with appropriate section headings and page numbers.
  • Reference sources must be cited in the text of the report, and listed appropriately at the end in a reference list using Harvard referencing style.
  • It is the responsibility of the student who is submitting the work, to ensure that the work is in fact her/his own work. Incorporating another’s work or ideas into one’s own work without appropriate acknowledgement is an academic offence. Students should submit all assignments for plagiarism checking on Blackboard before final
submission in the subject. For further details, please refer to the Unit Outline and Student Handbook.


Individual Assignment Specifications

This assignment aims at developing your understanding of cost concepts, and demonstrate your ability to apply your knowledge of cost concepts to a service-based company. Additionally, you are to critically evaluate a journal article to analyse the practical use of accounting information to real-life companies’ decision-making and achievement of business goals.

Assignment Structure should be as the following:

Part A: Case Study Analysis (15 Marks)

You are to answer the 5 questions relating to the case study of a child care business. It includes both theory and calculation type questions. Do show your working for the calculations.

Case Background

Douglas and Pamela Frank are a married couple. They both worked for a railroad company for 30 years. At age 57, Douglas and age 52, Pamela retired and moved to the small town of Ovilla, Texas, which has a population of approximately 3,500 residents. When the Franks moved to the town, they decided to start a child care business in their home called Nanna’s House. Nanna’s House is licensed by the state. The state charges an annual fee of $225 to maintain the license. Insurance is required at a cost of $3,840 annually. The facility is licensed to care for a maximum of six children. The Franks charge a fee of $800 per month for each child. The monthly fee is based on a full day of care, from 8:00 a.m. to 4:00 p.m. If additional time is required beyond 4:00 p.m., parents must pay an additional charge of $15 per hour for each child. The couple provides two meals and a snack for the children. The cost of the meals and snack is $3.20 per child per day. There are six children currently enrolled.

The facility is very nice. It is an 820 square foot addition to their home that was built in 1964. The Franks purchased the home and completed the renovations for $79,500 and they believe the addition has a useful life of 25 years. The facility has a large open space for play, reading, and other activities. There is a section for sleeping which contains small cots. The facility is equipped with a small kitchen, two bathrooms and a small laundry area. The daycare increased the Franks’ utility cost by $50 each month.

During the first week of operations, the washer and dryer stopped working. Both appliances were old and had been used by the couple for many years. The old appliances cost a total of $440. While a laundry room was not initially a necessity, it became increasingly important for laundering the soiled clothes of the children, blankets, and sheets. A company nearby, Red Oak Laundry and Dry Cleaning, can launder clothing for the Franks, including pick-up and delivery, for $52 per month. Alternatively, the Franks can take clothes to the laundromat once a week, which is three miles away (one way). The applicable mileage rate is $0.56/mile. They can launder the clothes themselves at a cost of $8 per week. The self-service alternative does not include detergent or fabric sheets. The couple would need to purchase these items in order to use the laundromat. Purchasing laundry supplies in bulk from MegaMart would cost $35 every quarter. The final alternative is for the Franks to purchase a washer and dryer. The cost of the appliances is: washer $420 and dryer $380. The additional accessories for both appliances, needed for installation, cost $43.72. The store will deliver the appliances at a total cost of $35. The cost of installing the appliances is free. Both appliances are expected to last 8 years. According to the manufacturer the washer will increase energy costs by $120 per year. The dryer will increase energy costs by $145 per year.

The Franks need some assistance in decision making and evaluation. They have contacted you, their accountant, to provide some advice.


Respond to the following questions to help Douglas and Pamela make their decisions. (If necessary, the Franks will use straight line depreciation. For monthly calculations, use 4.33 weeks per month.)

  1. Consider the different types of costs discussed in this unit. List any three (3) types of costs and provide one specific example of each cost from the case. (3 marks)
  2. Based on the information provided, what information is relevant to the decision to purchase the appliances? What information is irrelevant to the decision to purchase the appliances? Why? (3 marks)
  3. What could it cost the couple to launder clothes? Show your detailed calculations for each option. (3 marks)
  4. The Franks have a waiting list for their day care. They can hire an employee for $9 per hour for 40 hours each week. With the additional employee, the Franks can accept three additional children. Should the Franks hire the additional employee? Show your detailed calculations. (3 marks)
  5. The Franks home can accommodate a maximum of nine children. They can move the day care from their home to rented space in town, which can accommodate up to 14 children. The space will cost $650 per month and the utilities will cost $125 per month. Additionally, insurance will now cost the Franks $5,000 per year. Per state regulations, each adult can supervise no more than three children. As their accountant, prepare a letter to the Franks advising them on their space options. Should they continue to operate the facility at home or should they rent space in town? How many children should they accept? How many employees will they need to hire? Show your detailed calculations for each scenario. (3 marks)

Part B: Journal Article Critique (12 Marks)

You are to read the journal article by Nonaka and Kenney (1991), “Towards a new theory of innovation management: A case study comparing Canon, Inc. and Apple Computer, Inc.”, Journal of Engineering and Technology Management, 8, p. 67-83. The journal article is attached as a separate file in Blackboard under the folder <Assignment>.


Critically evaluate the role of management accounting systems and the provision of accounting information in the innovation process of these two companies by answering the 3 questions below:

  1. Identify the components of the management accounting system in each of the two companies, and discuss their relevance in enabling decisions to be made efficiently and effectively. Include examples in your answer. (4 marks)
  2. The article describes the innovation process in a firm as ‘a process of information creation’, and a firm needs to organise themselves ‘to transmit the new information’. Explain how management accounting contributes to this innovation process. Include in your discussion two (2) specific examples from each of the two companies mentioned in the journal article. (4 marks)
  3. Provide four (4) specific outcomes or lessons learned from the article’s research findings that will be useful for management accountants in Australian companies to learn from, and justify your answer [i.e. provide 2 outcomes from each company]. (4 marks)
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Answer :

Entrepreneurial Business Proposal

Executive Summary 

SoulSpace Electronics is the entrepreneurial venture in Sydney. The organisation primarily specialises for repairing as well as the sales of the home electronics, mostly the home entertainments electronic that involve the televisions than the VDVs along with the home theatre and the CD players. The organisation will effectively target the people who provide great importance for their electronic equipment and even have high-end electronic products. The organisation will also focus on repairing as it will be more cost-effective than just replacing the product. The firm is going to have numerous low budget electronic entertainment products also so that every people are able to get the products. This will also help the business for providing the option to the people to buy new products than repairing the old products. The company is owned by the 2 partners with the profit sharing ratio of 50-50 to maintain the working function of the store and provide suitable service to the customers. 

Background to the idea 

The organisation SoulSpace Electronics is the growth-oriented business that is having the ten years goal for becoming a leading electronic repair as well as entertainment company within the country. The organisation will effectively provide the repair service to the customers along with the electronic products for the entertainment like the television then the home theatre and even the DVDs to enhance the value of the firm within the market. The goal of the business is to provide the 100 percent satisfaction level to the customers and enhance brand awareness within the market in the coming years. They even provide the home service to the customers to enhance their market value and customer loyalty. For example; if the customers are facing a problem with the electronic device, the organisation will provide home visit and repair the system. The organisation will even provide the home delivery process for the customers so that they get the product effectively delivered to their particular address.


The mission statement of the organisation is to deliver the high quality as well as convenient along with the comprehensive entertainment electronic products and even the service of electronic repairs within low and suitable cost. The organisation is in the process of providing ultimate satisfaction level to the customers by providing them the valuable service as well as products in the market (Ward, 2016). The mission statement of the firm is also to maintain their service and the relationship with the customers in the friendliest way. They are also providing the service that is suitable to meet the expectation of the customers by providing them the valuable understanding within the process. 

Product/Service offering 

The SoulSpace Electronics offer a wide range of products as well as the services to the customers. The ultimate goal of the business is to provide the one-stop need for the customers for the products like the home entertainment which involves both the sales as well as the servicing facilities for the consumers (Qureshi, Saeed, and Wasti, 2016). It is the primary activity by which the organisation can effectively provide greater perceived value to the customers as compared to the numerous shops within the market. The organisation will provide the products of diverse range so that all type of customers is able to get the products and have a diverse range of activities within the market. The organisation will also provide a low-cost strategy for their service so that customers get the best service facility from the firm (Yang, and Gabrielsson, 2017). The organisation is also planning to have the various sizes of electronic devices with a diverse price range so that the customers prefer to buy the new product then getting the old product repair. The products, along with the services provided by the firm, will have an effective value within the market as they are providing the need of the customers most effectively and suitably.

Market analysis

Industry analysis 

The industry of electronic products is highly competitive in regard of the suppliers that have the great deal of the power within the setting as well as the negotiation of the price for the products then the services within the electronic shop. The customers in term of the electronic business generally expect to provide the service also, and for that, it is highly essential for the firm to provide the need of the customers effectively within the market. The level of competition is high within this industry, as there are numerous electronic shop and stores within the market (Plunkett, and Shen, 2019). It can be seen that the barriers to the entry within the market are moderately low as well as a large number of the competitors are present which eventually lead to the high level of a substitute and for that the pricing for all the substitute is having the high competition level within the industry. In recent years people are highly becoming gadget freak, and for that, they always prefer to have the latest model that also within the best prices that could be achieved from the market. The market level of the firm effectively shows that the business has been developed for providing their value and their most essential market condition within the field.


The level of competition is quite high within the market where it can be seen that numerous electronic products provide the home entertainment products to the customers along with the repair service to the customers. The primary competitor of the firm is Jaycar Electronics then the JB Hi-Fi then the Telstra Store World Square and the Officeworks in Sydney. The competitors are quite stable within the market, and they are providing some of the best facilities to the customers where they have the ability to maintain their activity within the field (Brinckmann et al., 2019). The competitors provide electronic products, mostly computers, than the DVDs and other electronic items within the market. SoulSpace Electronics dwell in the market of home entertainment electronic products that help them to stay within the competitive market where the people are highly crazy for electronic gadgets. The entire electronic firm provides a suitable service to its customers who hold the high competition level in term of service within the field.

Primary target market 

The primary target market is the people with medium to a high level of income and also has an interest in electronic gadgets as their passion. The major aim of the company is to target the people who have the likeness towards electronic products. The store even targets the teenage people for their home theatre and other electronic products like the smartwatch than the CDs which provide them the essence of music and value to the people (Din, Anuar, and Usman, 2016). The organisation has even segmented its section according to the lifestyle and the living of the customers. It is the fact that within the market the primary target of the firm are the middle-class couples without any children and also the single men or women living alone or with their roommates within the country (McKenzie, 2015). The baby boomers are also one of the major targets of SoulSpace electronics as they mostly stay alone at home, and home entertainment electronics will be highly effective for these people.  



The products that are available within the firm are the television then the home theatre, then portable media player along with the DVDs, CDs and even the home audio for the people. The organisation provides varieties of products to their customers so that there are numerous options available for the customers. The organisation even provides the service of repairing the electronic devices by providing both the home service as well as the store service to the customers (Kyndt, and Baert, 2015). They even provide products like the smartwatch and the iPod to attract teenage people. The organisation even provides the varieties in their television products like they have a smart TV then the television of various size so that every type of people are able to get the products of the firm with the suitable services. It is the primary fact that the business needs to develop their market and their understanding of dealing with the situation and providing the essential activity within the field (Abor, 2017). The other products that are being provided by the firm are the home theatre and the music system of various sizes and even the Walkman so that customers get the one-stop experience in this store and get the best products.


The organisation is dealing with the entirely competitive environment, and for that, it is highly essential to maintain the price of the products within the market. The organisation primarily sells the electronic products, and for that, there is a very limited ability for the firm to set the price of the products. They can eventually sell the products according to the market price to the people and get the best from the market (Ghezzi et al., 2015). The primary pricing strategy for the firm depends on the repairing service that has been provided by the organisation to its customers. The average prices for the service that the organisation provides to their customers are ranging between the 30-75 dollar per electronic devices according to the products and the warranty period of the products (Rodríguez-López, and Souto, 2019). The organisation effectively uses the market penetration pricing strategy for the repair service that has been provided by the firm to the customers. 


The organisation is the start-up business, and they are going to enhance their market value by sharing their products and their service within the market. The store will be located in Sydney, and they eventually target the local people to spread their product as well as the service within the service. The products are being distributed to various location of the country and mostly to the customers by the process of the home delivery system (Yang, Sun, and Zhao, 2019). It is the primary fact that the organisation develops its distribution process where they are eventually providing their value to the customers and also developing the need for the working function. The distribution centre of the firm is also to develop their working value to the market by providing the free home delivery then the free serving process to the customers with the valuation process and effective working function within the market.


The promotional strategy of the firm is to share their information for developing the band value of the market. The organisation will effectively use the flyers than the direct mailers along with the price discount pamphlet than the billboards as well as the television advertisement and the radio advertisement to deliver the awareness among the people all over the country (Yıldırım, Çakır, and Aşkun, 2016). The organisation will effectively use the newspaper and the advertisement process for dealing with the situation and providing the valuable activity within the market to deal with the customers and enhance the market share of the business (Spigel, 2016). The organisation is also expected to spend a large amount of money on the marketing process where the 1st two years they will work to build up the awareness for the products as well as the service value that come to the mind of the customers for dealing with the business and providing the valuable activity within the field. The organisation also uses the newspaper pamphlet that helps them to spread awareness to the entire market and analyse the activity of the firm for dealing with the situation and analysing the business process.  

Financial plan 

The financial plan of the organisation SoulSpace Electronics is as follows.

The projected profit and loss account of the firm for the first consecutive years;

Elements Year 1 ($)Year 2 ($)Year 3 ($)
The expense of the other products000
The entire operating expense of the firm187,950200,350290,560
The net profit or the loss incurred by the firm  -7.5%-0.6%4.89%

The projected profit and loss effectively show that the firm might face loss in their first years as they might face huge competition level within the market. The organisation needs to develop its marketing activity which will help them to deal with the situation, and for that, they could develop the market share for dealing with the situation by getting support from the market with the extra 100,000 dollars for the firm in term of marketing activity (Nabi et al., 2018)

The project balance sheet of the firm is as follows;

Elements Year 1 ($)Year 2 ($)Year 3 ($)
Total current assets40,25035,00039,450
Total long term Assets2,5005,0008,500
Total assets42,75040,00047,950
Current liabilities30,00032,00035,000
Total liabilities32,00035,00036,000
Total capital 10750500011950
Total liabilities42,75040,00047,950


Critical risks 

The risk that could be faced by the firm within the market is regarding government regulation to form the business within the market. Another risk that might be faced by the firm is to get suitable and effective staff members for the business to develop their value and their market within the field. It is the fact that the organisation needs specialised people to provide the suitable and effective repair service to the customers so that the value of the firm get enhanced and their business process is effectively done within the field. It is the primary activity of the firm that they need to understand the need of the customer and provide the suitable service and products and for that proper staff is required that would maintain the highly stabilised relationship with the customers.