Assignment Remit
|
Programme Title
|
B.Sc. Business Management/ International Business
|
|
Module Title
|
Managing Financial Resources
|
|
Module Code
|
32428
|
|
Assignment Title
|
Management Accounting System
|
|
Level
|
4
|
|
Weighting
|
50%
|
|
Hand Out Date
|
24/03/2025
|
|
Deadline Date & Time
|
12/05/2025
|
12pm
|
|
Feedback Post Date
|
16th working day after the deadline date
|
|
Assignment Format
|
Report
|
|
Assignment Length
|
1000 words
|
|
Submission Format
|
Online
|
Individual
|
Module Learning Outcomes:
This assignment is designed to assess the following module learning outcomes. Your submission will be marked using the Grading Criteria given in the section below.
LO 5. Evaluate the use of management accounting in the operation of business entities.
LO 6. Explain how management accounting relates to financial accounting and its relevance for financial markets.
LO 7. Apply appropriate accounting techniques to a range of management tasks.
LO 8. Demonstrate understanding of the nature of profit and cost, giving attention to cash, cost behaviour, overheads, contribution, and opportunity cost.
LO 9. Extend the application of management techniques to an analysis of business cases.
LO 10. Describe the various sources of finance available to business ventures in general and limited companies in particular.
Assignment:
You are required to write a 1,000-word report answering the following sets of questions. (Note: there is no allowance for exceeding the word count.)
Part 1 (48 marks)
Whirl-shine Ltd designs and manufactures a range of dishwashing machines. Below is an analysis of their products based on their current absorption costing system.
|
Model
|
Dom
washer
|
Econ
washer
|
Indus
washer
|
|
Budgeted annual sales and production Volume in units
|
100,000
|
30,000
|
5,000
|
|
|
£/unit
|
£/unit
|
£/unit
|
|
Selling price
|
400
|
700
|
2,000
|
|
Direct material
|
150
|
350
|
950
|
|
Direct labour (2, 3, 5 hours x £60/ hour)
|
120
|
150
|
300
|
The production overhead is estimated at £16,000,000 for the period and is absorbed on a direct labour hours basis.
The Dom washer model is designed for home use, catering to a highly price-sensitive market. In contrast, the Econ washer and the Indus washer models are intended for restaurants and other commercial caterers, where reliability and service are as important as price. The Dom washer and Econ washer are standard products produced in large batches, while the Indus washer model offers customisable options and is made to order based on customer specifications.
The Chief Executive has proposed focusing on boosting sales of the Econ washer and the Indus washer models, as they are the most profitable and the Indus washer model enhances the company’s reputation for high-quality products. However, the Finance Director recommended implementing an activity-based costing (ABC) system before deciding which products to promote. To support this, the Management Accountant provided the following analysis of the company’s budgeted production overhead and activities for the year:
|
Cost pool
|
Production overhead (£)
|
Cost driver
|
|
Purchasing
|
2,500,000
|
Purchasing Orders
|
|
Machining
|
4,500,000
|
Machine Hours
|
|
Production Set-up
|
3,500,000
|
Batches Produced
|
|
Assembly
|
5,500,000
|
Direct Labour Hours
|
|
Total
|
16000000
|
|
|
Budgeted activity
|
Dom washer
|
Econ
washer
|
Indus
washer
|
|
Purchasing Orders
|
1600
|
550
|
350
|
|
Machine Hours
|
0.5
|
1
|
4
|
|
Batches Produced
|
200
|
100
|
150
|
The Management Accountant commented that, although an ABC system can produce useful information, they would need to be careful in how they use the unit costs that are produced, as this is not always the best way of looking at cost information.
Required
You are reminded that marks are available for clear, labelled workings
a) Calculate the Overhead Absorption Rate (OAR) using the absorption costing approach. (3 marks)
b) Calculate, using the absorption costing approach, for each of the three products
i. The production overhead cost per unit (to the nearest £0.01).
ii. the full cost per unit (to the nearest £0.01) (8 marks)
c) Calculate the cost driver rates for each element of the cost pool. (12 marks)
d) Calculate, using an activity-based costing approach, for each of the three products:
i. the total annual overhead cost
ii. the overhead cost per unit (to the nearest £0.01)
iii. the full cost per unit (to the nearest £0.01) (12 marks)
e) Discuss to what extent the implementation of an ABC system could benefit Whirl-shine Ltd. You should use the information in the scenario to support your answer. (note you should use Harvard Referencing) (13 marks)
Part 2 (47 marks)
In March, Brush Ltd.’s director is considering two mutually exclusive investment projects. The projects relate to the purchase of a new plant. The following data are available for each of the projects:
|
|
Project 1
£'000
|
Project 2
£'000
|
|
Cost (immediate Outlay)
|
1000
|
900
|
|
Expected annual Operating Profit/(loss) Year 1
|
300
|
180
|
|
Year 2
|
-50
|
-20
|
|
Year 3
|
75
|
40
|
|
Year 4
|
180
|
80
|
|
Estimated residual value of the plant after 4 years
|
100
|
80
|
The business has an estimated cost of capital of 10%. It calculates operating profits using the straight-line depreciation method for all non-current assets. Neither project would increase the working capital of the business. The business has sufficient funds to meet all investment expenditure requirements.
The director of Brush Ltd has asked you to appraise these projects and report on the following:
a) Explain what information the investment appraisal techniques listed below provide and how they help decision-making. (note: you should use peer-reviewed sources and reference your work using Harvard referencing). (15 marks)
b) Calculate for each of the projects.
I. The Net Present Value (NPV) (6 marks)
II. The Internal Rate of Return (IRR) (6 marks)
III. The Payback period (PBP) (6 marks)
c) State, with reasons, which, if any of the two investment projects, the director of Brush
Ltd should accept and why. (support your reasons with appropriate citations) (14 marks)
Please note there are up to 5 Marks allocated for the appendix clearly showing how GenAI was or was not used
Grading Criteria / Marking Rubric
Your submission will be graded according to the following criteria:
a) The grades will reflect your knowledge to conforming to instructions where you will be expected to:
Referencing: you should acknowledge the sources you have used in the text and reference list and used effectively to support discussion and these references should follow the Harvard referencing protocol.
b) The Content and range of knowledge displayed should demonstrate a detailed,
systematic, in-depth, theoretically informed knowledge base, with some appreciation of the provisional nature of knowledge.
c) Your Conclusions should be well-developed, and analytical, use appropriate forms of conceptualisation, and show some originality. They are thoroughly grounded in theory/evidence/literature. They form an integrated part of the overall argument/discussion.