Assignment Requirements
You are required to SELECT 2 questions out of 3 presented below . Each question accounts for 50% of a total of100%. You CANNOT select only one questions. In the event you do, you will forfeit all the marks for the second question.
Question 1.
Limiting factors and optimal production programme. VIẾT THƯ FROM TÊN MÌNH +MA FROM HARRY SMITH MDThe Managing Director of Gamma Flooring Ltd. emailed you, as a Management Accountant, with someconcerns about the current production mix and inability to meet customer demand. Please see his emailbelow.
The Managing Director of Gamma Flooring Ltd. emailed you, as a Management Accountant, with someconcerns about the current production mix and inability to meet customer demand. Please see his emailbelow
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To: Management Accountant From: Harry Smith,
Managing DirectorRe: Gamma Flooring optimal production plan
Date: 15 Nov 2024“
Dear Management Accountant,I have recently reviewed Gamma Flooring’s plans for production and the raising product demand; and I amincreasingly concerned about our production line ability to fulfil all the orders on time. The machinery inour factories is not the newest and may be limiting us in achieving the full demand. According to theanalysis provided by the Production Manager las week, the machinery can operate at maximum 2,500hours per week. I am, therefore, writing to ask you to:
a) Review the below product details and demand and propose the optimal production plan that will helpGamma Flooring to maximise profits along with the profit statement.
b) As we have a limited factor of machine hours, if we are unable to fulfil demand for all products withinthe limit, please can you calculate the net benefit (if any) that we could achieve by asking our staffto work overtime. The overtime would be paid at 50% above normal labour rates, and variableoverhead costs would be expected to increase in proportion to labour costs.
c) As the production capacity is our limiting factor, can you please critically evaluate the benefits andlimitations of outsourcing some of Gamma Flooring’s production to external suppliers. – 350 words(15 marks)Please do let me know your findings (both quantitative and qualitative) in a written memo as to theexpected contribution and any issues that could arise that we would need to review in the future. (5marks)Many thanks,Harry Smith, Managing Director, Gamma Flooring Ltd.
Question Guide:In your answer you can include (in your logical order and approach):
- The calculations of the product contribution (per limiting factor) and the production plan for theavailable machine hours.The calculation of the net benefit (if any) when the overtime is offered to staff, including informationon the additional cost per unit and the revised contribution per unit.
- A memo-style response to the Managing Director to indicate your findings (points a & b) and includesuggestions to overcome the production limitations (c)
Question Background:
Week 2 (Lecture) and Week 3 (Seminar), Measuring Relevant Costs and Revenues, UGB393 StrategicManagement Accounting Canvas 2023/4. University of Sunderland.Drury C & Tayles M (2022), Chapter 4 Measuring Relevant Costs and Revenues for Decision-Making,Management Accounting for Business 8th edition. Available to read Online (login details required) at: Fulldetails and actions for Management accounting for business. (vlebooks.com)
Question 2:
BudgetsStrong Bond Ltd is preparing its annual budget for the year ending 31st December 2024. The companymanufactures and sells one product (strong-bond glue) which has a selling price of £420. The marketingteam of Strong Bond Ltd believes that the selling price of the glue is marketed too low and should beincreased to £460 with effect from 1st July 2024. If the price is increased, the sales volumes for eachquarter of 2024 will be as below.
Sales Volume
Quarter 1 28 000Quarter 2 23 000Quarter 3 17 000Quarter 4 32 00
For 2025, sales for each quarter are expected to be 45,000 units.Each unit of strong-bond glue requires 4 units of component R and 3 units of component T.
Bothcomponents are purchased from the external supplier at below prices:
Component R ,£4.50 each
Component T £2.50
It takes 5 labour hours to assemble the two components (R & T) into a finished product.Labour is paid at £6 p/hour and a 7% increase in salary costs is expected from October 2024.
Variable Overhead costs are expected to be £9 per unit for the whole year of 2024.Fixed Production Overhead costs are excluded from the budget.Stocks / Inventories on 31st December 2023 are expected as follows:Finished units – 8,500 units
Closing stocks / inventories at the end of each quarter are to be as below:Finished units 10% of next quarter’s sales
Requirements:
As a Management Accountant for Strong-Bond Ltd., you are required to:
a) Prepare the following budgets of Strong-Bond Ltd for the year ending 31st December 2024, showingvalues for each quarter and the year in total:
i) Sales Budget (in £’s and in units)
ii) Production Budget (in units)
iii) Material Usage Budge (in units)
iv) Production Cost Budget (in £’s)
b) Budgeting has been criticized as:
- A cumbersome process that takes a lot of management time
- Concentrating in majority on short-term financial control
- Having undesirable effects on the motivation of manage
Requirements:
i) Explain these criticisms.
ii) Explain what changes could be made in response to these criticisms to improve the budgetprocess.
Question Background:
Week 5 (Lecture) and Week 6 (Seminar), The Budgeting Process, UGB393 Strategic ManagementAccounting Canvas 2023/4. University of Sunderland.
Drury C & Tayles M (2022), Chapter 9 The Budgeting Process, Management Accounting for Business 8thedition. Available to read Online (login details required) at: Full details and actions for Managementaccounting for business. (vlebooks.com)
Question 3. Contemporary Cost Management
“Modern techniques of cost accounting assist strategic management of contemporary organization toachieve their strategic objectives. External versus internal, long-term unlike short-term perspective is whatdifferentiates the strategic cost management approach from the traditional cost management system.i”
As the author of the article suggests, modern cost management techniques help management withachieving their goals and aspirations. Taking this into consideration, critically discuss the benefits andlimitations of:
- Quality cost management
- Activity-based costing
- Target costing
Question Guide:
In your answer you can include (in your logical order and approach):
- The short section with an explanation of each of the contemporary cost management methods.
- The analytical discussion on benefits and limitations of each of the contemporary cost managementmethods and its impact on the strategic goals of the company.
- Supporting evidence of your argument in the form of case studies, calculations and references torelevant articles and studies.
- Summarise your findings and suggestions and provide a concise conclusion that highlights keytakeaways from your analysis of the contemporary cost management methods in achievingorganizational goals.
The aim of the assignment is to help you understand how key areas of strategic management accountingare demonstrated in practice by large, international companies. This will include investigating topics fromthroughout the course linked to the above issues. Some of the principles, concepts and models will bemore relevant to your chosen approach than others and so it is likely that different students will formulatedifferent approaches to the problems.
This is normal, it is not expected that all of the course content willbe used in the analysis, concentrate on that which you feel is most important.As part of your work, you might find it helpful to briefly explore the underlying theory behind the key areasof investigation that you identify before applying them to report.With a total of 3,000 words (for both questions), you do not have a lot of room for long introductions soassume you are writing to a sophisticated audience who has a working knowledge of strategicmanagement accounting and is well versed in business theory. Numerical examples for illustrativepurposes may be of use but should not be the main thrust of the work. If used, they should be to provideevidence to support your findings from your other analysis of position and policies.
If other sources areused remember to reference everything!Please avoid relying too heavily on descriptive sections reproducing information available from coursematerial or the set text. It is your own logical, evaluation of the situation, the interpretation of coursematerial and presentation, with critical analysis, and a coherent strategic plan that will attract high marks