accoutning 2



Arab Open University

BE211: TMA – 2nd Semester 2012-2013

Cut-Off Date: 27th of April 2013

About TMA:

The TMA covers the management accounting concepts and practices in the businesses. It is marked out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’ understanding of some of the learning points within chapters 15, 18, and 19. This TMA requires you to apply the course concepts. The TMA is intended to:

· Assess students’ understanding of key learning points within chapters 15, 18, and 19.

· Increase the students’ knowledge about the reality of the management accounting as a

· Develop students’ communication skills, such as report writing, essay writing, analysis and presentation of material.

· Develop the ability to understand and interact with the nature of the managerial accounting tools in

· Develop basic ICT skills such as using your
, searching, selecting, managing and presenting information on the internet.

The TMA:

The TMA requires you to:

1- Review various study chapters of ‘
Financial and Managerial Accounting
’ Book and apply some of the concepts within it.

2- Conduct a simple information search using the internet.

3- Present your findings in not more than 1,200 words (300 words for Part A and 900 words for Part B). The word count excludes headings, references, title page, and diagrams.

4- You should use a Microsoft Office Word and Times New Roman Font of 14 points.

5- You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment.

Criteria for Grade Distribution:





Structure and Presentation of ideas

Total marks

Part A

Part B






The TMA Questions


Financial Reporting on the Internet

(Tyco Electronics Ltd.)

TE Connectivity Ltd. is a global company that designs and manufactures approximately 500,000 products that connect and protect the flow of power and data inside millions of products used by consumers and industries. We partner with customers in a broad array of industries from consumer electronics, energy, and healthcare to automotive, aerospace, and communication networks.

Tyco Electronics Ltd. was incorporated in Bermuda in fiscal 2000 as a wholly-owned subsidiary of then Bermuda-based Tyco International Ltd. (‘‘Tyco International’’). Effective June 29, 2007, Tyco International distributed all of our shares to its common shareholders (referred to in this report as the ‘‘separation’’). Tyco became an independent, publicly traded company owning the former electronics businesses of Tyco International.

Access the Tyco Electronics Ltd. web page at: From Tyco’s home page, choose Investors, and then “Annual Reports”, followed by clicking on “2012 Annual Report” to download the annual report on Form 10-K (PDF).


Use the annual report to answer the following questions:

1- Is it a service, merchandising, or manufacturing company? How can you tell? What is its primary product or service?

[8 Marks]

2- Discuss how the decisions you would make might differ if you were a supplier, customer, or a member of Tyco Electronics’ management team.

[9 Marks]

3- Indicate which costing approach is used by Tyco Electronics in preparing its income statement, and briefly explain the usefulness of the other approach.

[10 Marks]

4- Using the Consolidated Statements of Operations, what does Gross Margin represent? Calculate Gross Margin percentage for the most three recent years (2012, 2011, and 2010). What do you observe? How does Gross Margin differ from Operating Income? Support your answer by evidence from the annual report.

[10 Marks]

5- Tyco Electronics has different inventory controlling accounts. Name each of the accounts, and describe briefly what the balance in each represents at September 28, 2012, September 30, 2011? Support your answer by suitable figures from the Tyco Electronics’ 2012 annual report.

[6 Marks]

6- Using the Consolidated Statements of Operations, p. 55 of the 2012 annual report) and inventory information from the Consolidated Balance Sheets and notes, calculate the cost of finished goods manufactured for 2012 annual year.

[8 Marks]

7- Robert J. Ott is the Senior Vice President and Corporate Controller at Tyco Electronics. He was recently quoted as saying, “Since management reports aren’t subject to generally accepted accounting principles, and they aren’t directly used by outside stakeholders, it’s really okay for managers to manipulate that reports as they see fit.” Do you agree with Robert’s statement? Defend your answer.

[9 Marks]


Decision Making: Special Order

Mega Electronics Ltd. manufactures an electric device (DD11) that it uses in several of its products. Mega Electronics’ management is considering whether to continue manufacturing the devices or to buy them from an outside source. The following information is available:

a- The company needs 5,000 devices per year. The devices (DD11) can be purchased from an outside supplier at a cost of $14 per device.

b- The unit cost of manufacturing the device is $38, computed as follows:

Direct materials

$ 45,000

Direct labor


Factory overhead:





Total manufacturing costs


Cost per unit ($190,000 ÷ 6,000 devices)

$ 38

c- Discontinuing the manufacture of devices (DD11) will eliminate all the raw materials and direct labor costs but will eliminate only 80% of the variable factory overhead costs.

d- If the devices (DD11) are purchased from an outside source, machinery used in the production of devices will be sold at its book value. Accordingly, no gain or loss will be recognized. The sale of this machinery would also eliminate $2,000 in fixed costs associated with depreciation and taxes. No other reductions in fixed factory overhead will result from discontinuing the production of devices.


1- Determine the incremental cost or benefit of buying the devices (DD11) from the outside supplier. Would you recommend that Mega Electronics manufacture the devices or buy them from the outside source? (Prepare a schedule to determine the incremental cost or benefit of buying the devices from outside supplier.)

2- Assume that if the devices (DD11) are purchased from the outside source, the factory space previously used to produce devices (DD11) can be used to manufacture an additional 3,000 electric devices (DD55) per year. Electric devices (DD55) have an estimated contribution margin of $7 per unit. The manufacture of the additional electric devices (DD55) would have no effect on fixed factory overhead. Would this new assumption change your recommendation as to whether to make or buy the devices (DD11)? In support of your conclusion, prepare a schedule showing the incremental cost or benefit of buying the devices (DD11) from the outside source and using the factory space to produce additional devices (DD55).

3- What nonfinancial concerns should Mega Electronics Ltd. take into consideration?

[Marks: (15 + 10 + 5) = 30 Marks]

[Total Marks: 60 + 35 + 5 for general presentation and references]

In your answer, you should explain each point or inquire separately. Use the following headings (below) to make up the different sections of your answer:

Part A

Part B

PT3 form (Cover)

Available on LMS


Title and contents page

Financial Reporting on the Internet (Tyco Electronics Ltd.)

Decision Making: Special Order

Reference list

Recorded according to the Harvard style – Available on LMS

Good Luck!

Dr. Helal Afify

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