Management Accounting

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HA2011_Management Accounting_T3_Group Assignment

HOLMES

INSTITUTE

FACULTY OF

HIGHER

EDUCATION

HOLMES INSTITUTE

FACULTY OF HIGHER EDUCATION

Group Assignment

HA2011 Management Accounting

TRIMESTER 3 / 2017

Instructions:

1. This assignment is to be submitted in accordance with assessment policy stated in the

Subject Outline and Student Handbook.

2. 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 can submit all

assignments for plagiarism checking (self-check) on Blackboard before final submission in

the subject. For further details, please refer to the Subject Outline and Student Handbook.

3. Maximum marks available: 20 marks.

4. Due date of submission: Week 10

5. Assignment should be up to 2,000-2,500 words with maximum of 03 members in each

group. Please use “word count” and include in report. Important Note: Please submit

Assignment through SafeAssign.

Format of the Assignment

1. You at least should have the following details:

• Assignment Cover page clearly stating your members name and student ID’s

• A table of contents including a summary

• Body of the assignment with sections to answer the two sections and with
appropriate section headings

• Conclusion

• List of references.

2. Spreadsheet and tables if required.

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HA2011_Management Accounting_T3_Group Assignment

3. Ensure all materials are correctly referenced. Plagiarism will be severely penalised.

Assessment Task Part: A (Activity Based Costing) (10 Marks)

US Bright produces a list of the activities performed at Cravings for cakes and their annual costs. In

addition, Bright identifies an activity driver for each activity and the annual quantity of each activity

driver. A partial list of activity costs and quantities of activity drivers is shown below:

Cravings for Cakes list of Activities

Activity Activity Cost ($) Activity Driver Annual Quantity of

Activity driver

Prepare Annual

Accounts

5000 None Available

Process receivables 15000 No. of Invoices 5000 Invoices

Process payables 25000 No. of purchase orders 2500 Purchase orders

Program production 28000 No. of production

schedules

1000 schedules

Process Sales order 40000 No. of sales orders 4000 sales orders

Dispatch sales order 30000 No. of dispatches 2500 dispatches

Develop and test

products

60000 Assigned directly to

products

Load mixers 14050 No. of batches 1000 batches

Operate mixers 45900 No. of kilograms 200000 kilograms

Clean mixers 6900 No. of trays 1000 batches

Move mixture to filling 3450 No. of cakes/pastries 200 000 kilograms

Clean trays 20000 No. of trays 16000 trays

Fill trays 16000 No. of cakes/pastries 800,000 cakes/pastries

Move to baking 8000 No. of trays 16,000 trays

Set up ovens 50000 No. of batches 1000 batches

Bake Cakes/Pastries 130000 No. of batches 1000 batches

Move to packing 40000 No. of trays 16,000 trays

Pack cakes/pastries 80000 No. of cakes/pastries 800,000 cakes/pastries

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HA2011_Management Accounting_T3_Group Assignment

Inspect pastries 2500 No. of pastries 50,000 pastries

Required:

Construct an Excel spreadsheet to

a. Calculate the cost per unit of activity driver for the activities listed (04 Marks)

b. Based on the information in the following table, prepare a bill of activities and determine the

cost per unit for Lamington (05 Marks)

c. What other costs must be added to calculate the product cost for Lamington? (01 Mark)

Lamington (Batch Size 1000; Annual Volume 100,000)

Activity Consumed Annual Quantity of Activity Driver

Process Receivables 500 Invoices

Process Payables 200 Purchase Orders

Program Production 100 Production Schedules

Process Sales Order 400 Sales Orders

Load Mixers 100 Batches

Operate Mixers 30 000 Kilograms

Clean Mixers 100 Batches

Move mixture to filling 30 000 Kilograms

Clean trays 2000 trays

Fill trays 100 000 cakes

Move to baking 2000 trays

Set up ovens 100 Batches

Bake cakes/pastries 100 Batches

Move to packing 2000 trays

Pack Cakes/Pastries 100 000 cakes

Dispatch Sales Order 500 Sales orders

Develop and Test product $600 assigned directly to this product

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HA2011_Management Accounting_T3_Group Assignment

Assessment Task Part B (Budgeting) (10 Marks)

Using Budgets to Evaluate Business Decisions:

Hawthorn Leisure Works (HLW) offers tennis courts and other physical fitness facilities to its

members. The club has 2000 members. Revenue is derived from annual membership fees and hourly

court fees. The annual membership fees are:

Individual $45

Student $30

Family $100

Approximately half the members are family and the remaining memberships are split equally

between individuals and students. For the next two financial years, the hourly court fees are $8 and

$12, depending on the season and the time of the day (prime versus non-prime time). There are 10

courts each club. The courts are available for 12 hours per day, from 9am to 9pm.

The peak tennis season runs from October to April (181 days). During this period, court usage

averages from 90 to 100 per cent of capacity during prime time (5pm to 9pm) and 50 to 60 per cent

of capacity during the remaining hours (9am to 4pm). Daily court usage during the off season

averages from 20 to 40 per cent of capacity, and is charged at $6 per hour. All of HLW’s

memberships expire at the end of September. A substantial amount of cash receipts is collected

during the early part of the tennis season due to renewal of annual membership fees and heavy

court usage. However, cash receipts are not as large in autumn and drop significantly in the winter

months.

For the start of the new financial year on 1 October, HLW is considering introducing a new

membership and fee structure in an attempt to improve its cash flow planning. Under the new

membership plan, only an annual membership fee would be charged rather than a membership fee

plus hourly court fees. There would be two classes of membership, with annual fees as follows:

Individual $300

Family $500

The annual fee would be collected in advance at the time the membership application was

completed. Members would be allowed to use the tennis courts as often as they wished during the

year under the new plan. All future memberships would be sold under these new terms. A special

promotional campaign would be instituted to attract new members and to encourage current

members to remain with the club. The annual fees for individual and family memberships would be

reduced to $250 and $450 respectively if members pay for their yearly memberships in advance

during the two month promotional campaign.

HLW’s management estimate that 70% of the current members will continue with the club and

student members would convert to individual membership. The most active members (45% of

current members) would pay the yearly fee in advance and receive the special fee reduction, while

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the remaining members who continued would renew memberships in October. Those members who

could not re-join are not considered active (that is, they five times or less than a year). Management

estimates that the loss of members would be offset fully by new members within six months of

instituting the new plan. These new members would pay a proportional amount of the yearly fee on

joining. Furthermore, many of the new members would be individuals would pay during non-prime

time. Management estimates the adequate court time will be available for all members under the

new plan.

If the new membership plan is adopted, it would be instituted at the start of the financial year (1

October), which is the start of the tennis season. The special promotional campaign would be

conducted during August and September, prior to the start of the new financial year.

Required:

Your consulting firm has been hired to help HLW to evaluate its new fee structure. Explain the

following issues to report to your managing director:

a) Will HLW’s new membership plan and fee structure improve its ability to plan its cash

receipts? Explain. (2marks)

b) Estimate the effect on sales revenue resulting from the planned change in fee structure for

the next financial year, which starts 1 October and ends on 30 September. State any

assumptions that you need to make. (5marks)

c) HLW should evaluate the new membership plan and fee structure completely before it

decides to adopt or reject it. Identify the key factors that HLW should consider in its

evaluation. (3marks)