ASSIGNMENT – BMAC5203

SEPTEMBER SEMESTER 2012 BMAC5203 – ACCOUNTING FOR DECISION MAKING ASSIGNMENT OBJECTIVE: To assess students ability to ethically use accounting information for costing, decision making, planning and control.

INSTRUCTIONS: The assignment consists of four (4) unrelated tasks. The details of the tasks are explained below: Task 1: Target Costing Target Co assembles and sells many types of radio. It is considering extending its product range to include digital radios. These radios produce a better sound quality than traditional radios and have a large number of potential additional features not possible with the previous technologies (station scanning, more choice, one touch tuning, station identification text and song identification text etc). A radio is produced by assembly workers assembling a variety of components. Production overheads are currently absorbed into product costs on an assembly labour hour basis. Target Co is considering a target costing approach for its new digital radio product. Required: (a) Write a report to the Managing Director, explaining the target costing process that Target Co should undertake. (5 marks) (b) Explain the benefits to Target Co of adopting a target costing approach at such an early stage in the product development process. (10 marks) (c) Assuming a cost gap was identified in the process, outline possible steps Target Co could take to reduce this gap. (10marks) (Total: 25 marks) (Marks would be allocated on clarity of argument and justification. Professional marks would be allocated for format and structure of presentation).

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(5 marks) b) Using appropriate calculations. (10 marks) Task 2B –Planning and Ethics c) James the Finance Manager. of Felix Bhd decided to have a participative budgeting process which allows employees to have a say in projected sales targets for the upcoming period.205 870 480 175 200 RM1. These targets are reflected in a series of performance reports that compare actual sales achieved against targeted amounts. 2. respectively. explain whether the end-of-year party was as successful as originally reported. "Attendance was an all-time high. 340 RM 235 Actual 60 members 2. which the treasurer noted was a financial success. 3. Food and beverage costs were anticipated to be RM15 and RM7 per attendee." The treasurer presented the following performance report at the executive board's June meeting: Budget Attendance Revenue (RM) Food (RM) Beverages Disc jockey Facility rental Total costs Profit 45 members 1.ASSIGNMENT – BMAC5203 Task 2A – Planning and Control The Marketing Club at the central branch of the Open University recently held an end-of-year dinner party.725 RM 480 Variance 630F 195U 165U 25U ---RM385U RM245F The budget was based on the assumptions that: 1. A disc jockey was hired via a written contract at RM50 per hour. 60 members. One of the company’s Sales manager submitted 2 . Forty-five members would attend at a fixed ticket price of RM35. Required: a) Comment on the treasurer's performance report.575 675 315 150 200 RM1. and the results were much better than expected.

The Institute of Management Accountants (IMA). This is despite the well recognised fact that selling clothing is a very competitive business. The owners are so convinced that growth will quickly follow that they have invested enough money in website server development to ensure that the server can handle the very high levels of predicted growth. They are confident that importing quality ties and selling via a website will be successful and that the business will grow quickly. It is not expected that marketing expenditure will continue to be as high in the future. confidentiality. patterns and colours of ties at different prices. The managers. They were prepared for a loss-making start and decided to pay themselves modest salaries (included in administration expenses in table 1 below) and pay no dividends for the foreseeable future. integrity. even if anticipated sales and closures don’t materialize. has published standards that focus on competence." Many professions have adopted a series of ethical standards to provide guidance for their memberships. who also own the company. as she confided in a colleague. are young and inexperienced but they are prepared to take risks. Significant expenditure on marketing was incurred in the first two quarters to launch both the website and new products. selling high quality imported men’s ties via the internet. consider the case of the Sales Manager in Felix Bhd. The business’s trading results for the first two quarters of trade are shown below in table 1 3 . (5 marks) (Total: 20 marks) Task 3 – Performance Measurement Ramsey Sdn Bhd is a new business. for example. In light of these standards. All website development costs were written off as incurred in the internal management accounts that are shown below in table 1. and credibility.ASSIGNMENT – BMAC5203 very low sales targets because. Customers can buy a variety of styles. "I always want to look good in terms of meeting targets.

320 40. (20 marks) (b) Briefly consider whether the losses made by the business in the first two quarters are a true reflection of the current and likely future performance of the business.000 (201.400 Quarter 2 RM RM 680.000 (340.640 33.000 –––––––– Total expenses (351.500 20.263) –––––––– Loss for quarter (132.320 4 .800 80.600) –––––––– Gross Profit less expenses Website development Administration Distribution Launch marketing Other variable expenses 120.763 60.000 100.760) –––––––– (55.863) –––––––– Required: (a) Using appropriate calculations. (10 marks) (Total: 30 marks) 90.000 –––––––– (394.000 150.ASSIGNMENT – BMAC5203 Table 1 Quarter 1 RM Sales less Cost of Sales RM 420.440) –––––––– 218.000 50.680) –––––––– 339. assess the financial performance of the business during its first two quarters using only the data in table 1 above.

ASSIGNMENT – BMAC5203 Task 4: Decision Making Rex Ltd manufactures chips used in Delco computers. Its installed capacity is 2000 chips per week. owl. Required: (a) At what level of activity will the plant break even? Explain your answer.g. Total costs of production this week at 80% of capacity level comprise RM75. References should use the American Psychological Association (APA) format References should be latest (year 2005 and onwards) 5 . what is the reported cost per unit? (5 marks) (d) Suppose that a new customer offers RM80 per chip for an order of 200 chips per week for delivery beginning this quarter.000 of fixed costs and RM80. refer to the various websites which discuss this matter. e.edu/handouts.english. (5 marks) (b) What will the plant's profit be if it operates at full capacity? (5 marks) (c) If the plant's accounting system reports fixed cost per unit using its installed capacity level as the base. Production this quarter is 1600 chips per week. Provide references. If you are not sure what is meant by plagiarism. b. If this order is accepted. production will increase from 1600 chips at present to 1800 chips per week. Plagiarism is not acceptable.000 of variable costs. The selling price is RM100 per chip. (5 marks) (e) What qualitative considerations are relevant in a make or buy decision? (5 marks) (Total: 25 marks) [TOTAL: 100 MARKS] Assignment Format: a. Should the company accept the order? Support your answer with calculations.purdue. c. Notes:   Assignments should be submitted according to the fixed date. Use double space and 12-point of Times New Roman font.

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