ACT502 Management Accounting, Sem 2, 2017

Assessment 2

50 Marks – Weight 30%

DUE DATE 29th of September 2017, 4pm (week 10)

The due date and time is noted in the unit information document as well as above. It
is yourresponsibility to ensure you factor in any time difference between Darwin and
your location when submitting your assignment.
Please upload your answers using the submission point for the assignment on Learnline.

Assignments submitted via e-mail will NOT be accepted.

There is no need to complete a university cover sheet but DO please include a title page
in your document that states your Student Name, Student Number, and your tutor’s
name.

Do not include the actual question in your submitted assignment; only include your
answer to the questions.

You will be graded on the following criteria:

Accuracy –
 Content
 Correct account names etc.
 Correct values
Presentation
 Accounting protocols
 Spelling
Be very careful that you acknowledge work of others to whom you have drawn
information from, a link to the CDU Harvard referencing guide is available on Learnline
under student resources. A link is also provided below. Any question found to be
plagiarised to any extent will result in a failed assignment. It is understood that correct
numerical answers will be identical and show up through safeassign, these will be
excluded from plagiarism charges.

http://www.cdu.edu.au/library/downloads/pdf/CDUHarvardReferencing.pdf
ACT502 Assignment Semester 2, 2017
1

Case Study 1 – 26 marks

Montana Farm is a 400-acre farm on the outskirts of San Bernardino Plains, one of the
major suppliers free range eggs in the country. A recent breakout of bird flu in the Asia
pacific region has affected the industry amid health concerns which has led to a decline
with the demand, and it has made the business extremely competitive. To meet the
competition, Montana Farm planned in 2017 to advertise more extensively, boost
health of laying hens with regular monitoring of veterinary specialists and sourcing
grain from trusted suppliers.

The budget report for 2017 is presented below. As shown, the static income statement
budget for the year is based on an expected 69,000 laying hens producing 568,100
dozen of eggs at $3.95 per dozen.

The variable expenses were budgeted as follows:

Per laying hen: feed $1.05, nutrition $0.12, supplies $0.06

Per dozen eggs produced: delivery $0.30

All other budgeted expenses were either fixed or mixed expenses.

During the year, management decided not to replace a farm hand who quit in March,
but it did issue a new advertising brochure and paid for more promotion and
advertising.

ACT502 Assignment Semester 2, 2017

2

MONTANA FARM

Static Budget Income Statement

For the Year Ended December 31, 2017

Master
Actual Dif
Budget
 Number of laying hens 65,423 69,000 3,577

Number of dozen eggs produced 510,299 568,100

Sales $1,939,138 $2,243,995 304,8

Less: Variable expenses

Feed 840,031 869,400 29,36

Nutrition 109,911 99,360 10,55

Supplies 62,806 45,540 17,26

Delivery expenses 153,090 170,430 17,34

Total variable expenses 1,165,838 1,184,730 18,89

Contribution margin 285,9

773,300 1,059,265

Less: Fixed expenses

Depreciation 60,000 60,000 0

Insurance 69,000 69,000 0

Utilities 62,000 58,000 4,000

Repairs and maintenance 30,000 25,000 5,000

Salary and wages 216,000 230,000 14,00

Delivery expenses 0

Veterinary fees 87,000 75,900 11,10

Advertisement 120,000 105,000 15,00

 Entertainment 7,000 5,000 2,000

Total fixed expenses 651,000 627,900 23,10

Net income 122,300 431,365 309,0

Instructions
 Based on the static budget report:
1. What was the primary cause(s) of the loss in net income?
2. Did management do a good, average, or poor job of controlling expenses?
3. Were management’s decisions to stay competitive sound?
 Prepare a flexible budget report for the year.
 Based on the flexible budget report, answer the three questions in part a above.
 What course of action do you recommend for the management of Montana Farm?
ACT502 Assignment Semester 2,
2017 3

Case Study 2 – 24 marks

You are the management accountant at Luxe Fashion Retail Limited (LFR) reporting to the
CFO, Mark Newson.
LFR is a company listed on the Australian Securities Exchange. LFR has eight stores
across Australia and New Zealand, with its flagship store situated in central Melbourne.
Its stores stock luxury clothing, footwear and accessories, as well as cosmetics and
beauty products for both men and women.

LFR’s strategy is to be the leading retailer of luxury goods in Australia and New Zealand,
providing the best of life’s luxuries to customers and a superior return to shareholders
as it continues to expand and grow the business.
The company has a reputation for stocking the best quality and range of products.
Careful consideration is given at a senior management level to the product lines and
brands stocked, to ensure that the company’s reputation is maintained. The following
information is provided to assist you with completing the tasks below.

Product range
LFR stocks an extensive range of many well-known luxury brands (e.g. Chanel, Gucci
and Burberry). It also stocks a number of lines under exclusive agreements with
suppliers, ensuring it is the sole local retailer. As a result, approximately 30% of
product stocked by LFR is not available anywhere else in Australia or New Zealand. LFR
head office employs a highly skilled buyer to manage its stock lines and to determine
customer pricing. Although the company does stock a number of locally designed and
made product lines, the majority of its stock is imported

Purchasing
A key area of focus for the board relates to the purchasing of stock. Depending on the
nature of the product, lead times between placing a non-cancellable order and receiving
the stock can be significant. For example, clothing collections often need to be ordered
12 months in advance.
In-store experience
Similarly, the in-store experience of customers is considered pivotal for LFR, particularly
in light of the increasing popularity of online retailers. Sales staff are trained to provide
a personalised shopping experience for each customer. Many of the sales staff have
developed close relationships with their customers who they have been serving for
many years, and who buy most of their wardrobes from LFR. The ambience of the
store, which refreshes its displays regularly, is seen as critical

ACT502 Assignment Semester 2,

2017 4
to attracting new customers and retaining existing customers. High-value existing
customers are issued with a LFR gold privileges card and their preferences are recorded
in a customer database. While in the store, they are served coffee or champagne. All
other customers are offered a bronze privileges card, if they do not show a card at time
of purchasing.

Store manager responsibilities

Each of the eight stores is run by an experienced store manager. They are responsible
for the store opening hours, store layout and design display, resupply of stock from the
central warehouse, staff management and the customer experience while in the store.

Instructions
For this activity you are required to complete the following tasks:
1. Develop a balanced scorecard for LFR at the organisation level by:
1. Identifying at least one LFR’s strategic objectives in each of the perspectives (i.e. financial, customer,
internal process, and learning and growth).
1. Developing a measure in the form of a KPI for each objective identified. Use the template below in
completing task 1
2. Now apply the balanced scorecard you have developed at the store level. (You have recognised that the
measures appropriate for each store may differ from those developed at the organisational level.)
1. Describe why internal perspective measures that are appropriate at an organisational level may not be
appropriate at an individual store level.
1. Develop two (2) new KPIs which would be appropriate to include in the internal process perspective of a
balanced scorecard for the individual stores.
1. For each measure included explain how it links back to LFR’s strategy. Use the template below in
completing task 2 b and c
ACT502 Assignment Semester 2, 2017