ACCT3203 Contemporary Managerial Accounting

Semester Two 2017

Group Assignment (15% of Overall Unit Score)

This assignment is based on Strategy, Balanced Scorecard and Strategic Profitability

Analysis. The assignment consists of FOUR parts. Students MUST answer all parts of the
assignment. Each part must be answered on a new page. Answers including diagrams and
tables to be submitted in a WORD document via the unit LMS site.

Part A

Scott Company manufactures a DVD player called the Maxus. The company sells the player
to discount stores throughout the country. This player is significantly less expensive than
similar products sold by Scott’s competitors, but the Maxus offers just DVD playback,
compared with DVD and Blu-ray playback offered by competitor Nomad Manufacturing.
Furthermore, the Maxus has experienced production problems that have resulted in significant
rework costs. Nomad’s model has an excellent reputation for quality.

Required:
1. Draw a simple customer preference map for Scott and Nomad using the attributes of
price, quality, and playback features, Use the format of Exhibit 12-1 in Horngren et
al.’s textbook “Cost Accounting: A Managerial Emphasis” (15th Edition).
2. Is Scott’s current strategy that of product differentiation or cost leadership? Discuss.
3. Scott would like to improve quality and decrease costs by improving processes and
training workers to reduce rework. Scott’s managers believe the increased quality will
increase sales. Draw a strategy map as in Exhibit 12-2, in Horngren et al.’s textbook
“Cost Accounting: A Managerial Emphasis” (15th Edition), describing the cause-and-
effect relationships among the strategic objectives you would expect to see in Scott’s
balanced scorecard.
4. For each strategic objective, suggest a measure you would recommend in Scott’s
balanced scorecard.

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Part B

As a result of the actions taken, quality has significantly improved in 2013 while rework and
unit costs of the Maxus have decreased. Scott has reduced manufacturing capacity because
capacity is no longer needed to support rework. Scott has also lowered the Maxus’s selling
price to gain market share and unit sales have increased. Information about the current period
(2013) and last period (2012) follows.

2012 2013

1. Units of Maxus produced and sold 8,000 11,000

2. Selling price $95 $80

3. Direct materials used (kits*) 10,000 11,000

4. Direct material cost per kit* $32 $32

5. Manufacturing capacity in kits processed 14,000 13,000

6. Total conversion costs $280,000 $260,000

7. Conversion cost per unit of capacity (row 6/row5) $20 $20

8. Selling and customer-service capacity 90 customers 90 customers

9. Total selling and customer-service costs $13,500 $16,200

10. Selling and customer-service capacity cost $150 $180

per customer (row 9/row 8)
*A kit is composed of all the major components needed to produce a DVD player.

Conversion costs in each year depend on production capacity defined in terms of kits that can
be processed, not the actual kits started. Selling and customer-service costs depend on the
number of customers that Scott can support, not the actual number of customers it serves.
Scott has 70 customers in 2012 and 80 customers in 2013.

Required:
1. Calculate operating income of Scott Company for 2012 and 2013.
2. Calculate the growth, price-recovery, and productivity components that explain the
change in operating income from 2012 to 2013.
3. Comment on your answer in requirement 2. What do these components indicate?

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Part C

Suppose that during 2013, the market for DVD players grew 10%. All increases in market
share (that is, sales increases greater than 10%) and decreases in the selling price of the
Maxus are the result of Scott’s strategic actions.

Calculate how much of the change in operating income from 2012 to 2013 is due to the
industry-market-size factor, product differentiation, and cost leadership. How does this relate
to Scott’s strategy and its success in implementation? Explain.

Part D

In reference to Scott’s business information for the periods 2013 and 2012, as shown in Part B
(above):

1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused
selling and customer-service capacity at the beginning of 2013 based on actual
production and actual number of customers served in 2013.
2. Suppose Scott can add or reduce its selling and customer-service capacity in
increments of five customers. What is the maximum amount of costs that Scott could
save in 2013 by downsizing selling and customer-service capacity?
3. Scott, in fact, does not eliminate any of its unused selling and customer-service
capacity. Why might Scott not downsize?

This is the end of the Assignment questions. Students are advised to work on the assignment
consistently rather than to attempt the questions closer to submission date. All group members
should attempt the questions (particularly, Part B calculations), compare your calculations,
share your views in relation to decision-making type questions.

Details of assignment presentation and allocation of marks for each part of the assignment are
provided in the next page. The allocation of marks provides a guide of the amount of work
needed for each part of the assignment. Therefore, it may not be appropriate to allocate each
part of the assignment to each member of the group. ALL THE BEST!!!

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Assignment details are as follows.

Please upload your WORD DOCUMENT to LMS by 5pm on Monday 16 October 2017.

Please use font size 12, Times New Roman, 1.5 line spacing and 2.5 cm margins on all sides.

Presentation:

1. Each part (e.g. Part A, Part B etc.) must start on a new page.

2. ALL workings and formula must be shown clearly (in a Word Document NOT in
Excel).

3. Any reference to journal articles or books must have in-text referencing and also
shown in the References section.

Marking schedule:

 Part A: 20%
 Part B: 50%
 Part C: 20%
 Part D: 10%
 Total: 100%

REMEMBER TO COMPLETE YOUR SPARK

The End