XJTLU Entrepreneur College (Taicang)
School of Intelligent
IFB102TC Qiong Ji qiong.ji02@[Link]
Finance and Business
1st SEMESTER 2023/24 ASSESSED COURSEWORK
BSC INTELLIGENT SUPPLY CHAIN WITH CONTEMPORARY
ENTREPRENEURIALISM
IFB102TC Managerial Accounting Essentials
Deadline: 11:59 on 30 October 2023 (Beijing time).
INSTRUCTIONS TO STUDENTS
1. This coursework comprises 100% of the module mark and the total marks available are 100.
2. Please answer all questions.
3. Only English responses are accepted.
4. Word count: No more than 2,000 words, excluding table of contents, abstract/executive summary (no
more than 200 words), tables, figures, appendices and bibliography/list of references. Marks will be
deducted for
work that exceeds the word count limit.
5. In-text citations and list of references (bibliography) should follow the Harvard style of referencing.
6. Please ensure that your submission contains Taicang cover sheet with the following information: Module
code and title, your student number, the title of your work, and the word count.
7. Answers for individual report should be submitted in a single MS Word file, font size 12, line spacing 1.5.
Please ensure that you do a spell check and grammar check of your work using the functionality of MS
Word before submission.
8. When the work is submitted, the filename must be as follows: IFB102TC_assessment_studentID.docx.
9. It is the student’s responsibility to check that online submissions of coursework to the Learning Mall
Online (LMO) have been successful by downloading a copy of their submission.
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AY23/24 IFB102TC Managerial Accounting Essentials
Coursework Assessment: Integrative Management Accounting Analysis
Objective: The objective of this individual coursework assessment is to apply the concepts and
techniques of management accounting to real-world industry scenarios. This assessment aims to enhance
your critical thinking, analytical skills, and ability to make informed managerial decisions based on
financial data.
Instructions: You are required to analyze the industry cases provided from a management
accounting perspective. Your analysis should be well-structured, supported by relevant data, and
demonstrate your understanding of the course concepts. Your submission should be in the form of a
written report.
Case: Imagine you are a management accountant at a retail company that sells electronic gadgets.
The company is considering introducing a new line of smartphones in the market.
Section 1 (20 Marks): You are tasked with analyzing the costs associated with manufacturing
and distributing these smartphones and providing recommendations on the pricing strategy. Your
analysis should include:
1. Identification and classification of different types of costs (fixed, variable, etc.) involved in
manufacturing and distributing the smartphones.
The following are the key cost categories associated with manufacturing and distributing
smartphones:
[Link] costs are expenses that remain constant regardless of the level of production or sales
volume.
(1)Factory rent: The cost of leasing or owning the production facilities, which remains constant
irrespective of the number of smartphones produced.
(2) Machinery and equipment: The depreciation or rental expenses for manufacturing machinery
and equipment used in the production process.
(3)Salaries and wages: The salaries of production managers, technicians, and other staff
involved in the manufacturing process.
(4)Research and development: The costs associated with developing and designing the new
smartphone line, including software development and testing.
[Link] Costs:Variable costs change in direct proportion to the level of production or sales
volume.
(1)Raw materials: The cost of components, such as processors, memory chips, screens, batteries,
and other electronic parts, which vary with the number of smartphones produced.
(2)Direct labor:
The wages and benefits of workers directly involved in the assembly and manufacturing
[Link] and (3)shipping: The costs associated with packaging materials and shipping
the smartphones to distribution centers or directly to customers.
3. Semi-Variable Costs:Semi-variable costs have both fixed and variable components. They
consist of a fixed component that remains constant and a variable component that changes with
production or sales volume. (1)Utilities: Costs such as electricity, water, and heating that have a
fixed component (base charges) and a variable component (usage charges) based on the level of
production.
[Link] Costs:Indirect costs are not directly traceable to a specific product or [Link]
include costs such as factory maintenance, insurance, taxes, and administration expenses that
are not directly associated with the production process but are essential for its operation.
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2. Calculation of the breakeven point in units and dollars, considering the projected selling price and
cost structure.
Let’s assume the total fixed costs of my smartphone company are $500,000, the selling price per
unit is 500$ and the variable cost is 300$.
Breakeven Point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)=
$500,000 / ($500 - $300) = 2,000 units
Breakeven Point (in dollars) = Breakeven Point (in units) * Selling Price per Unit = 2,000
units * $500 = $1,000,000
Therefore, the company needs to sell 2,000 smartphones to breakeven, resulting in a
revenue of $1,000,000.
Given that it is within the range of usual smartphone market values, my assumption of a selling
price of $500 per smartphone is plausible. Depending on elements including the brand,
features, and market competitiveness, the actual selling price may change. And because it
accounts for the price of raw materials, direct labor, packaging, and shipping, the $300 per
smartphone variable cost assumption is also acceptable in the global market. On the other
hand, given that it comprises the price of factory rent, machinery and equipment, salaries
and wages, and research and development, the assumption of total fixed costs of $500,000
is appropriate for the case.
3. Discussion of the potential impact of different pricing strategies (cost-plus, value-based, competition-
based) on the company's profitability and market positioning.
The company's profitability and market placement may be significantly impacted by the pricing strategy
decision.
Cost-plus pricing: In this method, a markup is added to the manufacturing costs to arrive at the selling
price. In this scenario, my business decides to set the selling price at $500, which includes a $200 markup,
assuming a variable cost of $300 per unit. By using this pricing model, it is guaranteed that every unit
sold helps to pay for both variable and fixed costs. However, it might not account for elements like the
product's perceived value or the state of the smartphone market. Setting a higher selling price may allow
the business to boost its profitability if the market is prepared to pay more for the [Link]-based
pricing:
Value-based pricing takes into account how buyers perceive the value of the product. It entails pricing a
product in accordance with the advantages and value that the client receives from it. In this situation, our
corporation may be able to establish a higher selling price if it thinks that our smartphone has distinctive
features or functionality that sets it apart from rivals. If clients are willing to pay a higher price for our
goods, this method may result in more profitability.
Pricing that is competition- based: Pricing that is influenced by competition in the smartphone market can
significantly affect businesses. Customers have a lot of options, so businesses must constantly assess and
modify their pricing to remain competitive Such as Xiaomi providing products that are afforadble for
most of people, thereby holding a market share of 12.5% in the second quarter of 2023 , Xiaomi has a
firm hold on third place(IDC, 2023).Customers frequently compare prices before making a purchase in the
smartphone market because there are so many different brands and models to pick from. A company can
attract price-conscious customers who are shopping around by offering a lower price than rivals. This
could aid the company's efforts to grow both its clientele and market [Link] this tactic could lead
to reduced profit margins, it might aid the business in gaining market share and raising overall revenue.
In conclusion, selecting a pricing strategy in the smartphone industry, or any industry, is a difficult choice
that requires taking into account factors including cost structure, perceived value, and the market
situation. Cost-plus, value-based, and competition-based pricing strategies are a few examples of those
that might affect profitability and market positioning differently. Therefore, it is crucial for businesses to
thoroughly consider these aspects before choosing a pricing strategy.
IDC. (July 27, 2023). Global smartphone market share from 4th quarter 2009 to 2nd quarter 2023 (by vendor)
[Graph]. In Statista. Retrieved October 23, 2023, from [Link]
share-held-by-smartphone-vendors-since-4th-quarter-2009/
4. Analysis of the sensitivity of the breakeven point and profitability to changes in key assumptions, such
as variable costs or selling price.
We can investigate various scenarios based on modifications to fundamental assumptions to analyze the
sensitivity of the breakeven point and profitability. For example, If the variable cost per unit of my
smartphone company above increases, for example, to $350, the breakeven point will be [Link] order
for the business to break even, it must sell 2,000 smartphones at a price of $500 each. This would generate
$1,000,00 in revenue. The breakeven point would change to 4,000 or 5,000 units, respectively, with a
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revenue of $2,000,000 in both cases if the the selling price per unit fell to $400. The breakeven point and
overall profitability of the new smartphone line can thus be significantly impacted by changes in variable
costs or selling price.
Section 2 (25 Marks): Now please complete the following budget of your company for this coming year.
1. the sales budget
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Budgeted unit sales 1,000 2,000 3,000 4,000 10,000
Budgeted sales price $100 $100 $100 $100 $100
Budgeted sales revenue $100,000 $200,000 $300,000 $400,000 $1,000,000
2. the production budget
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Budgeted
Budgeted beginning
unit sales 300
1,000 100
2,000 200
3,000 300
4,000 400
10,000
inventory
Budgeted ending 100 200 300 400 1,000
inventory(10% of current
Budgeted production 800 2，100 3,300 4,400 5,500
period budgeted sales)
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3. the direct materials purchases budget
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Budgeted production 800 2,100 3,100 4,100 10,100
Materials requirement 1 1 1 1 1
1 per unit
Total materials needed for 800 2,100 3,100 4,100 10,100
production
Planned ending direct 80 210 310 410 410
materials inventory
(10% of current
quarter’s production
needs)
Planned beginning direct 80 80 210 310 410
materials inventory
Total purchases of 800 2,230 3,200 4,200 10,430
direct materials
Average cost of direct $10 10 10 10 10
materials per unit ($10)
Total cost of purchases $8,000 ￥22,300 $32,000 $42,000 $104,300
of direct materials
4. the direct labor budget
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Budgeted production 800 2,100 3,100 4,100 10,100
Direct labor requirement 0.1 0.1 0.1 0.1 0.1
(0.1 hour per unit)
Total direct labor hours 80 210 310 410 1010
needed for production
Direct labor cost per hour 1 1 1 1 1
3
($10 per hour)
$800 $2,100 $3,100 $4,100 $10,100
Total direct labor cost
However, after two years, the company is facing challenges in meeting its budgeted targets and wants
to evaluate the performance of its various departments. Your analysis should include:
5. Discussion of how the use of flexible budgets can provide a more accurate assessment of
performance in a dynamic business environment.
Here are a few ways that using flexible budgets can result in a more accurate performance evaluation:
reflects evolving business conditions: In a dynamic business environment, sales volumes, production
levels, and other activities may vary considerably. It aids companies in comprehending how variations in
activity levels affect costs and [Link] instance，if actual unit sales of my company in the future is3,800
units and actual sales revenue is $380,[Link] comparing the above budgeted production with actual
production, I can identify that there is a $20,000 shortfall by comparing the budgeted sales revenue with
the actual sales revenue. This meant that the sales tactics used during the quarter weren't as successful as
expected. To pinpoint the precise causes of the lower sales and make the necessary adjustments going
forward, more investigation could be done.
Enhances performance evaluation: Businesses can evaluate performance based on reasonable expectations
when using a flexible budget for that purpose. This offers a more accurate evaluation of how the company
fared in light of the shifting environment. For example, Let’s assume Actual direct labor cost of my
company is $750. After comparison, we can see that there is a $50 savings. This could indicate that the
labor utilization was more efficient than anticipated, potentially due to improved processes or better
workforce management. This analysis highlights the importance of optimizing labor utilization and
identifying opportunities for cost savings or productivity improvement.
6. Examination of the role of cost variances (e.g., materials, labor, overhead) in evaluating
departmental performance.
Cost variations for things like materials, labor, and overhead can give information about how
effectively and efficiently the smartphone operation is run, which can be used to assess departmental
[Link] Price Variance is a measurement of the variation between the standard
(budgeted) cost per unit of materials purchased and the actual cost per unit. It aids in evaluating the
business's capacity to obtain favorable terms from suppliers while Labor Rate Variance determines the
discrepancy between the actual hourly wage paid and the expected (budgeted) wage. This variation aids
in assessing the company's ability to control labor costs and labor cost control.
Take my company as example,11,000 units were purchased for a total cost of $110,000 in the first
quarter according to the direct materials budget. In the same time period, the direct labor budget
projects spending $10,000 for 1,000 labor hours. These budgets enable efficient resource allocation and
cost management in the operation of my smartphone.
Section 3 (15 Marks): The company’s standard cost card for direct labor and variable
manufacturing overhead follows:
Direct Costs Standard Quantity Standard Price
Direct Labor 0.1 hours $10 per hour
Manufacturing Overhead 0.1 hours $5 per hour
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Actual results were as follows:
• The number of units sold and produced was 10,000 units.
• The direct labor cost was $12,000 for 960 hours ($12.50 per hour).
• The variable overhead cost was $4,992 for 960 hours ($5.20 per hour).
Calculate the following variances and label them as favorable (F) or unfavorable (U):
1. Direct labor rate variance.
Direct labor rate variance =(Actual Price− budgeted Price)*Actual Quantity= ($10 -$12.50 ) * 960 hours =
$2,400 (U)
2. Direct labor spending variance.
Direct labor cost: 10000units*0.1hours=1000hours
Direct labor efficiency variance =(960-1000) * 10 = 400 (F)
Direct labor spending variance=400-2400=-2000(U)
3. Variable overhead rate variance.
Variable overhead rate variance = (Actual Price− budgeted Price)*Actual Quantity=($5.20 - $5) * 960
hours=$192 (U)
4. Variable overhead efficiency variance.
Variable overhead efficiency variance.=(960-1000)*5=200(F)
5. Briefly explain the relationship between direct labor efficiency variance and variable
overhead efficiency variance.
Section 4 (20 Marks): The manager is considering a new project that would require an initial investment
of $1,197,810. The cost of capital or the required rate of return of this company is 10 percent. This
project will generate an annual cash inflow of $300,000 in the following five years.
1. Calculate the net present value (NPV) of this project. Indicate whether or not this project is
acceptable.
2. Calculate the internal rate of return (IRR) of this project. Indicate whether or not this project
is acceptable.
3. Briefly explain what the time value of money means.
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4. Which capital budgeting methods incorporate the time value of money and which do not? Which
are considered superior and why?
5. How do cash flow and net income differ? Explain why this difference is important to capital
budgeting.
Indicative grading scheme:
- Section 1 - up to 20 marks.
- Section 2 - up to 25 marks.
- Section 3 - up to 15 marks.
- Section 4 - up to 20 marks.
- Structure, presentation and organization of report - up to 5 marks.
- Use and application of relevant scholarly literature (including appropriate referencing, use of
in text citations and accurate presentation of bibliography/list of references) - up to 5 marks.
- Completion of class exercises - up to 5 marks.
- Lecture and tutorial participation- up to 5 marks (0 mark if your attendance rate is below 70%).
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