strategic management accounting Assignment | Online Assignment

BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 1 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
BIRMINGHAM CITY UNIVERSITY
UNDERGRADUATE EXAMINATION
BSc (HONS) ACCOUNTANCY
BSc (HONS) ACCOUNTING & FINANCE
BSc (HONS) BUSINESS ACCOUNTING
MAcc (HONS) ACCOUNTING & FINANCE
ACC6020 STRATEGIC MANAGEMENT ACCOUNTING
3 hour open book online assessment (exam)
Date: 27th July 2020
Duration: We would expect you to be able to complete this assessment in 3 hours
Workload restriction: The maximum word count is 2,500 words
Note: Under normal circumstances you should be able to complete this assessment within the stated duration and should not exceed the maximum word count.
Instructions to Candidates:
 This paper contains EIGHT questions, the allocation of marks is indicated for each question.
 Answer all Section A questions and all Section B questions
There are 5 questions in Section A, each question is worth 5 marks and there are 3 questions in section B, each question is worth 25 marks
 The use of non-programmable calculators is permitted
 Candidates should ensure that all workings are shown clearly
Materials Provided:
The exam question paper

Instructions for submitting assessment:
 All your answers should be entered into a single WORD document
 Answer each question on a separate page
 You MUST show all your workings as marks are allocated to the workings
 You should include your name and student ID number on each page of the submission
 Your assessment should be uploaded to Moodle and submitted via Turnitin as a single WORD document by 9.00am on 28th July 2020
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 2 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
Note on Plagiarism, Collusion and Cheating:
This is an individual assessment – University policy will apply where cases of copying and plagiarism are suspected.
When you submit the assessment you declare that you:
 Have read and understand that university’s guidance on plagiarism and cheating.
 You confirm that it is solely your own work or, in the case of a group submission, that it is the result of joint work by members of the group that you represent.
 That it contains no unreferenced material from another source.
 That you keep a copy of the assessment. (Please do not access/edit this copy after submission)
 Failure to abide by the rules will result in disciplinary action against you.
Advice:
 Do not copy tracts of work from printed material, the internet or another student.
 Do not share an electronic copy of your work with anyone not concerned in its production.
 Please refer to https://www.bcu.ac.uk/library/services-and-support/referencing for guidance on how to reference using Harvard referencing.
Please also read: https://icity.bcu.ac.uk/Academic-Services/Information-for-Students/Assessment/Avoiding-Allegations-of-Cheating
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 3 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
Relevant Formulae: Learning curve: Y = axb
SECTION A – ATTEMPT ALL 5 QUESTIONS:
The following information is for questions 1 and 2:
A company is to start producing a new product, the widget, and the manager of the production department is trying to set the budgets for the coming year.
She has established, based on current working methods, that a learning rate of 75% is the norm until employees have each produced 90 units, at which point steady state is reached.
The prototype for the widget took 11.5 hours to produce.
Note: the learning coefficient for a 75% learning curve is -0.415.
Question 1:
How long should it take to produce the 90th widget?
Note: keep answers to 3 decimal places.
(5 marks)
Question 2:
The standard cost card for the widget has been produced, based on the prototype:
£
Material 57.50
Labour (£10 per hour) 115.00
Variable Overheads (£3 per hour) 34.50
Fixed Overheads 27.50
Total 234.50
What is the overall cost of the first 120 widgets produced?
(5 marks)
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 4 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
The following information is for Questions 3 and 4:
Costland Ltd produces three products, the Axa, the Banda and the Cayno. The financial director has discovered a bottleneck in one of the divisions, and would like to maximise the returns on this. The business is currently operating at full capacity.
The details of the products are:
Axa Banda Cayno
Selling Price £62 £75 £60
Material (£5/kg) 3kg 3.5kg 2kg
Labour (£10/hour) 2 hours 3 hours 1.5 hours
Variable Overheads (£2/hour)
Bottleneck hours 1 hour 1.5 hours 0.75 hours
Maximum Demand 500 units 600 units 750 units
The total bottleneck hours for the division is 1,500 hours, and the total factory costs are £70,000.
Question 3:
What is the optimum production plan for the division?
(5 marks)
Question 4:
What is the Throughput Accounting Ratio for each product?
Given your answers, explain which product is of concern, and one reason why it should not be discontinued?
(5 marks)
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 5 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
Question 5:
The board of directors of Wanna Ltd has decided that it needs to improve the performance of its divisions. It has decided to introduce performance related bonuses for the managers.
The marketing director has stated that Return on Income (ROI) is a good choice, as that is the measure chosen within his last post.
The finance director disagrees, and wants Residual Income (RI).
The Sales Director does not understand these terms, and is not mathematically minded, and so does not want to offer an opinion.
You are the assistant to the Sales Director. Explain to him what each of these terms mean and how they are calculated, and recommend, with one reason, which one should be chosen.
(5 marks)
END OF SECTION A
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 6 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
SECTION B: ATTEMPT ALL 3 QUESTIONS
Question 6:
Virgo Ltd is a 10 year old company which runs low-cost gyms in the UK, known as Gymbo.
It controls its costs by:
 operating outside the town or city centre to reduce rental costs
 leasing the gym equipment from one provider to reduce maintenance costs
 having no reception area
 not providing television screens for gym users’ viewing
 providing vending machines rather than cafes
The gyms have been ranked seventh in the UK, based on customer retention; income;
number of classes offered; staff turnover; plus other measurements. It prides itself on being
one of the cheapest gyms in the country, with no joining fees as well as class bookings and
information all being available via its phone app.
Required:
a) For each of the four main perspectives of the Balanced Scorecard describe what each of them means within a company
(8 marks)
b) For each perspective of the Balanced Scorecard, identify one goal together with a corresponding performance measure which could be used by Virgo Ltd to measure the company’s performance. The goals and measures should be specifically relevant to Virgo Ltd. For each pair of goals and measures, explain why you have chosen them.
(12 marks)
c) Critically evaluate the arguments for and against using profit to measure the performance of a company.
(5 marks)
(Total 25 marks)
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 7 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
Question 7:
Mase Ltd is a new manufacturer of boxes of high end boxes of chocolate. Its three products
are the Yummy, the Gutso and the Morish. The Finance Director is concerned about the
selling prices agreed, and wishes to undertake Direct Product Profitability analysis, to ensure
a profit is made.
Information for the three products are as follows:
Yummy Gutso Morish
Selling Price £7.50 £12 £13
Material (kg) 0.2 0.3 0.4
Direct Labour (hours) 0.1 0.15 0.2
Machine hours 0.5 0.7 0.9
Number of production runs per annum 16 12 8
Number of purchase orders per annum 24 28 42
Number of deliveries per annum 48 30 62
Sales demand per annum 15,000 12,000 18,000
The price of the materials is constant at £12 per kg.
The direct labour cost is £14.80 per hour.
The annual overhead costs are:
£
Machine set-up 26,550
Machine running 66,400
Procurement 48,000
Delivery 54,320
Required:
a) Calculate the cost per unit for each of the products using traditional absorption costing, with direct labour hours as the basis for apportionment.
(7 marks)
b) Calculate the cost per unit for each of the products using activity based costing.
(9 marks)
c) Compare and contrast your answers to parts a) and b) above from the point of view of the manager responsible for each of the products, and the company overall.
(9 marks)
(Total 25 marks)
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 8 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
Question 8:
Bobdard Ltd has two divisions, W and X. Division W produces a component for mobile phones, which can be sold to external customers and also transferred to Division X, which completes and sells the phones.
If Division W sells the components for £500 there will be no demand, but demand will increase by 60 units for every £30 decrease in price. The variable cost of producing the component is £100. The fixed costs of the division are £1.5m per year. It has the capacity to satisfy the maximum possible demand if required.
If a complete phone is sold for £900 there will be no demand, but demand will increase by 25 units for every £10 decrease in the price. The variable cost is £250, and the annual fixed costs are £1.75m.
Required:
a) Calculate the total revenue generated by the complete phones if the manager of the Division W sets the transfer price of the component equal to the selling price which would be set to maximise profits from the sale of the components to external customers. (Note – the algebraic approach is to be used);
(7 marks)
b) Calculate the total revenue generated by the complete phones if the manager of the Division W sets the transfer price of the component equal to the price which would be set to maximise profits for the company Bobdard Ltd as a whole, therefore at its Marginal Cost.
(Note: round up to the nearest whole number of units)
(4 marks)
CD Ltd is a divisionalised company that specialises in the production of DVDs. Division A produces the DVDs, and the Division B produces the boxes within which the DVDs are delivered to the shops.
The manager of Division A has just won a fixed price contract to supply 750,000 DVDs to a chain of book stores. This will fully utilise the capacity of Division A for the next year. Budget details for the next year are:
Variable cost per unit £15 per unit
Fixed costs £700,000
Revenue £2.35m
BIRMINGHAM CITY UNIVERSITY
FORMAL EXAMINATION
STRATEGIC MANAGEMENT ACCOUNTING ACC6020
Page 9 of 9
This examination is subject to the Code of Practice – Conduct of Examinations and the Student
Disciplinary Procedure
There are 10 DVDs in each box.
Division B has agreed to supply the 75,000 boxes to Division A at the same price that it sells boxes to external customers. Budget details for Division B (including the order from Division A) for the next year are:
Variable cost £1.50 per box
Fixed costs £340,000
External Demand 70,000 boxes
Division B Capacity 85,000 boxes
CD Ltd pays a bonus to divisional managers if the profit of their division is at least 12% of the level of fixed costs in the next year.
Required:
c) Calculate, given the bonus scheme available, the minimum price per box that Division B would be willing to charge at the moment, on its external sales.
(6 marks)
The manager of Division A has calculated that he will only receive his bonus if the internal Transfer Price for the box from Division B is at £5.88. Therefore he is not happy about paying the same price per box as an external customer and thinks that transfer prices should be set using an opportunity cost based approach, i.e. a price that reflects the economic cost and loss to the transferring division.
d) Discuss the view that transfer prices should be set using opportunity cost, based on the scenario of CD Ltd. Your answer should discuss the point of view of each of the managers, plus a calculation of a fair Transfer Price that could be charged using this method.
(8 marks)
(Total 25 marks)
END OF SECTION B
END OF PAPER