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ACT507 Accounting for Managers Assignment
i. Explain how faster processes can be applied in areas such as engineering and administration. How can reduced process times in these areas help a company be more competitive?
In order to implement the faster processes in engineering department organisation implement new and updated equipments that helps in improving their overall capacity of producing their products and also helps in maintaining their cost as well as time. With the help of it there is effective efficiency is noted down within the manufacturing department (Nolan, 2012).
In the administration department also management deploy the faster processes in the form of implementing new and useful software related to their reporting and accounting so that their operational activities get processed speedily as well as more accurately (Nolan, 2012).
In order to implement these updated technology and equipment management need to follow the change management according to which they need to prepare pilot batch for testing the new procedure. When the pilot batch complete the testing successfully then other members get trained over it in effective manner. Once all the members get trained effectively then they easily process the activities related to the engineering and administration department (Nolan, 2012).
With the effect of the reduced time period within these areas company become more competitive as they can invest their remaining time period in enhancing their overall quality level as well as they work over their deficiencies and improve them effectively (Nolan, 2012).
ii. Explain why improved quality is essential to a company that is able to work faster and reduce process times.
For such company that is able to work faster and reduce process time improved quality is essential because it is the effective feature that helps in getting adequate market share and remain competitive in front of their competitors. For an company it become easy to implement faster processing within their process but it is very hard to maintain their quality level and make adequate level of improvements in it. Along with the implementation of the faster processing in order to reduce process time management need to focused over enhancing their quality (Nolan, 2012).
It is also possible as with the effect of the faster process the activities get performed within lesser period of time and this helps in improving the quality of the work done. They can engage their employees in training and development session in order to enhance their efficiency so that they perform in adequate manner and process the activities more accurately. They also adopt new and updated technology in order to improve their overall efficiency that results into increase in their quality level (Sare & Ogilvie, 2010).
With the decrease in quality level organisation face fall in their profitability level as well as their market share also get decreased so in order to increase their profitability as well as market share they need to improve their overall quality (Sare & Ogilvie, 2010).
iii. What are potential problems that may arise from the increased speed of processes?
With the increase in the speed of processing the activities there are effective issues get raised that get discussed below in effective manner such as: -
Number of errors get increased: -With the effect of the increase in the speed of processing the activities results in to increase in the number of errors. In order to complete the task speedily there is high possibility of skipping some important facts or steps that results into increase in the number of errors. The team members perform the activities uncomfortably and this results into increase in their errors (Sare & Ogilvie, 2010).
Level of quality get dipped down: -The quality level of work get impacted badly as with the increase in number of errors the quality get dipped down. Due to errors the re-work get increased and effective amendments are required that affect their overall quality level.
Outcomes are not as per their desired level: -With the increase in the number of errors as well as decrease in the quality level of the processing activities the set outcome level is not attained by them and there is huge fall is noted down within their attained outcomes. They are not able to perform as per their set target (Sare & Ogilvie, 2010).
Level of accuracy become poor: -There are two factors helps in measuring the accuracy such as number of errors and level of quality. With the increase in number of errors as well as decrease in the level of quality the end results of accuracy shows poor performance from the organisation. Accuracy is essentially needed for the purpose of customer satisfaction as well as helps in remaining competitive in front of their competitors (Sare & Ogilvie, 2010).
Comment on Steve’s observation. What conflicts are created when a company determines its manager’s bonuses based on net profit alone?
Steve Smith is operational manager in XYZ Ltd. and look over the overall operations. There are two branches of the company one is in Brisbane and another one is in Adelaide and both of them are handled by their respective appointed managers. There is a company policy regarding the bonus of the manager as it depends over the net profit earned by the factory (Wilson, et. al., 2011).
Steve observe that the Brisbane Branch yields net profits along with this the share of finished goods inventory get increased whereas the Adelaide branch not able to yield net profits as well as the share of their finished goods inventory gets fallen down. He observed that there is something wrong that Brisbane branch manager make some manipulation in it for the purpose of getting higher level of bonuses as his bonus is directly linked with the net profit of the factory. So there is high possibility of having any manipulation or fraud within the net profits and the share of inventory of finished goods. Due to direct relation manager didn't put much efforts for increasing their overall sales and focus over reporting higher net profits. There is a possibility of having effective difference between the share amount of net profit earned and net profit reported and it is because to get the high bonus share. There is effective need of removing such confusion in order to eliminate the conflict situation among operational manager and factory manager. For this purpose management need to enhance their bonus calculation system as they need to divide the bonus within several heads because single head bonus creates lots of issues like fraud and manipulation within the system (Cunningham, 2012).
i. In general, what do these variances indicate regarding production costs for the period?
The remaining amount attained by deducting the actual spending from their budgeted spending or standard spending. This is measured for income as well as expenditure. Variance can be positive and can be negative. So by observing the provided data it get identified that material variance is favourable which make inclusion of price of material and quantity of material. Favourable results shows that they effectively follow the prepared budget in order to utilise the material. With the effect from this favourable results the production's variable cost get lower down and with this effect they become capable enough in order to gain the higher level of profits with the sale of their products (Horngren, et. al., 2014).
On the other hand there is unfavourable variance is also identified in the form of labour cost as the cost of labour is identified as more than their set budgeted cost or their standard cost. The part of labour cost is also associated with the total cost of the product and with the unfavourable cost it is observed that it increases the overall cost and reduce the total profitability with the sale of product. Both elements are considered within the variable cost and with this effect their favourable or unfavourable results affects their total cost as well as their profit share also (Horngren, et. al., 2014).
ii. What further information would management find useful in analysing production costs and variances for the period?
For management there are various diverse set of information is available that helps in analysing the cost of production as well as the variance. The outcome of actual as well as budgeted figures get utilised and it includes the direct expenses such as material cost, labour cost and other direct expenditure, variable expenses, fixed expenses, units of sales and production and many more. Management compare the actual results with budgeted results in order to get the information that helps in evaluating their overall performance (Drury, 2012). Variances is of two types one is favourable and another one is unfavourable. Favourable variance shows that activity is performed as per the set standards whereas in unfavourable variance they miss out over the set standards. Analysis of this information helps in knowing the reasons behind variances so that they took corrective measures in order to resolve these issues and get the favourable variances. Management also utilise the information for the purpose of evaluating the cost of production, among their pricing decision along with the estimation of their profit share (Drury, 2012).
i. Calculate the cost per unit for the variable costs and present the result in a table form.
The sum of cost that get invested by the manufacturer for the purpose of manufacturing single unit. Manufacturer tries to control their cost per unit in order to attain higher profits and with the increase in the number of produce units of same product the cost per unit get decreased and vice-versa (Katrina, 2015).
Cost per unit for the variable costs is calculated as follows: -
Variable selling and administration expenses
Total variable expenses (A)
Sales units (B)
Variable cost per unit (A/B)
As per the Budget A the cost per unit is $21.00 and Budget B yields $18.50 (Katrina, 2015).
ii. Why do you think budget A has high costs and low sales forecasts?
The approach that get utilised for preparing Budget A is bottom-up approach that results into high costs and low sales forecasting. According to this approach bottom level management prepare the budget. The involvement of lower level results that costs get allocated inappropriately and become the major reason for high costs. Along with this they closely review the market that helps in knowing the market demand of their product and accordingly they set their targets. Due to these factors the target sales get forecasted at low level. These are major factors that results into high costs and low sales forecasts in budget A (Katrina, 2015).
iii. Why do you think budget B has low costs and high sales forecasts? What are the behavioural implications of this top-down approach?
The approach that get utilised for preparing the Budget B is top-down approach. As per this approach top level management prepare the budget and other management level follows that budget and need to perform accordingly. The top level management allocate the cost in effective manner that the results their cost remain low. Along with this they prefer sales over the cost due to which they set the high sales target. The reason behind setting low cost and the higher level of sales is they deemed to get the higher level of profits with the sale of their products. They put their emphasis over increasing their overall sales and lower down their overall cost that helps in getting the desired level of profits. With the effect of these factors the cost of the budget B is lower and the sales unit is higher. Low cost attract the number of customers that increases the sales of the product and contribute more in getting higher level of profits (Guenther, et. al., 2012).
iv. How should the two groups participate to come to a consensus on the budget? What are the advantages of this approach?
In order to prepare the consensus on the budget there are two groups make active participation such as top level management and operational level management. There are some aspects of top level management is effective and some of operational level management. As top level management effectively allocate the cost that helps in controlling the cost and results into setting lower cost for the product. On the other hand operational level management is knowing the demand of the product within the market that helps in setting the sales unit. Both levels of management perform together in order to achieve the desired outcomes. The benefits of this approach are the estimations made by them are more accurate as compare to other estimations, along with this their set targets of selling units are also achievable and effective. The communication and budget following become effective enough as both management level participate together and effectively (Guenther, et. al., 2012).
Cunningham, B.M. 2012, Accounting: information for business decisions, 1st Asia-Pacific edn, Cengage Learning Australia, South Melbourne, Vic.
Drury, C. 2012, Management and cost accounting, 8th edn, Cengage Learning, Andover.
Guenther, E., Jasch, C., Schmidt, M., Wagner, B. & Huisingh, D. 2012, "Material Flow Cost Accounting", Journal of Cleaner Production, vol. 29-30, pp. 291-292.
Horngren, C.T., Datar, S.M., Rajan, M.V., Wynder, M.B., Maguire, W.A.A. & Tan, R.C.W. 2014, Cost accounting: a managerial emphasis, 2nd edn, Pearson Australia, Frenchs Forest, NSW.
Nolan, S. 2012, "Change management", Strategic HR Review, vol. 11, no. 5, pp. 251.
PhD, P.H., PhD, C.E. & Katrina Fischer MD, M. 2015, "Price-Transparency and Cost Accounting", Inquiry: The Journal of Health Care Organization, vol. 52.
Sare, M.V. & Ogilvie, L. 2010, Strategic planning for nurses: change management in health care, Jones and Bartlett, Sudbury, Mass.
Wilson, V., Freeman, S. & Freeman, J. 2011, Accounting: a practical approach, 3rd edn, Pearson, Frenchs Forest, N.S.W.