HA2011 Management Accounting Proof Reading Services

HA2011 Management Accounting Assignment Help

HA2011 Management Accounting Proof Reading Services

Part A: Activity Based Costing.

a.Activity Based costing is basically aimed at calculating the actual costs for completion of an activity. It breaks the whole process into a number of activities, and then allocates cost pertaining to the same. If the unit cost is higher, then activities can be reduced or the allocation can be worked out to decrease the costs. It is beneficial in the sense that it allows the employees to get a clear view of the cost of operations without the segregation of material, labour and overheads. The overall cost needs to be based on the cost drivers of the activity. The following calculation shows information about different activities in Cravings for cakes, and how the cost is allocated to each activity driver. The activity driver is based on the figures of quantities through which it is multiplied and allows the management to understand about the costs of different activities. (Macinati et. al, 2014)

Cost Per Unit of activity driver
Activity	Activity Cost ($)	Activity Driver	Annual Quantity of Activity Driver	Cost Per Unit

Prepare Annual Accounts	5000	None Available
Process Receivables	15000	No. of Invoices	5000 Invoices	3.00
Process Payables	25000	No. of Purchase order	2500 Purchase orders	10.00
Program Production	28000	No. of Production Schedules	1000 Schedule	28.00
Process Sales Order	40000	No. of Sales Order	4000 Sales orders	10.00
Dispatch Sales Order	30000	No. of Dispatches	2500 Dispatches	12.00
Develop and test products	60000	Assigned Directly to products
Load Mixers	14050	No. of Batches	1000 Batches	14.05
Operate Mixers	45900	No. of Kilograms	200000 Kilograms	0.23
Clean Mixers	6900	No. of Trays	1000 Batches	6.90
Move Mixture to Filling	3450	No. of Cakes/Pastries	200000 Kilograms	0.02
Clean Trays	20000	No. of trades	16000 Trays	1.25
Fill Trays	16000	No. of Cakes/Pastries	800000 Cakes Pastries	0.02
Move to Baking	8000	No. of Trays	16000 Trays	0.50
Set Up Ovens	50000	No. of Batches	1000 Batches	50.00
Bake cake/Pastries	130000	No. of Batches	1000 Batches	130.00
Move to Packing	40000	No. of Trays	16000 Trays	2.50
Pack Cakes/Pastries	80000	No. of Cakes/Pastries	800000 Cakes Pastries	0.10
Inspect Pastries	2500	No. of Pastries	50000 Pastries	0.05

The cost per unit of an activity is calculated in the form of different factors where it provides a base for allocating the costs associated with baking process of a cake.

HA2011 Management Accounting Assignment Help

Further, a bill of activities is created below to depict the cost of production of 100000 cakes, and 1000 batches of the cake. This would simply mean that each batch has 100 units in the same. On the basis of activity drivers, the costs are allocated to different activities and included in the unit at the time of deriving the costs of per product. Thereby, the decisions of profit and margins can be taken after the cost is known to the management.

Bill of Activities
Activity Consumed	Annual Quantity of Activity driver	Cost per Driver	Annual Cost ($)
Process Receivables	500 Invoices	3.00	1500
Process Payables	200 Purchase Orders	10.00	2000
Program Production	100 Production Schedules	28.00	2800
Process Sales order	400 Sales Orders	10.00	4000
Load Mixers	100 Batches	14.05	1405
Operate Mixers	30000 Kilograms	0.23	6900
Clean Mixers	100 Batches	6.90	690
Move Mixture to Filling	30000 Kilograms	0.02	600
Clean trays	2000 Trays	1.25	2500
Fill Trays	100000 Cakes	0.02	2000
Move to Baking	2000 Trays	0.50	1000
Set Up Ovens	100 Batches	50.00	5000
Bake cakes/Pastries	100 Batches	130.00	13000
Move to Packing	2000 Trays	2.50	5000
Pack Cake/Pastries	100000 Cakes	0.10	10000
Dispatch Sales order	500 Sales orders	12.00	6000
Develop and Test Product			600
Total Cost Annually			64995
No. of Batches			1000
Cost Per Batch			65
No. of Units			100000
Cost Per Unit			0.65

The bill of activities is created to get an understanding about the different factors of cost involved in producing cakes in a bulk. The cost has been based on the drivers and further distributed to each activity. The total cost for production is known by segregating the figures in different type and classes. Some of the costs are major to the production i.e. the baking costs and the setting of ovens is the most costly activity amongst all activities. The activities are lined up and segregated to allow for the suitable allocation of the costs to each activity. It can also be said that the bill of activity includes all the costs pertaining to production. Costs relating to production are included and the other costs related to sales and distribution or marketing strategies is not taken up. These are further included to calculate the net profit from the gross figures of sales. (Macinati et. al, 2014)

b.Other costs to be added to the product cost includes different items which costs the company after the production process is completed. This may include sales promotion and advertisement expenditure. The cost related to production is allocated within the cost. However, such costs which are administrative in nature. For example, hiring an accountant to maintain the books of the company. These activities do not increase revenue but are related to the overall functioning of the business. These have to be adopted so that the business processes can run without any problems. Such costs can be reduced by effective processing of the decisions which are to be taken by keeping into mind a cost reduction approach. There can be some more examples of the costs which are not related to the production but are crucial to determine the actual profits earned by the entities. Some of them are depreciation on machinery, vehicles used for business. Other example is the building which can be rented out in place of a business. The opportunity cost can also be used sometimes to determine the costing for a product. (Macinati et. al, 2014)

Part B – Budgeting

a.The revenue method chosen during the current financial year is based on collecting the receipts upfront and most of the fees in advance so that ample cash is available to the club in off season as well. The receipts are very thin during the off-season and the club is not able to generate sufficient revenue as well. This makes the business operations limited and does not allow the business to flourish in different segments. However, if the club plans its receipts in such a way that it is able to leverage on the different aspects of a sale. It has decided to remove the hourly fees for the courts and collect an annual amount from the customers.(Dekker, 2016) This will allow them to receive cash up front and thereby increasing the revenue in overall aspect. Currently, the setup is such that the club has to collect the receipts from hourly charges and the fees comes in different and smaller parts. However, the receipts are allowing the firm to ensure sustainability through collecting ear (Dekker, 2016) nings in bulk and not breaking up into different parts. If the earnings are segregated into different parts, the revenue falls short of the targets set by the management. Initial reimbursement of membership fees helps the club to take participation in different advertisement campaign which can help promote the club. Pricing in the form of a cartel is expected to provide good results and increase its ability to plan cash receipts.

Calculation of Number of Hours Available for Rent
Season	Period	Court Usage (A)	No. of Hours (B)	Number of Courts ©	*Total Hours Rented (ABC)*
Peak Season	October - April (Prime Time)	95.00%	724	10	6878
Peak Season	October - April (Remaining Time)	55.00%	648	10	3564
Off Season	May-September	30.00%	2172	10	6516
Total					16958

Calculation of Admission Fees under old fee structure
Revenue from Admission Fees	Fees	% Members	Total Number of Members	Admission Fees
Family	45	50%	1000	45000
Students	30	25%	500	15000
Individuals	100	25%	500	50000
Total			2000	110000

Calculation of Hourly Fees under old fee structure
Revenue from Admission Fees	Fees	No. of Hours Rented	Admission Fees
Prime Time	12	6878	82536
Non Prime Time	8	3564	28512
Off Season	6	6516	39096
Total			150144

Total Fees			260144

Calculation of Admission Fees under New fee structure
Revenue from Admission Fees	Fees	% Members	Total Number of Members	Admission Fees
Current Member - Family Pay Fees Early	450	15.75%	315	141750
Current Member - Family Pay Fees Late	500	19.25%	385	192500
Individual Member - Pay Fees Early	250	15.75%	315	78750
Individual Member - Pay Fees Late	300	19.25%	385	115500
New Members - Family	250	7.50%	150	37500
New Members - Individuals	150	7.50%	150	22500
Total			1700	588500

The value of fees has substantially increased as a result of the change in the revenue structure of the company. The number of members has reduced as an effect of the percentage change in revenue received by the club. The club has received income pertaining to members on a proportionate basis. The information have been calculated after assuming certain things before the calculation of revenue from different structures. It has been assumed that the percentage range average is the actual percentage of amount received by the club. Percentage has been calculated by taking the average of the lower and upper limit of the club. Further, the information has been considered authentic and no change is done in the existing figures for the calculation. However, the number of members reduce to 1700 as some members are paying fees in the off season as per a promotion offer by the club. Earlier, when the club was receiving income on the bases of hourly rate, it was charged at around $12 in the prime time. This was not sufficient to cover the expenses and the revenue targets of the management. The number of hours available were not sufficient to cover all the members and the revenue intended from the members was not being achieved. After changing the membership fees structure, a huge amount of increase is noticed in the fees amount received by the club and therefore the revenue targets of the club will be met.

C. Key Factors to be considered for evaluation.

Any organisation follows a set of practices and principles which are aimed at deciding the future course of a business. When an organisation wants to change its business revenue model, or any such intricate activity which has a direct impact on the profitability of operations, then the management has to consider various options in respect of the same and ensure that the policies do not have a negative effect on the operations. These are some of the key factors which have to be considered while evaluation a proposal to change business operations and policies:

Resistance to change: whenever there is a proposed change, the ease of implementation shall be figured out in respect of the proposed amendment to processes. The employees as well as customers are sometimes very resistance to change. Since, the prices are being increased, the customers can have a problem with giving a higher price for the intended services.

Effect on Profits:The objective of any business concern is to maximize the profits from its operations to increase the profits, it has to do careful analysis in respect of the same. However, the effect of profits shall never be negative when it is proposed by the management. The potential profit and cash flow from a business setup is the sole concern of any proprietor.

Cash flow:revenue decisions of a company effects the cash flow a company is earning. It can hinder the cash flows if the policies are restrictive and not in accordance with the company objectives. There shall be no restrictions on the cash flow of the company, and it shall be truly noticed that the decisions are not hindering the cash flows earned during the process.

References

1.Bromwich, M. and Scapens, R.W., 2016. Management accounting research: 25 years on. Management Accounting Research, 31, pp.1-9.

2.Dekker, H.C., 2016. On the boundaries between intrafirm and interfirm management accounting research. Management Accounting Research, 31, pp.86-99.

3.Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7), pp.414-428.

4.Macinati, M.S. and Anessi-Pessina, E.U.G.E.N.I.O., 2014. Management accounting use and financial performance in public health-care organisations: Evidence from the Italian National Health Service. Health policy, 117(1), pp.98-111.

5.Messner, M., 2016. Does industry matter? How industry context shapes management accounting practice. Management Accounting Research, 31, pp.103-111.

6.Suomala, P., Lyly-Yrjänäinen, J. and Lukka, K., 2014. Battlefield around interventions: A reflective analysis of conducting interventionist research in management accounting. Management Accounting Research, 25(4), pp.304-314.