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Management Accounting Assignment Help
Q1. Can the Balanced Scorecard be adapted to fit a governmental setting? • f so, how would t be adapted (i.e. what are the changes)?
Management Accounting Assignment Help given that the government department has formulated a government policy which would seek to establish the strategic plan. By this planning the methods are to be developed which would help to measure the performance of their strategic initiative. The Government Department looks forward to implementing strategy based responsibility accounting system. Within this strategy, t s being suggested that the efficacy of using the Balanced Scorecard be explored. t s known that the balanced score card strategy has been a successful management approach within the private sector. The success factors as seen in governmental environment are different from the private sector as whilst n a Government environment the outcome is measured in terms of mission success, n private sector t s more on financial success. This fundamental difference raises an apparent doubt as to whether the strategies applicable n private sector will have the same efficacy in the Government Departments. Specifically t has been asked whether the balanced scorecard strategy would be successful in the government Departments or not. Usually the Government Departments are set-up as nonprofit and mission critical object or simply set up to fulfill a purpose. Balanced scorecards were initially involved to measure the corporate performance. (Kaplan & Norton, 1992). Hence it is not necessarily that the performance be measured in terms of only the financial success. it can be measured as to how close an organization s towards the achievement of ts goals and objects. Government Department is close to fulfilling the purpose for which it was set-up means that it is doing its work successfully. This can be measure through the balanced scorecard.
Are there any successful applications of the Balanced Scorecard n state or local government agencies n Australia or New Zealand?
- As t was stated earlier that the Balanced score card is a measure which scores the performance of corporate governance, so this strategy can be applied to many sector, including the ones from state or local government agencies in Australia or New Zealand. it was highlighted that the balanced scorecards were initially evolved to measure the corporate performance. (Kaplan & Norton, 1992). For instance this strategy has been successfully implemented at the Dunedin City Council New Zealand. (Greatbanks & Tapp, 2007). However n many government Departments, the usage is not very high and the mean usage index comes to around 3.03 as compared to the overall index of 7, but nevertheless t has been used successfully at many places. For instance, the Australian Treasury Performance Management System Model (ADT, 2009) had implemented the Balanced Scorecard n its operation which helped the Department to broaden the scope of its career development & performance appraisal system. This system was also extended to the actual performance appraisal system prevalent n the Department which involved the meeting between employee and his or her manager to discuss performance within the appraisal period. So the Balanced Scorecard had ts application n similar way n several other Government Departments n both Australia and New Zealand Governments.
What are examples of core measures and lead ndicators?
- For the success of any business or operations of any Government Department, t s necessary that the stakeholders of such organization, Department or Business are satisfied. n a recent research t has been revealed that the core stakeholders are the customers or the people for whom a Department has been set-up. A core indicator of the success of the business communication s that they key customers are satisfies. These are the key or lead indicators of a balanced scorecard system. n a way the balanced scorecard system s a performance measurement system, so there have to be certain parameters which would indicate the success measurement. The core measures undertaken while setting up the balanced scorecard system s to identify and set up the core measures and the lead indicator’s. Once these measures are set-up, the success or failure of the organization, department or a sector for which the balanced scorecard system s being developed and implemented, depends on how the scores are coming up against these key indicator’s. f a department s doing poorly on these lead indictors, but may be performing well n some other indicators, the chances are that the overall performance s not good and t s likely to fail n the near future. On the contrary of a department is doing well on the core measures as identified, means that the department is doing fairly well, even though it has not scored better in other indicators.
What are the desired characteristics of measures n the government sector?
- Key performance measures or (KPIs) for a Government sector have certain characteristics which are non financial n nature and pertain more to mission achievement. The characteristics of measures n the government sector are more value based as the balanced score card itself s developed as a value based system. Government Department s usually set up as a non-profit center with an object to achieve certain goals. Therefore, the balanced score card system s aligned to achievement of these goals and display an ethical and value based measures. For nstance Ministry of Finance confirmed that good governance could be developed through the promotion of values in the Department’s performance management system. The minister from the Department had duly emphasized that a value based performance measurement system would empower the whole of government and the staff to resolve national level concerns and ssues.
- What are the limitations or weaknesses of this approach for this setting?
- Apparently the advantages of the Balanced Score card system do outweigh any demerits of applying this system, but there are certain limitations. Where the Government Department has already set the standard appraisal system and developed the templates which are ssues as per the Government Order, the Balanced Scorecard system cannot find ts wide application n that Department. t may rather spread some confusion f 2 different appraisal systems are n place and would affect the staff performance. Hence t s also seen that so far the adaptability of this system s bit lower as compared to the private sector.
Australian Department of Treasury [ADT] (2009). The Treasury Management Model, Performance Management System and Career Development System. Canberra: Australian Department of Treasury.
Farneti, F., & Guthrie, J. (2008). 'Italian and Australian local governments: balanced scorecard practices. A research note', Journal of Human Resource Costing & Accounting, 12 (1): 4-13.
Greatbanks, R. & Tapp, D. (2007). The impact of BSC n A public sector environment: Empirical evidence from Dunedin City Council New Zealand. international Journal of Operations and Production Management, 27(8), 846-873
Graetz, F., Rimmer, M., Lawrence, A., & Smith, A. (2006). Managing Organisational Strategic Change, (2nd edn, Australasian edn). Milton, Qld: John Wiley & Sons.
Halligan, J. (2008). Performance Management n Government: international Perspectives on the Challenges. in Holy Grail or Achievable Quest: international Perspective on Public Sector Performance Management. KPMG Global Government & Public Sector Practice/Institute of Public Administration Canada/Institute of Public Administration Australia/Commonwealth Association for Public Administration.
Hoque, Z., & Adams, C. (2011). ‘The rise And use of Balanced Scorecard measures in Australian government departments’, Financial Accountability & Management, 27(3): 308-334.
Q2. 1 Verify the overhead cost per unit reported by the consulting group using direct labour hours to assign overheads. Calculate the per-unit gross margin for each product.
Overhead |i|Cost |i|per |i|Unit*
Prime |i|cost |i|per |i|Kg
Number |i|of |i|Production |i|Runs
Direct |i|Labour |i|Hours
Material |i|Handling |i|(number |i|of |i|moves)
Material |i|Handling |i|Costs
- Total |i|overheads |i|= $6,990,000
- Units produced:X-12=1,000,000,S-15=200,000
- 6,990,000/5= 1,398,000
- Overhead allocations for 2 product:X-12=$5,592,000,S-15=$ 1,398,000
2. Recalculate the unit cost of each product using activity-based costing. Calculate the per-unit gross margin for each product.
Activity Based Cost per Unit Produced= total activity costs/ total number units for the activity.
Total activity costs:
•X-12=Prime costs +OH costs
•S-15= Prime costs +OH costs
Per unit Gross Margin:
Revenues per unit: = units sold * selling price
Total Unit costs: X12=$10.68, S15=$6.02
X-12=$ (15.93-10.68) = $5.25, S-15=$ (12-6.02) =$5.98
Per unit profit margin for product X-12$5.25/15.93*100=32.97%
Per unit product margin for unit S-15$5.98/12*100=49.83%
Hence, a further increase in the price of S-15 would provide the entity with a greater profit as well as enabling the entity to increase its profitability through additional production of the commodity. As provided product, x-12 has lower profit margin per unit because of the great costs associated with the production process. However, such costs could be reduced in various ways by the management to increase the profitability form the product.
3. Should the company switch ts emphasis from the high-volume product to the low-volume product? Comment on the validity of the factory manager's concern that competitors are selling below the cost of producing compound X-12.
A. The overheads of the product X-12 are reducing the profitability of the organization. Some measures in terms of cost reduction could be established by the organization in the specified production process. This would ensure an increase in revenues and profitability from the product. Furthermore, the product has higher demand than the S-15; hence, there is a need to ensure that the organization would reduce the costs of production associated with the specified product. This would accrue economies of scale associated with the production process as well as organizationalbehaviour.
4. Explain the apparent lack of competition for S-15. Comment also on the willingness of customers to accept a 25% increase in price for this compound.
The production processes of product S-15 are specialised requiring the need for special handling and labour to run the processes steps. Consumers are willing to accept the 255 increase in the purchase price of this commodity as it is scarce in the market. The scarcity of the product S-15 is due to minimal presence of manufacturers in this product making of S-15. Hence, they are willing to accept the product at any price, as they understand the speciality procedures sued in making the product.
5. Describe what actions you wouki take based on the information provided by the activity-based unit costs.
As an organisational executive, I would ensure an increase in the price of the product S-15 to ensure that the product reduces the costs of product X-12. In addition, I would also ensure that the organisation increases sales in relation to the demand of product X-12 by reducing the overhead costs of the product. The overhead costs have increased costs of making of the product. The product X-12 does not require any form of specialised production process, which translates to the presence of irrelevant costs in the production processes that could be reduced o r done away with to increase the profitability of the organisation from the sale of the product X-12.
Q3 1. Discuss the benefits of a standard costing system for Tasty Chips.
By using a standard costing system, Tasty Chips can increase control of its manufacturing inputs. By developing price and quantity standards for each input, management can compute price and usage variances for each input. Since a standard costing system provides more information, control is enhanced. For example, since managers have the most control over usage of inputs, knowing the usage variances provides specific information about where action is needed. Moreover, by breaking out price variances, which are not as controllable, performance evaluation is improved.
2. Discuss Edward's concern about using the results of the engineering study to set the labour standards. What standard would you recommend?
The engineering standards are ideal standards. Edwards’r concern is probably reflecting doubt that the labor standards can be achieved. If pressure is applied to workers to achieve perfection standards, the outcome is likely to be unsatisfactory. Workers may become frustrated and lower their performance as a consequence. Many firms elect to use currently attainable standards in lieu of ideal standards. The standard suggested by the president is a good starting point. If experience indicates that his standard is too loose, then the standard can be adjusted later on.
3 Develop a standard cost sheet for Tasty Chips' plain potato chips.
Standard cost sheet
Potatoes actual 0.450Kg @ $0.49)* = $0.2205Cooking oil (84.9/28.3 @ $0.04) =0.12
Bags (15 @ $0.11)= 1.6500
Boxes (1 @ $0.52)= 0.5200
Total cost = $2.5105
*Grams per box = 15*4*120/16 = 450
Price per Kg = $0.49 minus scrap value; scrap per box = 15*(1 – 0.458 Kg) = 8.13
= scrap value/ounce = $0.32/16=$0.02 per Kg.
Scrap savings per box s $0.02*8.13=$0.1626
and the savings per Kg of potato s $0.1626/0.45=$0.363.
So, the standard price per Kg of potato s $0.49-$0.363=$0.127
Potato inspection (0.006 hr.@ $15.20)=$0.0912
Chip inspection (0.0225 hr.@$10.30)=0.2318
Frying monitor (0.0118 hr.@$14.00)=0.1652
.Boxing (0.0311 hr.@$11.00)=0.3421
.Machine operators (0.0118 hr. @$13.00)=0.1534 0.9837
Variable overhead ($0.9837*1.16) = 1.1411
Fixed overhead ($0.9837*1.9671)*** = 1.9350
Cost per box=$12.0029
Cost per bag = $12.0029/15 = $ 0.8002
** Number of Boxes/year =8,800,000/15 = 586,667
Potato inspection: (3,200*1.1)/586,667
Chip inspection: (12,000*1.1)/586,667
Frying monitor: (6,300*1.1)/586,667
Machine operators: 6,300*1.1)/586,667
***$1,135,216/($0.9837*586,667) = Fixed OH rate based on labor dollars.
4. Suppose that the level of production was 8.8 million bags of potato chips for the year as planned. f 4.32 million kilograms of potatoes were used. calculate the materials usage variance for potatoes.
Material Usage Variace (MUV) = (Actual Used (AQ) – SQ)SP
SQ=0.45*8,800,000/15 = 2,64,000
SP =standard price per Kg of potato = $0.49 – $0.363 = $0.127
MUV =(4320000 – 264000)*0.127=515112
Q4. 1. Calculate the organisation wide contribution margin associated with part Y34 and model SC67. Calculate the contribution margin earned by each division.
Given that part Y34 s used by the receiver division in its production of a basic scanner, model SC67.
PSF division sells 40,000 units of model SC67 each year at a unit price of $42
- Selling Price = 42
Cost of manufacturing of scanner SC67 = (6.5+12.5+3+1+15) = 38
Manufacturing cost of part Y34 = (2.5+0.5+1+2.5) = 6.5
Model SC67 contribution margin = sales - variable expeses = (40000*42 – 92000)
= (1680000 - 92000) = $760,000
Y34 contribution margin = sales - variable expeses = (40000*6.5 – 160000) = (260000 - 160000) = $100,000
The company wide contribution margin = ((260000+1680000) – (160000 – 192000))
= 194000 – 1080000 = 860,000
2. Suppose that Cam abolishes the current transfer pricing policy and gives divisions autonomy in setting transfer prices. Can you predict what transfer price the manager of the components division will set? What should be the minimum transfer price for this part? What should be the maximum transfer price?
The transfer price needs to be equal to the market price which s $12. This s the minimum price as well as the maximum price for the Components Division.
3. Given the new transfer pricing policy, predict how this will affect the production decision for model SC67. How many units of part Y34 will the manager of the PSF division purchase, either internally or externally?
The manager would discontinue production and will not purchase any of the components, until and unless the PSF Division s able increase the price of Model SC67. Also, the cost of producing scanner would go up from $38 to-- $43.50, which s higher that the current S.P. of 42.
4. Given the new transfer price set by the components division and your answer to Requirement 3, how many units of part Y34 will be sold externally?
There are 40,000 units reported to be sold and all of Component Y34 will be sold externally at the given market price of 12/unit.
5. Given your answers to Requirements 3 and 4, calculate the organisationwide contribution margin. What has happened? Was Cam's decision to grant additional decentralisation good or bad? Explain your answer.
For organizawide Total sales = 480000 and the variable expenses are = 160000
So the contribution margin = 320,000
The contribution margin has decreased by 540,000 so this s not a good decision