Acf5955 Management Accounting And Customer Assessment Answers

Answers

(Source: Created by Author)

(ii) The cost pool is an accounting term that refers to the amount of cost that has to be allocated between the goods and services of the business. In this case, the two other cost pool that could have been included or sales man Commission and inspection expenses. The cost drivers are the basis on which the costs are allocated on various departments. In this case, the cost driver that could have been used for allocating sales man commission is the number of units sold. The reason behind using number of unit sold as a cause driver for allocating detachment Commissioner is that the commission is dependent on the sales made by the person. On the other hand, the cost of inspection can be the number of inspections. The cost of inspection will be dependent on the number of inspection made so selecting the number of inspection as a cause driver is justified.

4. The table above shows the customer profitability analysis for department store, soccer clubs and sports shops. The calculation shows the net profit or loss that the business has made from each of the above categories of customers. The company is engaged in selling three types of soccer tops this are of small medium and large size. The total revenue earned by departmental stores is $1,816,257.00, by Soccer Club is $4,937,507.00 and by sports shop is $2,775,007.00. Then all the costs have been deducted from the revenue for ascertaining the net customer profit or loss. The activity cost have been classified as selling, distribution cost, and administrative expenses. Then each of these costs have been further classified in various categories. Then that cost is distributed among the customers based on the cost drivers. After making all the calculations it has been found that department store sports shop has made a loss of $(892,217.93) and $(2,854,800.68) respectively. The company has made a profit of $373,014.61 for soccer club customers. Therefore based on the above calculation it can be said that only profitable customer group for the company is sports club (Lopez-Valeiras et al., 2015).

On further analysis of the customer, profit statement have shown that the main reason for the two categories of customers for making losses are the activity costs. The scrutiny of the activity cost shows that the activity cost of the customer is 105% of the revenues in case of department stores. On the other hand, in case of sports shop it can be seen that the activity cost is 159 % of the revenue. These are the reasons for which this customer group have made huge losses.

5. The strategic issues are the critical changes that affects the value, mission, resources and structure of the organization. In this case, the customer profit analysis have shown that there are two categories of loss making customer for the company. The strategic issues used to make decision whether to continue or discontinue with this customers. It is an important strategic decision so actions should be taken after proper analysis. This decision is strategic in nature because this could change the structure and resources of the company (Contrafatto & Burns 2013).

The analysis of customer profit statement have indicated that the basis on which the activity costs are allocated among various customer group is not appropriate. The reason is that on analyzing the proportion of activity cost among various customer groups it appears that the distribution of activity cost is unbalanced. It can be seen that 21% of the activity cost is allocated to the department store, the 29% of the activity costs is allocated to soccer club and 50% of the activity causes are located to the sports shops (Hiebl, 2014). Where if the sales figure is compared then it can be seen that department store contributes 19% of the total sale, soccer club contributes 52% of the total sales and the sports shop contributes 29% of the total sale. Therefore, it is apparent from the above figures that 50% of the activity cost is absorbed in sports shop that only contribute 29% of the total sale. Hence, it is an important strategic issue for the company change the basis of allocating the activity cost.

Table 2: Cost and sales proportion

(Source: Created by Author)

Reference

Ax, C., & Greve, J. (2017). Adoption of management accounting innovations: Organizational culture compatibility and perceived outcomes. Management Accounting Research, 34, 59-74.

Chiarini, A., & Vagnoni, E. (2015). World-class manufacturing by Fiat. Comparison with Toyota production system from a strategic management, management accounting, operations management and performance measurement dimension. International Journal of Production Research, 53(2), 590-606.

Christ, K. L. (2014). Water management accounting and the wine supply chain: Empirical evidence from Australia. The British Accounting Review, 46(4), 379-396.

Contrafatto, M., & Burns, J. (2013). Social and environmental accounting, organisational change and management accounting: A processual view. Management Accounting Research, 24(4), 349-365.

Dobroszek, J., & Szychta, A. (2015). Indicators as an Instrument of Measurement in Management Accounting in Logistics Enterprises in Poland. Management and Business Administration, 23(4), 11-33.

Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2013). Management accounting and control practices in a lean manufacturing environment. Accounting, Organizations and Society, 38(1), 50-71.

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

Grunewald, K., Syrbe, R. U., & Bastian, O. (2014). Landscape management accounting as a tool for indicating the need of action for ecosystem maintenance and restoration–Exemplified for Saxony. Ecological Indicators, 37, 241-251.

Hiebl, M. R. (2014). Upper echelons theory in management accounting and control research. Journal of Management Control, 24(3), 223-240.

Lavia López, O., & Hiebl, M. R. (2014). Management accounting in small and medium-sized enterprises: current knowledge and avenues for further research. Journal of Management Accounting Research, 27(1), 81-119.

Lopez-Valeiras, E., Gomez-Conde, J., & Naranjo-Gil, D. (2015). Sustainable innovation, management accounting and control systems, and international performance. Sustainability, 7(3), 3479-3492.

Lukka, K., & Vinnari, E. (2014). Domain theory and method theory in management accounting research. Accounting, Auditing & Accountability Journal, 27(8), 1308-1338.

Macinati, M. S., & 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), 98-111.

Otley, D., & Emmanuel, K. M. C. (2013). Readings in accounting for management control. Springer.

Quinn, M. (2014). In recent years, much has been written on the nature of management accounting change, and indeed stability. Many researchers have used concepts such as rules and routines to interpret this change and/or stability. Recent research has provided an increasingly clear picture of what rules and routines are, as well as contributing to our understanding of the processes of change and stability in management... Management Accounting Research, 25(1), 93-112.

Renz, D. O. (2016). The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.

Soin, K., & Collier, P. (2013). Risk and risk management in management accounting and control.

Van der Stede, W. A. (2016). Management accounting in context: Industry, regulation and informatics. Management Accounting Research, 31, 100-102.