Managerial Accounting Assignment

Managerial Accounting Assignment

Topic: Managerial Accounting Assignment

Question 1: (20 marks)
Implementation of a company’s strategic plan often begins by determining management’s basic expectations about future economic, competitive, and technological conditions, and their effects on anticipated goals, both long-term and short-term. Many firms at this stage conduct a situational analysis that involves examining their strengths and weaknesses and the external opportunities available and the threats that they might face from competitors.
After performing the situational analysis, the organization identifies potential strategies that could enable achievement of its goals. Part of this process involves business managers creating budgets to plan for future operations, create benchmarks to measure progress, and maintain necessary accounting controls.
Required:
A. Clearly define and explain the nature of a Master budget and why it is important to prepare such a budget. (5 Marks)
B. Besides preparing the master budget, management accounting is also involved in the role of preparing functional budgets. Among these functional budgets are the Sales, production and cash budget. Discuss the nature of these budgets and 3 factors that need to be considered in preparing these budgets. (15 Marks)

Question 2: (30 marks)
United Garments company sales in December 2019 were $80,000 and they are expected to rise by $6,500 per month for the next 5 months. Of sales, 80 per cent are collected during the month of sale and the rest two months after sales. The cost of sales is 60 per cent of sales and, the company plans to keep an inventory at the end of each month equal to forty per cent of the anticipated sales for the next month’s sales. Suppliers are paid one month after purchases are made. Monthly wages amount to $4,000, rent and heating $700 and depreciation $600. A machine is to be bought in March for $8,000 paid in cash. The purchase of the machine means that the monthly change for depreciation will increase by $40. The inventory held at January 1st is $16,500.
Required:
1. Calculate the estimated cash collection from sales for February and March. (6 marks)
2. Calculate the purchases for February and March. (10 marks)
3. Assuming that the cash balance at 31/01/2020 is $10,000; prepare a cash budget for the two months ending March 31, 2020. (12 marks)
4. Discuss whether the company will be able to repay a loan of $75,000 at the end of March. (2 marks)

Question 3 (20 Marks)
A. James Henderson is the president of York Athletics, a producer of hats and jerseys and other accessories for fans of several professional sports teams. Imagine you are the accountant in charge of all accounting functions at Sportswear. She reviewed the most recent financial statements, and noticed that the company did not do as well as they had planned. She wanted to look more closely at the profitability of each of our products to determine exactly what happened, but realized that she did not have this information in the financial statements. According to the accountant, financial statements are prepared according to the Generally Accepted Accounting Principles (GAAP) and do not require their company to disclose profitability by product, and therefore did not prefer not to make this information public. Accordingly, product profitability information stays in-house and is prepared by the company’s managerial accountant.
It is common among companies like York Athletics to prefer not to disclose more information than is required by the GAAP, but they would like to have more detailed information for internal decision-making and performance-evaluation purposes. This is why it is important to distinguish between financial and managerial accounting.
Required:
1. What is the difference between information prepared by financial accountants and information prepared by managerial accountants? (3 Marks)
2. It is clear that financial accounting focuses on reporting to outside users while managerial accounting focuses on reporting to inside users. What specific characteristics would we expect to see in managerial accounting information? (6 Marks)
B. Suppose you are the co-owner and manager of a retail store that sells and repairs racing bicycles.
1. Provide one example of a financial accounting report that would be useful to you and your co-owner. Provide two examples of managerial accounting reports that would be useful to you as the manager. (3 Marks)
2. Provide two examples of nonfinancial measures used by a pizza parlor that serves food in the restaurant and offers delivery services. (2 Marks)
3. For each report listed in the following, indicate whether it relates to financial or managerial accounting. Clearly explain the reasoning behind your answer for each item. (6 Marks)
a. Defective goods produced as a percentage of all goods produced
b. Income statement for the most current year, prepared in accordance with GAAP
c. Production department budget for the next quarter
d. Balance sheet at the end of the current year, prepared in accordance with GAAP

Question 4 (30 Marks)
Marantz Inc. produces various AV devices with a wide assortment of different models for its customers. One item, AV3100 is very popular. Keen of keeping its stock under control, a decision is taken to order only the optimum economic quantity, for this item, each time. You have the following information.

Annual demand (units) 48,600
Purchase price per unit $ 250
Carrying/Holding costs per unit $ 6
Cost per order $ 200
Required:
1. Determine the EOQ using the equation method. (6 marks)
2. Fill in the blanks in the following table using the above data. (8 marks)
No. of orders 1 10 20 30 90 120
Order size
Average stock
Carrying (Holding) costs

Order costs

Total costs

3. Calculate the holding, ordering cost & their total cost at the EOQ level. (5 marks)
4. Plot the graph at the EOQ level showing the numbers (2 marks).
5. Marantz Inc. has been offered a 3 per cent discount on the cost if it places orders in quantities of 18,200. Discuss whether the company should accept the discount and place larger orders, show your workings. (9 marks)

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