• April 16th, 2016

Accounting

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Managerial Finance Assignment 1 AC50030E Background Roman Ltd. Manufactures three different products and the following information is available concerning these products together with other operating statistics and information. The company calculates selling price as a mark- up on cost of 10%. The company has total overheads of RWF 748, 800, which are currently allocated on a plant-wide basis using direct labour hours as the absorption base. Roman Ltd is considering implementing on Activity Based Costing (ABC) system and has recently identified various cost drivers and assigned costs to related activity cost pools as follows:- Managerial Finance Assignment 1 AC50030E Required:

(1) Answer the following:

  1. A) Using the traditional approach to accounting for overheads, calculate the product cost per unit for each of the three products. (10 Marks)
  2. B) Using the principles of Activity Based Costing, calculate the product cost per unit for each of the three products. (20 Marks)
  3. C) Explain the difference in your answers to (a) and (b) and the potential implications for decision making in Roman Ltd. (10 Marks) (Total: 40 marks)

(2) It is just as important for an organisation to determine how individual customers or groups of customers differ in terms of the profitability to the organisation as it is to determine the relative profitability of products. Briefly explain how this can be done. Would you advise Roman to do this? (Total: 15 Marks)

(3) Keita is a client of your firm and operates a small courier service on the east region of Canada. She is keen to expand the business in the future and has just attended a seminar on the usefulness of management accounting in small companies. She is aware that management accounting is common in manufacturing industries but is unsure of its relevance to service industries such as her own courier company. Managerial Finance Assignment 1 AC50030E Keita has asked you to write a report addressing her concerns as follows:

(i) Explain the role of management accounting in a modern business environment. (10 Marks)

(ii) Outline two areas of difference between management accounting and financial accounting (10 Marks)

(iii) Explain how and why management accounting may be applied in service industries. (10 Marks)

(iv) Advise Ketia on one specific use of ABC approach, which will be beneficial in the future, expansion of her business. (10 Marks) (Total: 40 Marks) Report format and bibliography. Marks will be awarded for structure and presentation. (This includes the appropriate use of appendices, clarity of explanation and ability to summarise your findings). (Total: 5 Marks) (TOTAL :100 MARKS)

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