Managerial Accounting Is an Interdisciplinary Topic

You have worked your way through four managerial-accounting-related Cases and a Session Long Project. Provide three specific examples about how you would use your new skills in your current position or a possible future position.

These are the topics discussed in this course:

Module 1 – Case

ACCOUNTING COST SYSTEMS AND COST BEHAVIOR

Assignment Overview

Preparation of an Income Statement for The Serious Reader Company

The first case of this course provides an opportunity to prepare a segmented variable costing (contribution margin, behavioral) income statement and analyze the information. This is a very small company and the information may seem simplistic at first glance. Don’t forget that numbers and hands-on practice best illustrate many basic accounting concepts.

The Serious Reader Company is a small online retailer operating out of a garage apartment. The owner buys books at garage sales, thrift shops, library sales, and whenever an opportunity arises. The company classifies all books into five categories based on cost of acquisition and estimated sales price. See below for details about books purchased and sold during the last year (20XX).

	Price Categories
	A	B	C	D	E
Units Sold	4,000	1,000	500	400	400
Unites Purchased	6,000	1,200	1,000	1,000	1,000
Resale Price	$4.00	$12.00	$20.00	$45.00	$60.00
Cost	$0.50	$4.00	$10.00	$20.00	$20.00

In addition to purchasing inventory (used books), the company incurs some operating expenses.

Variable Operating Expenses
Shipping per book	$1.50
Common fixed expenses
Internet-related costs	$10,000
Travel, etc.	$4,000
Advertising	$1,000
Other overhead	$5,000

Case Assignment

Required:

Computations (use Excel)

• Prepare a segmented variable costing (behavioral) income statement for the company in good format.
• Prepare a second variable costing statement assuming 90% of all the books in each category purchased were actually sold.
• Prepare a third variable costing statement assuming that the price is increased by 50% for all five categories (use original sales information).
• The owner enjoys the used-book business. Any suggestions as how to turn this into a full-time business venture so the owner can quit his other job? Prepare another income statement to support your idea.

Memo (use Word)

Interpret the results from the computations and explain how the information is useful. Write a 4- or 5-paragraph memo to the owner of the business. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.

Short essay to comment on the questions below (use Word). Start with an introduction and end with a summary or conclusion. Use headings. Maximum length of two pages.

• Why do many organizations make the effort to prepare a different type of income statement for internal purposes?
• Variable costing is not just about preparing income statements. Provide at least three scenarios in which understanding how costs behave is useful.

Assignment Expectations

Each submission should include two files: (1) An Excel file; and (2) A Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.

Module 1 – SLP

ACCOUNTING COST SYSTEMS AND COST BEHAVIOR

You are applying for a managerial position at an innovative and rapidly growing company. This is a dynamic company that wants an individual who adds value to the organization. Managers at this company wear many hats, so the position requires managing products, people, and financial aspects of running the company.

As part of the interview process, you are required to make a presentation covering four different topics, one per module for this course.

You choose the company and the new product that you want to showcase in your presentation. It can be real or fictitious (based on an industry). This is for background purposes only. The presentation is to showcase your abilities and what you can contribute to the organization.

IBIS World (access on the Portal through the Online Classroom & Library, Additional Library Resources link) and BizStats have estimates of cost of goods sold and some other categories of operating expenses. Information about contribution margins is not available, but adding new products typically mean incurring both fixed and variable costs. Consequently, cost of goods sold is a reasonable estimate. Net operating income as a percentage of sales or some variation thereof may also be relevant if the new product is expected to contribute significantly to the bottom line. As a candidate for a position you would not have internal information available, but being resourceful and being a skilled researcher are desired traits for the position. IBIS World also has a wealth of other market statistics that may be helpful. Use listed background material and other resources as needed.

Required:

Include the following items in your presentation.

• Present an idea for a new product.
• Describe the product.
• Show some cost estimates and pricing suggestion for this product based on research.
• What approach would you use to determine selling price (for example cost plus or target costing)? It is important when choosing a design.
• Explain your rationale for the pricing approach.
• Show expectations of growth and potential profit.

SLP Assignment Expectations

Submit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.

Module 2 – Case

COST–VOLUME–PROFIT ANALYSIS

Assignment Overview

The Annie Smith Dance Center

The Director of Annie Smith Dance Center is asking for assistance with the financial aspects of running a professional group of performers. She wants financial information presented in an easy to read format and a better understanding of the profitability of the concerts and the organization as a whole.

The Annie Smith professional group features three styles of dance concerts each year. Two of the dance concerts showcase a different genre. The third performance is a Christmas Spectacular, which is the most popular and is therefore scheduled every year. The table below provides information about expected ticket sales for the performances.

	Lower Orchestra Section (A)			Upper Orchestra Section (B)
Descriptions	No. of Seats.	Ticket Price	Tickets sold per performance	No. of seats	Ticket Price	Tickets sold per performance
Hip-Hop Performance	150	$85	100%	450	$50	90%
Jazz and Tap Dance	150	$85	100%	450	$50	60%
Christmas Spectacular	150	$125	100%	450	$50	100%

Ms. Smith has prepared a tentative schedule for the coming season. The table below also shows the type and number of performances and direct cost per type of concert.

Descriptions	Number of Performances	Cost per Dance Concert (direct fixed costs)*
Hip-Hop Concert	10	$48,000
Jazz and Tap Dance	5	86,000
Christmas Spectacular	20	22,000
Total Direct Fixed Costs		$156,000

*Examples of direct fixed costs are costumes, rehearsals, royalties, guest artist fees, choreography, and salaries of production staff, music, and wardrobe for each of the concerts. This amount does not change with the number of performances.

Additional costs:

Variable costs associated with each performance are shown below.

Musicians	$6,100
Rental of auditorium	2,500
Dancers’ compensation	6,700

Annual general administrative and operating costs for the dance center are:

Administrative staff	$185,000
Insurance	25,000
Marketing	115,000
General office expenses	90,000

Case Assignment

Required:

Computations (use Excel)

• Summarize key financial information in a table as shown below.

Title
Name of Dance Concert	Revenues/ Performance	Variable Costs/ Performance	Contribution Margin/ Performance	Number of Performances	Total Contribution/ Type of Dance Concert	Direct Fixed Costs	Segment Margin/ Type of Concert
1.
2.
3.
Total

• Use the information in the table you completed to compute the number of performances required to break even for each concert. Do not include general and administrative expenses. These are separate computations for each dance concert.
• Compute break even for the organization as a whole (include all fixed expenses) and express the result in revenues instead of the number of performances.
• Ms. Smith wants the Dance Center to generate at least $200,000 in operating profit. What level of revenues does the performance group need to achieve to meet this goal? Prepare an income statement in good format to support the computations.
• Give a recommendation about changes Ms. Smith can implement to achieve the target profit. Support your idea with computations.

Memo (use Word)

Write a 4- or 5-paragraph memo to the owner of the dance center to assist her in interpreting the financial analysis. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.

Short Essay (use Word)

Start with an introduction and end with a summary or conclusion. Use headings.

• What are some shortcomings of multi-product even analysis?
• How does demand and resource constraints affect this type of analysis.

Assignment Expectations

Each submission should include two files: (1) An Excel file and (2) a Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want informatio

Module 2 – SLP

COST–VOLUME–PROFIT ANALYSIS

Second part of the presentation. See background information for the Module 1 SLP.

Required:

Include the following items in your presentation:

• What about special pricing for some markets or customers?
• Determination of customer profitability.
• Show effect on revenues and profitability based on stated assumptions.
• Potential advantages and disadvantages, both financial and non-financial.

SLP Assignment Expectations

Submit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.

Combine the submissions from prior module(s) into one file before uploading to the SLP 2 Dropbox.

Module 3 – Case

TRANSFER PRICING AND RESPONSIBILITY CENTERS

Assignment Overview

Coffee Maker’s Incorporated (CMI)

Three divisions of a CMI are involved in a dispute. Division A purchases Part 101 and Division B purchases Part 201 from a third division, C. Both divisions need the parts for products that they assemble. The intercompany transactions have remained constant for several years.

Recently, outside suppliers have lowered their prices, but Division C refuses to do so. In addition, all division managers are feeling the pressure to increase profit. Managers of divisions A and B would like the flexibility to purchase the parts they need from external parties at a lower cost and increase profitability.

The current pattern is that

• Division A purchases 2,700 units of product part 101 from Division C (the supplying division) and another 1,300 units from an external supplier.
• Division B purchases 1,100 units of Part 201 from Division C and another 700 units from an external supplier.
• Note that both divisions A and B purchase the needed supplies from both the internal source and an external source at the same time.

The managers for divisions A and B are preparing a new proposal for consideration.

• Division C will continue to produce Parts 101 and 201. All of its production will be sold to Divisions A and B. No other customers are likely to be found for these products in the short term, given that supply is greater than demand in the market.
• Division A will buy 2,000 units of Part 101 from Division C at the existing transfer price; and
• 2,000 units from an external supplier at the market price of $900 per unit.
• Division B will buy 900 units of Part 201 from Division C at the existing transfer price; and
• 900 units from an external supplier at $1,800 per unit.

Division C Data Based on the Current Agreement

Part	101	201
Annual volume (units)	2,700	1,100
Transfer price/unit	$1,000	$2,000
Variable expenses/unit	$700	$1,200

The fixed overhead for Division C is $1,200,000.

Case Assignment

Required:

Computations (use Excel)

• Set up a table similar the one below to compute the difference between the current situation and the proposal for Divisions A and B.

Division A
	Current Situation			Proposal
	No. of Units	Purchase Price	Total Purchases	No. of Units	Purchase Price	Total Purchases
Internal purchases	2,700		$	2,000		$
External purchases	1,300			2,000
Total cost for Part 101			$			$
Savings to Div. A						$

• Compute the operating income for Division C under the current agreement and the proposed agreement.
• Is the revised agreement a good idea? Support your answer with computations.

Memo (use Word)

Write a 4- or 5-paragraph memo to the division manager explaining the analysis performed. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.

Short Essay (use Word)

Start with an introduction and end with a summary or conclusion. Use headings.

Evaluate and discuss the implications of the following transfer pricing policies:

• Transfer price = cost plus a mark-up for the selling division
• Transfer price = fair market value
• Transfer price = price negotiated by the managers

Why is transfer pricing such a significant issue both from a financial and managerial perspective?

Assignment Expectations

Each submission should include two files: (1) An Excel file and (2) a Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.

Module 3 – SLP

TRANSFER PRICING AND RESPONSIBILITY CENTERS

Third part of the presentation. See background information for the Module 1 SLP.

Required:

Include the following items in your presentation.

• The organization is currently centralized, but is reviewing options to put a decentralized structure in place.
• You are asked to comment on responsibility centers and their functions.
• Cost centers can be a drain on an organization. Could internal charge backs be implemented? Present specific ideas.
• Comment on the role of business analytics in a growing decentralized organization.

SLP Assignment Expectations

Submit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.

Combine the submissions from prior module(s) into one file before uploading to the SLP 3 Dropbox.

Response # 1

3 Specific Uses

posted Aug 30, 2018 6:52 PM

Looking back at all the work I’ve done here, there are thee areas I’d like to call out that I’d use this particular information in.

Internal Chargebacks

As someone who works in a shared service business group, I completely understand the importance of tracking costs for requests and projects. In looking at some of the services I’ll provide as a leader later on in my career, I plan to investigate this further to see if what’s paid into ratio or service costs are truly reflective of the time utilized. Having this sort of knowledge and not letting costs fall completely under organizational overhead is a unique way to view some of this information, and I plan to use it in this instance. One of the items I do plan on looking in extensively here is if tracking the project costs completely outweigh the benefits of charging the business group by usage. As mentioned by Judith Herman (1997), I hope to keep it as simple and inexpensive as possible in personnel and administration costs.

Flexible Budget

Until now, I had never heard of flexible budgets. I think from the perspective of my small business I plan on opening, I want to use flexible budgeting to make sure that regardless of whatever I earn, or at different periods in the year that my expenses are under control. I think this is especially important for companies (like mine), who don’t depend on borrowing and capital. What I find especially important is the ability to update the variable costs in a way that static budgets cannot do in different time periods through the year (Bragg, 2017). Ensuring that out of control costs are managed correctly, I’d hope to set up my business on a successful track for continued success for the long-haul.

Transfer Pricing

Transfer pricing is something that I hope to utilize one day as someone who owns an even larger company. I could see this being done in conjunction with seasonal trends. For instance, if my business provides has a winter lull from sales or other requests, it could use this excess capacity to perform function internally that 1) keep the business busy and 2) strategically reduce tax burdens. Geoff Castle (2012) recognizes this as practical to companies with offshore assets who want to reduce their overall tax burden by performing these internal transfers in areas where the tax burden is lower. Until now, I had never heard of options such as transfer pricing, and I look forward to seeing how this can benefit my small business later on. I think specifically there could be internal administration services that could be transferred given capacity is available for areas with build up and less capacity available.

Castle, G. (2012). The tax benefits of transfer pricing. NZ Business, 26(2), 66. Retrieved from https://search-proquest-com.ezproxy.trident.edu/docview/926452131?accountid=28844

Herman, J. (1997). Internal chargeback: Keep it simple, but not too simple.Business Communications Review, 27(4), 24-27. Retrieved from https://search-proquest-com.ezproxy.trident.edu/docview/224973910?accountid=28844

Pfeiffer, T., Schiller, U., & Wagner, J. (2011). Cost-based transfer pricing. Review of Accounting Studies, 16(2), 219-246. doi:10.1007/s11142-0119140-0

Response #2

• 3 Examples

  The following are three ways that I will use the skills obtained from the case study and SLP projects from the course. 1) And, most importantly, the excel product usage. I’ve never been great with creating excel products but this course forced me to learn formulas and become fairly good at them. Also, its motivated me to take an advanced excel course to master the skill before I retire from the military next year. 2) My military to civilian transition will take me to some contract work, which I will be exposed to more memos about aviation equipment. This course bolstered my ability to write memos and translate memos that are focused on accounting data. 3) Along with my previous financial course, I can better interpret income statements, which will give me an added advantage in my managerial pursuits. Jessie

Response # 3

Reflective Discussion – Managerial Accounting Is an Interdisciplinary Topic

Contains unread posts

Chrysanthemum Williams posted Sep 4, 2018 3:19 PM

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This managerial accounting course was an eye-opening lesson full of experiences. To begin with, day to day activities of an organization revolve around the achievement of set goals, however, the ultimate outcome relies on the big picture. Using the sensitivity analysis, I was able to figure out the reason for the small discrepancies found in the calculations of various costs and revenues. The professor always took his time to correct me and provide a detailed analysis of what I should have done or what I was expected to do in the next module. Nevertheless, I was able to get marks for the right recommendations given the calculations done, which encouraged me to forge ahead and correct myself. Therefore, numbers matter a lot when it comes to managerial accounting.

Depending on the case at hand, decision making is an important role played by accountants and managers which enable the smooth running of the company activities. Managers should be comfortable when making such critical decisions using the right numbers and figures. Cost management decisions and risk control are a pertinent part of budgeting decisions and financial reports which play a large role when making decisions.

Through the undertaking of the new product launch project, I gained a lot of experience on how to do right using minimum costs and available resources. Making accounting decisions using the information in the market as well as providing an interpretation of the numbers before providing the new product to the market helped in sharpening my analytical and financial skills. I was able to make internal decisions regarding pricing, cost, and internal systems.

In conclusion, managerial accounting helps in preparing, collection, recording and analyzing of financial information required for decision making by managers. These lessons will impact largely on my business career in the future.