Reference no: EM133014449

MA700 Advanced Management Accounting

LEARNING OUTCOME ONE
Understand and outline the concepts of management accounting in the contemporary business environment from a strategic approach
(a) Introduction to contemporary management accounting
(b) The concept of strategies and strategic management accounting
(c) Behavioural concerns of management accounting
LEARNING OUTCOME TWO
Discuss advanced issues in costing system in relation to strategic cost management.
(a) Evaluation of costing systems
(d) Activity based budgets
(e) Contemporary cost management techniques
· Managing cost
· Quality costing
· Supplier costing and management
· Customer profitability and management
LEARNING OUTCOME THREE
Discuss contemporary issues of performance measures.
(a) Financial performance measures
(c) Special issues for investment centres
(d) Reward systems
LEARNING OUTCOME FOUR
Discuss and evaluate advanced management accounting issues in assisting strategic decision making.
(a) Information for tactical decisions
(b) Pricing and product mix decisions
(c) Information for capital expenditure decisions
LEARNING OUTCOME FIVE
Students will explore and evaluate the dynamics of management accounting research.

PART ONE

Artificial Inteligence (AI) and Big Data

On 6 March 2018, Cedric Joshua Martinez posted the following comment as part of his post on "Artificial Intelligence in Accounting And Managerial Accountant Roles" on the D&V Philippines blog:

"Let's start with a reassuring fact - robots will not take over the job of management accountants in the foreseeable future. However, the progress made in the development of artificial intelligence (AI) is also undeniable."

Management Accountants have to take note of the progress being made in the areas of artificial intelligence and big data, since it does not only influence the environment in which they operate, but also the way in which they will conduct their work in the future.

The following are a number of references to information on the topic:

Jargon

AI

• Ethics
• IFAC
• ICAEW
Big Data

• CAANZ articles
• CGMA slides
• SAS website

REQUIRED

With references to the examples given above, as well as your own research into similar publications on artificial intelligence and big data, discuss the following:

(a) The basic philosophy of Artificial Intelligence and Big Data.

(b) Five (5) technical terms often used in relation to artificial intelligence and big data which is important for the management accountant to understand before he/she start to explore its benefits and pitfalls.

(c) The impact which artificial intelligence and big data would have on at least three (3) areas (topics) in Management Accountounting, higlighting the following:

• The specific aspects of each area (topic) which will be impacted; and
• The features of artificial intelligence and big data which would impact each area; and
• The benefits and pitfalls which the use of artificial intelligence and big data will bring in the specific area (topic).
Hints:
• Use the areas (topics) covered in this paper as a guide for choosing areas (topics).
• Marks will be awarded for sufficient coverage of the key aspects, features and benefits and pitfalls in each area (topic) chosen

(d) Five (5) ethical issues faced by the management accountant who employs artificial intelligence and big data in his work environment.

APA referencing

PART TWO

Choose a New Zealand Polytechnic. Search the internet for information on the polytechnic's mission, objectives, strategic priorities, organisational structure and operations.

Please note: You need to clear your choice of polytechnic with the tutor, in order to ensure that each student choose a different polytechnic and also to ensure that this part of the assignment is doable.

REQUIRED:

(a) Outline the polytechnic's mission, objectives and strategic priorities.
(b) Select perspectives that are appropriate to supporting the objectives and strategy of the polytechnic, develop one or more objectives for each perspective, and present a strategy map.
(c) Develop a balanced scorecard for the polytechnic (Similar in style to Exhibit 14.3 of your textbook) including two to four performance measures to address each objective. You must include both lag and lead indicators.
(d) Outline some of the design and implementation processes that need to be managed carefully to ensure that the balanced scorecard is successfully implemented across the company.

PART THREE
Strategic decision-making

Ignore taxation

You are a management accountant at Bean Ltd (‘BL'), a coffee roastery based in Hamilton. The coffee roasting process transforms the physical and chemical properties of raw coffee beans into flavourful roasted products. The roasting process produces the flavour and aroma of coffee craved by coffee drinkers throughout the world. BL imports raw coffee beans from Jamaica, Columbia and Ethiopia and roasts, blends and packages them for resale. BL currently has 12 different coffee blends which are sold to restaurants, coffee shops and gourmet shops.

The coffee roasting process commences with the selection and screening of raw coffee beans. These beans are then transferred to coffee roasting equipment where they are heated for 15 to 30 minutes at varying temperatures. BL does not add any other raw materials apart from the raw coffee beans to the process. At the end of the roasting process, the coffee beans are cooled and then packed into either 500g or 1kg packs.

The Financial Director of BL recently presented the draft budget for the financial year ending 31 March 2021 (‘FY2021') to the Board of Directors for review and approval. The directors debated the forecast gross profit margins of two products, namely the Latin and Africa blends.

1 Budgeted production and sales of Latin and Africa products

Latin and Africa products are manufactured exclusively in one coffee roasting machine (the X4B machine). The X4B machine is not used to manufacture any other products. Latin is sold in 1kg packs and Africa is sold in 500g packs. The FY2021 budget relating to the production and sale of Latin and Africa coffee products is summarised below, together with explanatory notes:

Notes

1.1 The budgeted sales of the Latin and Africa products are summarised in the table below:

1.2 BL is planning to manufacture the quantities of the Latin and Africa products to meet the above budgeted sales targets, so that there will be no inventories of these products at year end. The raw coffee beans lose weight during the manufacturing process mainly due to water evaporation and this is referred to as ‘shrinkage'. The budget is based on the following assumptions:

1.3 The FY2021 budget assumes that four hours of direct labour are required per batch of the Latin blend manufactured and five hours are required per batch of the Africa blend manufactured. The cost of direct labour is $60.00 per hour for both the Latin and Africa products.

1.4 BL employs skilled and qualified individuals to test the quality of each batch of coffee beans before and after the roasting process in the company laboratory. The costs of operating the laboratory are allocated to all products based on a charge-out rate of $24.00 per batch tested.

1.5 BL uses high-quality packaging material to pack its final products. The organic packaging material is designed to keep the contents fresh and be visually appealling to customers. The packaging cost per pack of Latin is $3.50 while the Africa pack costs $4.50 (the higher cost of the latter is due to the higher quality material and more graphics used).

1.6 Indirect manufacturing overheads are allocated to each roasting machine used in the manufacture of BL's 12 products. Each roasting machine is treated as a cost centre. The budgeted indirect manufacturing overheads that have been allocated to the X4B machine are as follows:

The following allocation bases were used for each of the above expense items in the FY2021 budget:
• Premises rental has been allocated based on the factory floor space used in the manufacture of the Latin and Africa products relative to the total factory space.
• The purchasing department sources and purchases raw coffee beans for all 12 coffee blends manufactured by BL. The annual operating costs of the purchasing department are allocated to individual products based on the relative number of raw material purchase orders placed annually. The above allocated cost of $675,000 represents the total cost based on 100 Latin and 80 Africa raw material orders per annum.
• Repairs and maintenance costs are based on the estimated costs directly associated with the X4B machine.
• 25% of the total indirect employee costs and other overheads have been allocated to the Latin and Africa products, based on the number of workers employed in operating the X4B machine relative to the total number of workers employed directly in manufacturing.
• Depreciation represents the depreciation charge specifically related to the X4B machine.

The total allocated indirect manufacturing overheads of $3,192,500 associated with the X4B machine were allocated to the Latin and Africa products based on the forecast annual direct labour hours.

2 Allocation of indirect manufacturing overheads

The Board of Directors of BL is concerned that the allocation of indirect manufacturing overheads to the Latin and Africa products on the basis of direct labour hours may not accurately reflect the relative costs of manufacturing these products. The Board has suggested that the allocation be reperformed on the following basis:

3 Long-term supply contract: Holesome Foods

Holesome Foods (‘HF') is a niche retailer of gourmet foods and related products. It has ten retail oulets in Hamilton, Auckland and Wellington. HF has not purchased products from BL in the past but has noted that many of its customers request the Latin coffee blend while shopping in its stores.

HF has approached BL to manufacture coffee beans, to be branded as ‘HF Fine Beans'. HF Fine Beans 1kg packs will be identical to the Latin product except that it will be packaged in HF branded packaging material.

HF has put the following proposal to BL:
• HF will purchase and pay for all raw materials and packaging material required to manufacture the HF Fine Beans packs and deliver these to BL's premises as and when required for manufacture;
• HF and BL will enter into a five-year supply agreement;
• HF will purchase 51,200 packs of HF Fine Beans during the first year of the supply agreement; and
• During the first year, HF will pay BL $40.00 for each pack of HF Fine Beans manufactured and supplied. The price per pack will thereafter be renegotiated annually by the two parties.

The Board of Directors of BL has requested that the Financial Director analyse the impact which entering into the long-term supply agreement with HF will have on BL's profitability. The Board has provided the following guidance with regard to this financial analysis:
• The X4B machine is able to manufacture additional products but this will be restricted to an additional 100 roasting hours per annum. BL may thus need to reduce the volume of the Latin product manufactured and sold to other customers in order to fulfil the HF contract;
• BL will be able to employ more direct labour to cater for increased production at the prevailing rates per hour;
• The laboratory staff involved in quality control will be able to cope with increased batch testing volumes at no extra cost;
• BL will incur additional repair and maintenance costs and other overhead costs of $50,000 per annum, should it enter into the supply agreement wth HF; and
• The supply contract with HF will have to result in an incremental contribution of at least $1 million per annum to be financially viable to BL.

REQUIRED

(a) Recalculate the budgeted gross profit margin of each of the Latin and Africa products for FY2021, on the following assumptions:
• Indirect manufacturing overheads are allocated to products based on the new allocation basis suggested by the Board of Directors of BL (as indicated under 2 above); and

• BL does not enter into the long-term supply agreement with HF (as indicated under 3 above).

(b) Analyse the revised gross profit margin of the Latin and Africa products for FY2021 per the recalculated budget in (a), and comment on the relative performance of the two products (Latin and Africa).

(c) Estimate the impact of entering into the long-term supply agreement with HF on BL's profitability for FY2021.

(d) Discuss the key factors BL should consider in evaluating whether or not to enter into the long-term supply agreement with HF.

Attachment:- Advanced Management Accounting.rar