Determine the production plan which will maximize the weekly profit of Gemini plc and prepare a profit statement showing the profit your plan will yield

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APC309 STRATEGIC MANAGEMENT ACCOUNTING

(PROFESSIONAL)

Individual assignment

General Information

Weighting – 100% of the marks for this module

This is an individual assignment limited to 3,000 words (+or- 10%), excluding the reference list, bibliography and any appendices. The word count MUST be shown on the front cover of the assignment. Note: see quality Handbook Ref AQH-F15 Guidance for students on the penalty for exceeding the limit for assessed work.

All of the learning outcomes for the module are being assessed in this assignment. The learning outcomes are shown in the section entitled “Marking Guide”, which is further on in this document.

The University’s policy on cheating collusion and plagiarism will be applied to this piece of work.

The assignment has three questions. Only two of the three questions should be answered each question carries the same maximum mark.

THE FRONT COVER OF YOUR ASSIGNMENT MUST SHOW:

1) YOUR NAME;

2) YOUR STUDENT REGISTRATION NUMBER;

3) THE WORD COUNT (excluding the reference list and bibliography and any appendices

The assignment has three questions only two should be answered. Each question carries the same maximum mark.

Assignment Requirements APC309 STRATEGIC MANAGEMENT ACCOUNTING

You are required to answer two of the following three questions, each question is worth 50% of the marks:

Question 1

Gemini plc manufactures four products using the same machinery. The following details relate to its products:

 

Product A £ per unit

Product B £ per unit

Product C

£ per unit

Product D

£ per unit

Selling price

28

34

45

46

Direct material

6

7

9

7

Direct labour

5

5

10

10

Variable overhead

3

3

6

6

Fixed overhead *

8

8

16

16

Profit

6

11

4

7

Labour hours

1

1

2

2

Machine hours

4

3

4

5

 

Units

Units

Units

Units

Maximum demand per week

200

180

250

100

*Absorbed based on budgeted labour hours of 1000 per week.

There is a maximum of 2000 machine hours available per week. Requirement:

(a) Determine the production plan which will maximize the weekly profit of Gemini plc and prepare a profit statement showing the profit your plan will yield25 marks

(b) The marketing director of Gemini plc is concerned at the company’s inability to meet the quantity demanded by its customers. One consideration to overcome this is to increase the number of hours worked using the existing machinery by working overtime. Such overtime would be paid at a premium of 50% above normal labour rates, and variable overhead costs would be expected to increase in proportion to labour costs.

Requirement:

Critically evaluate this strategy and state your findings (quantitative and qualitative) as to the expected increase in contribution (if any) and discuss any issues (in particular in regard to overtime working) that could arise and would need to be resolved. 25 marks Total 50 mark

 

Question 2

Companies have found that offering discounts to customers in return for early payment can be counterproductive in terms of the resulting adverse effect on profitability. This is when the reduction in profitability outweighs any marginal improvements gained from the benefit of a reduction in the working capital requirement.

a) Given the above critically discuss the alternative measures to offering discounts to customers that could prove more effective in reducing the working capital requirement for a company with only minimal potential reductions in profitability. 25 marks

b) Critically evaluate the methods that can be adopted to manage and achieve the efficient control of inventories and gain the resulting benefits for improving cashflow and ultimately profit in a business. 25 marks Total 50 marks

Question 3

Many organisations use transfer pricing when transferring products between different divisions of the same organisation. You are required to critically discuss the advantages and disadvantages of two of the following methods:

1) Market based transfer prices;

2) Full cost transfer prices;

3) Marginal/variable cost transfer prices; 4) Cost-plus a mark-up transfer prices; and

5) Negotiated transfer prices.

Choose any two of the above five transfer pricing methods:

(a)  The first chosen method 25 marks

(b)  The second chosen method 25 marks Total 50 marks

The report should include critical evaluation of the models and concepts proposed outlining their merits and limitations. You may incorporate logical assumptions with regard to the company and use numerical examples to illustrate the models and concepts that you propose to adopt

The University policy on cheating collusion and plagiarism will be applied to this piece of work. Guidance:

Students are encouraged to be inquisitive and innovative in their approach as to what should be included in this report the following may be of some use in providing guidance as to what could possibly be included, although this is in no way meant to be prescriptive.

The aim of the assignment is to help you understand how key areas of strategic management accounting are demonstrated in practice by large, international companies. This will include investigating topics from throughout the course linked to the above issues. Some of the principles, concepts ad models will be more relevant to your chosen approach than others and so it is likely that different students will formulate different approaches to the problems. This is normal, it is not expected that all of the course content will be used in the analysis, concentrate on that which you feel is most important.

As part of your work you might find it helpful to briefly explore the underlying theory behind the key areas of investigation that you identify before applying them to report.

With a total of 3,000 words you do not have a lot of room for long introductions so assume you are writing to a sophisticated audience who has a working knowledge of strategic management accounting and is well versed in business theory. Numerical examples for illustrative purposes may be of use but should not be the main thrust of the work. If used they should be to provide evidence to support your findings from your other analysis of position and policies. If other sources are used remember to reference everything!

Please avoid relying too heavily on descriptive sections reproducing information available from course material or the set text. It is your own logical, evaluation of the situation, the interpretation of course material and presentation, with critical analysis, of a coherent strategic plan that will attract high marks.

Marking Guide APC309 STRATEGIC MANAGEMENT ACCOUNTING

The learning outcomes for this module assessed by this piece of work are:

Knowledge

  1. A Critical understanding of a range of key strategic management accounting models and concepts.
  2. A Critical understanding of the strategic role of management accounting at local and international level
  3. A Critical understanding of the merits and limitations of management accounting theory.
  4. How to apply the key management accounting concepts and methodologies in order to contribute to successful decision making in an organisation.

Skills

In light of this the assessment criteria in the grid below will be used when assessing your work


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