MANAGEMENT ACCOUNTING: HAWTHORN
LEISURE WORKS (HLW) AND US BRIGHT
Table of Contents
Introduction. 2
Assignment A: Calculation of bill of activities and cost per
unit for US Bright 2
Assignment B: Close analysis of budgetary elements of HLW… 6
Conclusion. 10
References. 11
Introduction
In the era of global competitive domain,
the quest for increasing the efficiency by maintaining transparency has become
the vital element for smoothing the decision making process. In the complex
industrial juncture, management accounting acts as the guideline promoting the
managers in adopting innovative steps for satisfying the customers. Performance
measurement and involvement of active collaboration help in maximising profits
thereby introducing brand popular among the customers. In the assignment, cost
per unit and bill of activities preparation for US Bright has been reviewed.
Relevant budgetary decisions related to effective decision making for HLW has
also been focused on this assignment.
Assignment A: Calculation of bill
of activities and cost per unit for US Bright
A. Estimation of cost per unit
According to Öker and Ad?güzel (2016,
p.39), cost per unit for each activity has been deduced by dividing the cost
drivers with total cost. In this
case, cost activities and their drivers have been identified. As per the case study cost, drivers of two
activities has not been provided, which needs to be assumed for calculating the
cost per unit of that two cost. In this case, annual reports can be formed over
the batch orders activity as annual reports need to be presented for each
batch. Therefore, direct link can be established with the annual report and
batch orders. Furthermore, the testing and developing products have been
assumed to be taken over number of purchase orders. Testing and development of
products have been assumed to be done for products purchased. As product
development is done, therefore, link can be established with the product
development and product cost.
Estimation of cost per unit of US Bright
Activity
Activity cost
Activity Driver
Annual Quantity of activity driver
Prepare annual accounts
5000
Assumed batch orders
1000
5
Process receivables
15000
No if invoices
5000
3
Process payable
25000
No of purchase orders
2500
10
Program production
28000
No of production orders
1000
28
Process sales order
40000
No of sales order
4000
10
Dispatching sales order
30000
No of dispatches
2500
12
Testing and developing products
60000
Assigned to the products directly
2500
24
Load mixers
14050
No to batches
1000
14.05
Operate mixers
45900
No of kilograms
200000
0.2295
Clean mixers
6900
No of trays
1000
6.9
Move mixture to the fillings
3450
No of cakes
200000
0.01725
Clean trays
20000
No of trays
16000
1.25
Fill trays
16000
No of Pastries/cakes
800000
0.02
Move to baking
8000
No of trays
16000
0.5
Set up of the ovens
50000
No to batches
1000
50
Bake pastries/ cakes
130000
No to batches
1000
130
Move to packing
40000
No of trays
16000
2.5
Pack pastries/ cakes
80000
No of pastries/ cakes
800000
0.1
Inspect pastries
2500
No of pastries
50000
0.05
Total cost per unit
297.61675
Table 1: Estimation of Cost per unit for US Bright
(Source: Created by Author)
It has been deduced that total cost per unit,
in this case, has been $297.61675.
Total cost of the product after dividing with the activity drivers helps in
understanding the cost per unit for each cost activity.
B. Presentation of bill of activities
According to Storey (2014,
p.10), Bill of
activities includes total cost of product (Lamington) including cost of labor,
materials and manufacturing overhead for calculating the total cost of the
product. In this case, the bill of activities preparation is to be done based
on the activities provided in the list of lamington product cost. Furthermore,
the activities related to batch cost has been estimated on batch cost and other
activities have been allocated on volume cost.
Mixer related cost has been provided and calculated on batch cost. Cost
per product price has been estimated to be $ 2.29 in ‘000’) amount. The bill of
activities provides details of the cost incurred for producing the specific
product.
Preparation of bill of activities
Total volume
100000
Batch size
1000
Bill of activities
Activity
Activity cost rate
Total cost
in 000
Process receivables
500
50000000
Process payables
200
20000000
Program production
100
10000000
Process order for sales
400
40000000
Load mixers
100
100000
Operate mixers
30000
30000000
Clean mixers
100
100000
Move to filling mixtures
30000
30000000
Clean trays
2000
200000000
Fill trays
100000
10000000000
Move to the process of baking
2000
200000000
Bake pastries and cakes
100000
100000000
Set up ovens
100
100000
Move to packing
2000
200000000
Pack cakes
100000
10000000000
Dispatch order for sales
500
50000000
Test and develop products
60000000
Total cost
20990300000
Cost per unit
209903
2.29903
Table 2: Bill of activities
(Source: Created By Author)
C. Inclusion of other related
costs for bill of activities preparation
Estimation of total cost including direct
materials, direct labor, and other manufacturing overhead cost helps in
determining the total product cost (Coronel and
Morris, 2016, p.12). In this
case, all the cost related to direct materials, direct labor and manufacturing
overhead has been provided. However, cost related to segregation of
subcomponents, subassemblies, and bill of materials needs to be included.
Furthermore, cost related to intermediate assemblies and other cost related to
the manufacturing products needs to be included in the bill of materials.
Moreover, in this context cost related to sale bill of materials, manufacturing
bills and service materials needs to be included in the bill of materials list.
As stated by Nagle et al. (2016,
p.14), production BOM and component cost for each item forms an important part
of BOM and therefore need to be included. Unit cost and other associated cost
related to inspection and accounts presentation need to be included in this
list.
Therefore, apart from the cost mentioned
in the table of the case study, all the above-mentioned cost needs to be
included further in preparing a complete BOM list. Aforesaid activity list of
cots further helps in understanding the cost of each sub segments.
Assignment B: Close analysis of budgetary elements of HLW
1. Relevance of membership fees towards cash position improvement
In the present scenario, two important
sources of income have been seen in the organisational structure of Hawthorn
Leisure works (HLW). The two sources of income have been court fees and
membership fees. Furthermore, the hourly court fees and annual membership fees
can be replaced by the advance fees collection. This further reduces the loss
arising due to collection of hourly fees thereby improving the cash viability
and position in the business. According to Kroes and Manikas (2014, p.37), cash
position improvement serves as the key element for success as it creates
different areas of opportunities thereby enhancing the revenue of the company.
Therefore, introduction of new membership
plan can improve the ability of the company in preparing effective planning
program denoting sources of total receipts in HLW. Advance membership fees
program reduces the administrative cost thereby improving the cash position of
the company. Exclusion of hourly fees collection reduces the potential loss
arising due to new membership fees and redrafting the strategies for cash
management encourages debt reduction. Advance collection of fees as per the new
management plan acts as guideline for managers in determining the areas where
effective utilisation of fees can be done. As stated by Donate and de Pablo
(2015, p.360), effective and judicious use of resources helps in meeting the
obligations thereby enhancing the cash position viability of HLW. Therefore,
introduction of new membership plan can be effective and advantageous for HLW
as it can improve the cash position of the company. Better utilisation of the
resources and advance payment of fees helps the managers in getting an idea
about the total amount of resource available. This further helps in better
utilisation of cash resources that further enhance the financial position of
the business. Better cash position and better operational viability lead to
improvement in cash position of HLW.
2. Estimation of sales revenue effects
Estimation of earned list of revenue in respect of Old membership fees
in HLW
Particulars
Calculations
Amount ( 000)
Individual
500*45
= 22500
22.5
Student
500*30
= 15000
15
Family
1000*100=
100000
100
Total
137.50
(22.5+15+100)
Table 3: Estimation of earned
list of revenue
(Source: Created by Author)
Estimation of Total receipts from Court fees
Particulars
Calculations
Amount ( 000)
Primetime
(2000*90%)
(181 days) * 4 hours @ 12
86.4
Nonprime time
(2000*
50%) (181 days)*[email protected]
56
Offseason
(
2000*30%)(184 days) *6 hours @6
21.6
Total
164
Table 4: Cost Estimation
(Source: Created by Author)
Therefore, based on the above calculation
it is seen that total receipts from the two sources are (137500 + 164000) = $
301500.
Determination of total receipts after the introduction of new membership
plan
In this case, new members are (2000*70%)
= 1400 Members.
Under Campaign
Particulars
Calculation
Amount (000)
Family
700*450*45%
$141750
Individual
700*250*45%
$78750
Total
$220500
Table 5: Cost Estimation
(Source: Created by Author)
Under No Campaign
In the case of no campaign situation,
cost estimation needs to be done. In this case, 45% of the current members are
to be included in the list (700*45%) = 315.
Particulars
Calculation
Amount (000)
Family
(700-315) *500
$192500
Individual
(700-315) * 300
$115500
Total
$308000
Table 6: Cost Estimation
(Source: Created by Author)
Total receipts derived from new
membership plan
Particulars
Amount
Under Campaign
$220500
Under no campaign
$308000
Total amount of receipts
$ (220500+308000) = $ 528500
Table 7: Cost Estimation
(Source: Created by Author)
Certain assumptions that have been taken
for calculating the above list can be deduced in the form of a table. The list
of occupancy has been taken as the rate ranges reported in the case study.
Effective calculation based on the assumptions has made the task more
efficiently.
Particulars
Amount
Prime occupancy time
90%
Nonprime occupancy time
50%
Off seasonal occupancy
30%
Table 8: Assumption list
(Source: Created by Author)
Moreover, it can be stated that the
changes in the collection (Membership fees and Court fees) has created a
positive impact on the earnings of HLW. Processing efficiency and increase in
revenue to $ 227000 ($528500-301500) can introduce value incrementation in the
business. Reduction of administrative fees and effective resource utilisation
can improve the sales position of the company.
3. Identification and derivation of key factors before evaluation of new
membership plan
HLW before implementing new membership
plan needs to develop a planning sketch showing the positive and negative
effects of this implementation. According to Linder and Williander (2017,
p.182), elimination of regular record keeping tactics can be treated as the positive
outcome of the new membership plan implementation. On the contrary Alshurideh
(2016, P.382), reduction in the number
of members due to shifting to advance fees paid from annual fees payment can be
treated as negative outcome arising due to this new plan implementation. Member
retention can be taken as the main challenge arising due to this new plan
implementation. Reaction of the members after implementation of new plan can be
treated as the major factor, which must be kept in mind before evaluating the
overall plan.
Furthermore, introduction of special
reduction in fee structure can be used as the attractive package for the
members opting for new membership plan. Attractive packages and the customer
retention strategies need to be focused on implementing new membership program.
Moreover, different facilities to be provided to the members and customers
preference pattern can be deduced as one of the factors required for analysed
before implementing new plan.
Conclusion
Cost per unit deducted from different
activity drivers has been used for estimating the total cost per unit for the
cake activities for US Bright. Furthermore, the bill of activities for a
specific product has helped in comparing the total cost with the specific cost
of a product. In the second assignment, the notion showing importance of new
membership plan towards cash position improvement has formed the main part of
this assignment. Sales effects due to new membership plan have helped in
understanding the profitability levels due to implementation of new plan.
Lastly, the factors that must be kept in mind while evaluating a new plan of
HLW has been stated in the assignment.
References
Books
Coronel, C. and Morris, S., (2016). Database
systems: design, implementation, & management Boston: Cengage Learning.
Nagle, T.T., Hogan, J. and Zale, J., (2016).
The Strategy and Tactics of Pricing: New International Edition. Routledge.
Storey, J., (2014). New
Perspectives on Human Resource Management (Routledge Revivals). Abingdon: Routledge.
Journals
Alshurideh, M.T., (2016). Is Customer
Retention Beneficial for Customers: A Conceptual Background. Journal of
Research in Marketing, 5(3), pp.382-389.
Donate, M.J. and de Pablo, J.D.S., (2015).
The role of knowledge-oriented leadership in knowledge management practices and
innovation. Journal of Business Research, 68(2), pp.360-370.
Kroes, J.R. and Manikas, A.S., (2014). Cash
flow management and manufacturing firm financial performance: A longitudinal
perspective. International Journal of Production Economics, 148, pp.37-50.
Linder, M. and Williander, M., (2017).
Circular business model innovation: inherent uncertainties. Business Strategy
and the Environment, 26(2), pp.182-196.
Öker, F. and Ad?güzel, H., (2016). Time?driven activity?based costing: An implementation in a
manufacturing company. Journal of Corporate Accounting & Finance, 27(3),
pp.39-56.
