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HI5017 Managerial Accounting Assignment - Management Accounting Case Studies, Holmes Institute, Australia

Purpose: This assignment aims at developing your understanding of cost concepts, and demonstrate your ability to apply your knowledge of cost concepts to a service-based company. Additionally, you are to critically evaluate a journal article to analyse the practical use of accounting information to real-life companies' decision-making and achievement of business goals.

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Answer - Solution 1 - Managerial Accounting

Introduction

The term "management accounting" is very popular in the world of modern business. The term is popular because of the benefits that management accounting generates to the business. The system of management accounting was introduced in the organizational context several years back but the popularity started after the globalization when the business world became complex and operating business became more challenging to the organizations. However, in this study, the entire focus will be on the usability of the management accounting system in the organizational context. The study will indicate the usability of the management accounting system in both small and large business contexts. Different case scenarios will be used to illustrate the importance and usability of management accounting.

Part A: Case Study Analysis

Answer the questions relating to the case study of a child care business. Respond to the questions to help Douglas and Pamela make their decisions.

Q1. Consider the different types of costs discussed in this unit. List any three (3) types of costs and provide one specific example of each cost from the case.

Answer - One of the key tasks of management accounting is to control the cost level of the business. Different cost controls and cost management methods have been provided by the management accounting system for managing and controlling the cost levels of the businesses in a better way (Kaplan and Atkinson, 2015). However, no cost can be controlled without identifying them in a proper manner. In order to control the cost level using the management accounting techniques, the first activity is to determine the different types of costs in the business. There are three types of costs that can be noticed in every organization and these three types of costs are - variable cost, fixed costs and semi-variable costs (Otley, 2016).

Considering the title of each cost, their nature can be clearly understood. It means the nature of the variable cost is to change according to the production level of the business. The nature of the fixed cost is to change over the time not depending on the production level of the business and the nature of the semi-variable cost is the mix of the nature of variable and fixed costs (Maas et al., 2016). In the business of the Frank couple, the variable cost was the cost to pay the salary to the employees because the case study indicates with the increase in the production level that is with the increase in the number of child in the firm, more employees are required to be appointed. Hence, the cost is variable cost. The fixed cost is the payment made by the couple to the state as the annual fee because the amount of annual fee does not get changed based on the production of the business. On the other hand, the semi-variable cost for the business is the laundering cost because to some extent the cost depends on the number of children to whom the firm provides care services.

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Q2. Based on the information provided, what information is relevant to the decision to purchase the appliances? What information is irrelevant to the decision to purchase the appliances? Why?

Answer - In a business management or the owner has the access on a large amount of information related to the business. However, not all the information is required by the management or the owner. If the particular case of Frank couple and their business is considered, it must be stated that for making the purchase decision for the appliances, the most important information to them is the price of the appliances at the market place because without knowing the price then cannot set the budget. They need to analyze the suitability of the purchase based on the price level. Along with that the Frank couple also need the information relating to the delivery charges for the appliances.

On the other hand, the couple do not require any information related to the old appliances of the business is irrelevant to them because the business does not depend on the old appliances at present time.

Q3. What could it cost the couple to launder clothes? Show your detailed calculations for each option.

Red Oak Laundering cost for the firm of Frank Couple:

Red Oak's monthly cost for laundering = $52

Therefore, Red Oak's weekly cost for laundering = $52 / 4.33 weeks = $12.00 per week

Laundromat Laundry's laundering cost for the firm of Frank Couple:

Fuel cost that the couple will incur for 1 mile = $0.56

Therefore, Fuel cost that the couple will incur for 3 miles = 3 miles * $0.56 = $1.68

Weekly laundering cost for the firm = $8

$11.67 is spent by the Franks on quarterly basis for buying the supplies for laundering for the firm.

Therefore, the weekly cost will be = $11.67 / 4 weeks = $2.91 per week

Hence, the amount of total weekly cost for laundering at the Laundromat laundry will be:

= $8 + $1.68 + $2.69

= $12.37 per week

Determining the cost for washer and the dryer if these are brought by the firm for the laundering purposes:

Total cost of the washer = $420

Yearly cost = $52.5

Monthly cost = $4.38

Total cost of the dryer = $380

Yearly cost = $31.67

Monthly cost = $2.64

The cost of installation accessories = $43.72

Therefore, the monthly cost for the installation accessories = $0.46 each month

Cost for delivery appliances in a year = $35

Cost for delivery appliances in a month = $0.36 each month

Appliance longevity is 8 years

Energy cost in a year = $120 + $145 per year = $265 per year

Energy cost in a month = $22.08 per month

Therefore, considering all the costs the total amount that Franks will spend for buying the washer and dryer will be: = $4.38 + $2.64 + $0.46 + $0.36 + $22.08

= $29.92 per month

= $6.91 per week

Considering the calculations, it must be concluded that the Frank couple will be in able to manage the cost in a better way if the dryer and the washer are purchased for the business because the total cost in this case will be lowest for the firm.

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Q4. The Franks have a waiting list for their day care. They can hire an employee for $9 per hour for 40 hours each week. With the additional employee, the Franks can accept three additional children. Should the Franks hire the additional employee? Show your detailed calculations.

Answer - With the additional employee, the Franks can accept three additional children. Should the Franks hire the additional employee? Show your detailed calculations

Cost of the firm for recruiting one extra employee for providing care to 3 extra children will be as follows:

Income of the Franks by providing care services to one child is $800 per month

Therefore, on yearly basis, the income will be = $800 * 12 = $9600 per year

Therefore, total income of Franks by providing care services to 6 children will be = 6 * $9600 = $57600 per year

The cost that Franks will incur for the purpose of providing the care services to the children:

License maintenance cost = $225 per year

Utility cost = $50 per month

Therefore, utility cost per year = $50 * 12 = $600 per year

Child care premises cost will be = $79500 / 25 = $3180 per year

Cost for proving snack and meal per month = $3.20 * 4.33 = $13.86 per month

Cost for proving snack and meal per year = $166.72 per year

Therefore, the total cost = $225 + $600 + $3180 + $166.72 = $4171.72 per year

Determining the employee hiring cost for the business of Frank:

Calculation for each employee weekly cost: = $9 per hour * 40 hours = $360 per week

Therefore, total cost will be = $360 * 4.33 weeks * 12 months = $18705.6 per year

Considering the calculations, it must be mentioned that the cost of recruiting the new employees will be affordable to the Franks. However, the final decision can be made after the calculation of total income and net profitability of the business.

Income calculation for Frank couple

$57600 per year + 3 * $9600

= $57600 + $28800

= $86400

Hiring cost

= $4171.72 per year + $18705.6 per year

= $22877.32 per year

Therefore, net profit for the business will be as follows:

= $86400 - $22877.32

= $63522.68

The calculations are showing higher amount of net profit for the business if the new employees are hired by the firm. Hence, considering the situation, it must be stated that the firm should recruit new employees.

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Q5. The Franks home can accommodate a maximum of nine children. They can move the day care from their home to rented space in town, which can accommodate up to 14 children. The space will cost $650 per month and the utilities will cost $125 per month. Additionally, insurance will now cost the Franks $5,000 per year. Per state regulations, each adult can supervise no more than three children. As their accountant, prepare a letter to the Franks advising them on their space options. Should they continue to operate the facility at home or should they rent space in town? How many children should they accept? How many employees will they need to hire? Show your detailed calculations for each scenario.

Answer - As their accountant, prepare a letter to the Franks advising them on their space options

To

Douglas and Pamela Frank

Subject: Suggestion regarding the selection of the best option for the business

Respected Sir and Madame,

Considering both options that you have taken into account for the expansion of your business, it must be stated that the renting option will not be feasible enough for your business. The following calculations can guide you both in a better way in this regard:

Cost for the space per year = $650 * 12 = $7800

Cost for the utility per year = $125 * 12 = $1500

Cost for insurance per year = $5000

As per your recent plan, if you provide care services to 14 children 3 new employees will be require by your firm. The total cost for these three new employees will be $187100 in a year, but the amount of total income that you will generate will be $134400 in a year. Therefore, your income will be less than your cost and you will generate loss of $52700.

However, cost will be less and business will earn profit if that is run at your home. The calculation of cost in this context will be as follows

License maintenance cost = $225

Utility cost = $600

Premises cost = $79500 / 25 = $3180

Food costs = $3.20 * 4.33 * 12 = $166.72

Weekly employee cost = $9 each hour * 40 hours = $360

Yearly employee cost = $18705.6

Total cost = $225 + $600 + $3180 + $166.72 + $18705.6 = $22877.32 per year

Therefore, considering the calculations above the cost will be much lesser if the business is operated at home. Hence, this option must be selected.

Thanks and regards

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Part B: Journal Article Critique

Read the journal article by Nonaka and Kenney (1991), "Towards a new theory of innovation management: A case study comparing Canon, Inc. and Apple Computer, Inc.", Journal of Engineering and Technology Management, 8, p. 67-83.

Critically evaluate the role of management accounting systems and the provision of accounting information in the innovation process of these two companies.

Q1. Identify the components of the management accounting system in each of the two companies, and discuss their relevance in enabling decisions to be made efficiently and effectively. Include examples in your answer.

Answer - In the case scenarios of Canon Inc and Apple Computer Inc given in the journal, it can be stated that management accounting played a major role in improving the business scenarios of the two companies. The case studies do not show the impact of management accounting directly on the innovation and business developments of the companies, but the case scenarios clearly indicate that the components of management accounting played an effective role in making the innovation successful in the businesses.

If the case of Canon Inc is considered, it will be noticed that the company incorporated innovation in the business with the help of proper planning, decision making, controlling and information management (Nonaka and Kenney, 1991). Now, if the system of management accounting is considered, it will be noticed that these four are the components of management accounting (Quattrone, 2016). The use of the components of management accounting can be better understood with the help of the specific examples.

Example 1: In the case study of Canon, it can be identified that the company has improved its level of efficiency through lowering down the cost and enhancing the reliability of the information management system (Nonaka and Kenney, 1991). This clearly indicates that with the help of better planning and controlling the management of Canon decreased the cost level and improved the information management system.

The case study of Apple Computer Inc also shows the usability of the components of management accounting system in the case of the performance improvement and innovation of the business. Considering the case scenario of Apple it can be understood that the management accounting components like, controlling, coordination and resource management helped the company in improving business scenario (Hopper and Bui, 2016). This can be better understood with the help of following example:

Example 2: In the case scenario of Apple, it has been identified that the management focused on the team play not on individual play within the organization (Nonaka and Kenney, 1991). This indicates that the company used the coordination component of management accounting, which helped the company in a better way.

Therefore, considering the two case examples, it can be clearly understood that management accounting components helped the companies in better decision making and improving their performance standards.

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Q2. The article describes the innovation process in a firm as 'a process of information creation', and a firm needs to organise themselves 'to transmit the new information'. Explain how management accounting contributes to this innovation process. Include in your discussion two (2) specific examples from each of the two companies mentioned in the journal article.

Answer - The contribution of management accounting system is very high in the context of innovation in the business. Innovation is always positively supported by the systems or tools under management accounting. Considering the case studies in the given journal, it can be clearly understood how the management accounting can contribute towards innovation in the business.

In this context, it is very important to be mentioned that innovation in the business can be implemented properly if there is proper communication within the workplace of the company. In the case of the Apple Computer Inc, it has been noted that the organization or its higher management team efficiently developed better communication network with the help of management accounting. In the other words, it can be stated that management accounting influenced the organization in developing proper bonding among the employees of the business. This bonding helped the company generating better and innovative ideas for the business. For example, in the case study, it has been identified that the Steve Jobs and the former leader in Apple focused on the personnel and the team because they believed in the principle that team effort is essential for the improvement and innovation in the business (Nonaka and Kenney, 1991). There is another example of usability of management accounting in the innovation process in Apple. Example 2: in the case study it has been identified that the Mac team involved in constant interaction and cooperation while incorporating innovation in the business. In this context, it is very clear that communication and cooperation helped the company in incorporation of innovation.

On the other hand, there are also the examples of Canon Inc. Example 1: Canon was focused on the customers' choices and due to that the company considered design of the product as the most important part of the business for the innovation (Nonaka and Kenney, 1991). This example, clearly states that the management accounting system encouraged the managers of Canon towards the choices of the customers and this influenced the innovation idea in the business. Example 2: In the case study of Canon, it has also been identified that for the innovation the management of the company emphasized on the research and development in the business (Nonaka and Kenney, 1991). This research and development was influenced by the constant communication better the leaders and the managing director of the firm. Therefore, considering this particular example, it can be stated that the communication improvement was influenced by the management accounting system of the business.

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Q3. Provide four (4) specific outcomes or lessons learned from the article's research findings that will be useful for management accountants in Australian companies to learn from, and justify your answer [i.e. provide 2 outcomes from each company].

Answer - The above findings have helped in developing better knowledge on management accounting. The lessons which have been gained from the findings are stated below:

  • With the help of the system of management accounting the organizations can enhance their level of efficiency in managing the data and information of the business in a better way. At the same time, it can also be stated that the management accounting system makes the information management easier for the business.
  • Management accounting contributes in the development of better plans for the business. It helps in developing more logical plans for the business so that they can improve their performance standard in a better way.
  • Management accounting system is very useful in the context of controlling the overall costs of the business in a better way. This particular system helps in identifying the better cost management and cost controlling strategies for the businesses, which helps in improving the standard of performance for the organizations.
  • Moreover, the system of management accounting helps in incorporating innovation in the business in a better way, which on the other hand helps in improving the overall performance and the position of the business in the market place.

Conclusion

The entire study has indicated the fact that the system of management accounting is highly recommendable for both small as well as large organizations in the world. Management accounting helps different organizations in different ways considering the specific problem in the business. In one hand, the system of management accounting helps in making the most suitable decision for the business and on the other hand management accounting helps in incorporating innovation in the business. Therefore, from the overall perspective it can be stated that management accounting is essential for the business development of the company and for making the future of the company stronger and sustainable.

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Solution 2 - MANAGERIAL ACCOUNTING

PART A:

Q1. IDENTIFICATION OF DIFFERENT TYPES OF COSTS

Costs are identified as different types shown below:

Type

Items listed

Fixed cost

Fixed costs don't change even when the output changes and as such don't decline as well. They remain constant.

The annual fee paid for license is a fixed cost because it does not change with size of the work. Fixed at $225 for the year.  

Fixed costs

The annual fee paid for insurance is a fixed cost because it does not change with size of the work. Fixed at $3,840 for the year. 

Fixed cost/Incremental costs

If the fixed cost increases because of change in an activity then the same is dubbed as an incremental fixed cost. Here the increase suggested to the energy cost related to washer of $125 can be defined as an incremental fixed  energy cost.

Fixed cost/Incremental costs

the increase suggested to the energy cost related to dryer of $120 can be defined as an incremental fixed  energy cost as the same has increased at a slab.

Variable costs

Variable costs either increase with increase in production or decease with decrease in production. These costs are directly proportional to the level of output. The laundry cost is a variable cost as it would be required to be spent on a per month basis. $52 per month is a variable cost.

Variable costs

The fuel cost or the cost of mileage is a  variable cost as it would be required to be spent on a per mile basis. $.56 per mile is a variable cost.

Q2. What information is relevant to the decision to purchase the appliances? What information is irrelevant to the decision to purchase the appliances?

The types of costs which would be regarded as relevant for the company is described as follows:

If frank goes for the buying of the long term appliance then the following types of costs are relevant for Franks company:

1) Acquisition cost of the appliance is relevant as it has to be committed by the management.

2) Delivery expenses related to acquisition of the appliance is relevant costs.

3) Appliance installation expenses are relevant.

4) Utilities which would be sued in relation to the appliance use would be relevant costs.

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If the firm of frank decides to go for alternatives then the following costs would become relevant as well:

1. Self-service costs at laundry

2. Mileage costs

3. Delivery expenses

4. Detergents expenses are also relevant costs in this scenario as the same would have to be incurred.

However if frank decides to use the pickup and delivery alternative then the detergent costs, costs of mileage etc. would be treated as irrelevant as they won't have to be incurred (Atkinson, Kaplan, Matsumura, & Young, 2016).

Q3. What could it cost the couple to launder clothes? Show your detailed calculations for each option.

Different alternatives are shown and evaluated as follows:

1. Alternative 1 - to buy the Appliance

If the appliance is decided to be bought then the costs are estimated as follows and shown in the following table:


$

Fixed incremental costs of energy

265.00

Annual expenses related to Detergents

140.00

Appliance Depreciation

109.840

(420.00+380.00+43.72+35.00)/8 = 109.840


Total annual costs

514.840

If this alternative is selected by frank then he would have to spend $514.840. He needs to evaluate if this is minimal costs or not of all the alternatives available.

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2. Alternative 2 - laundry under self service

If the firm of frank decides to undertake self-service then the costs are estimated as follows and shown in the following table:



$

Mileage costs for self service

.56 /mile * 6 miles /week * weeks 52 = 174.72

174.72

Cost to be paid the laundry owner

52 weeks *$8.00 /week = $416.00

416.00

Costs to be paid for detergents  

 $35.00/ quarter * 4 quarters in a year = $140.00

140.00

Total costs if self-service option is selected.


730.72

If this alternative is selected by frank then he would have to spend $730.72 which is much higher than the costs expected to be incurred under alternative 1.

3. Alternative 3 - pickup and delivery

If Frank decides to engage the pickup and deliver service offered by the third party then the costs are estimated as follows and shown in the following table:



$

Cost of pick up and delivery  

52/month  *12

624.00




Total annual cost


624.00

If this alternative is selected by frank then he would have to spend $624 which is much higher than the costs expected to be incurred under alternative 1.

As shown from the analysis of the three alternatives above the lowest cost is expected to be incurred if the appliance is bought by frank and it is recommended to frank to buy the appliance as the same would minimize his costs of laundry (Bhimani, 2012).

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Q4. Should the Franks hire the additional employee?

If an additional employee is hired then the cost of hiring the additional employee and incremental benefits must be estimated and must be evaluated:


$

Additional revenue (3 children @ 800)

$2400.00

Less: additional cost to be incurred


Food cost for three children (4.33 weeks*3*5*3.20 = 207.84)

$207.84

Labor hiring costs ($9 per hour for 40hours *no of weeks ) (4.33*40*9 = 1558.80

1558.80

Total additional /incremental cost

$1,766.64

Incremental or addl contribution

$633.36

It is seen that if frank hires a new employee then he would have three new children and revenue would increase by 42400. However the overall costs would be expected to increase by $1,766.64 and Frank would have an additional profit of $633.36. thus it can be recommended that as franks overall profit is expected to increase if one more employee is hired, frank shall actively consider hiring the additional workers to maximize benefit (Drury, Cost and Management Accounting: An Introduction, 2010).

Q5. Prepare a letter to the Franks advising them on their space options.

ALTERNATIVE 1: REMAIN IN THE CURRENT LOCATION

Under this option either 6 children can be taken or it can be extended for 9children. Both are evaluated as shown below:


6 children

9 children

Net Revenue  (@ $800/child)

$4800.00

7200.00

Less: Expenses



Cost of food ($3.20*5*6*4.33) and ($3.20*5*9*4.33)

$415.680

$623.520

License fee per month ($225.00/12)

$18.750

$18.750

Insurance fee  (5,000/12)

$416.67

$416.67

Laundry  Expenses  ($514.64/12)

$42.9

$42.9

Depreciation ($79,500/25 ) = $3,180/12 = $265.00

$265.00

$265.00

Utilities

$50.00

$50.00

Rent 

0

0

Employee costs

0

$1,558.80

Total Expenses

1,112.33

2,878,.97

Net income

3,687.67

4,321.03

If 6 children are accommodated by Frank then they would have a profit of $3,687.67 per month but if they have been able to accommodate 9 children then the net income can be $4,321.03. 3 more children would extend the net revenue by $2400 ad the increase in cost being lower overall profits can be extended by $633.36 approx.. So frank must be advised to accommodate 9 children (Horngren A. B., 2014).

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OPTION B: ALTERNATIVE MODEL FOR MOVING TO A LARGER FACILITY

Under this alternative Frank and his team can move to a new space which can accommodate more children. The alternative is evaluated as follows:


12 children

14 children

Net Revenue  (@ $800/child)

$9,600.00

$11,200.00

Less: Expenses



Cost of food ($3.20*5*12*4.33) and ($3.20*5*12*4.33)

$831.36

$969.92

License fee per month ($225.00/12)

$18.750

$18.750

Insurance fee (5,000/12)

$416.67

$416.67

Laundry  Expenses ($514.64/12)

$42.9

$42.9

Depreciation

$0

$0

Utilities 

$125.00

$125.00

Rent 

$650.00

$650.00

Employee costs

$3,117.6

$4,676.4

Total Expenses

$5,202.28

$6,899.64

Net income

$4,397.72

$4,300.36

It is quite evident that if frank decides to move to a new and larger location then they can either have 12 or 14 children's under their wing. If 6 children are accommodated by Frank then they would have a profit of $4,397.72 per month but if they have been able to accommodate 14 children then the net income can be $4,300.4 approx. 2 more children would lower their net income by an approx. $97. And this is why they can be recommend to have only 12 children. However they can be advised to have 15 children then they would have a much larger profit than having 12 children (Horngren, et al., 2011).

PART B:

Q1. MANAGERIAL ACCOUNTING SYSTEM COMPONENTS AND THEIR RELEVANCE

Management accounting systems all over the world is known to draw data form the current business environment alongside probable market data to enable the management of their organizations to analyze them and take certain decisions which can benefit their firm. In general the following three components are said to exist in the given article related to both Apple and Canon.

a) Risk Management System (RMS)

The risk management system(RMS) is essentially used by the management and the management accountants of an organization like Apple Inc for assessing the possible and probable risk factors and their effect. Analysis of the relevant Risk factors would be expected to enable the management of these firms to undertake the best suitable risk management measures to reduce their impact (Horngren, Datar, & Rajan, 2015).

Identifying the factors which can cause variances and disruptions are likely to allow the management of these firms enough time for discussing the best possible mitigation measures. In this scenario it can be noted that the data is made available to the managers by the management accounting system and also allows the publication of reports in best possible format to prepare for management of risk factors. If the data is not collected and presented rightly , it would be impossible for the management to find the right mitigation measures and the same would provide to be detrimental to the interests of the business in the long run.

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b) Performance Management system (PMS)

Performance Management system (PMS) is integral to assessing thee worth of employees and the overall production and distribution system within an organization. Under this method the actual performances achieved by the employees and the firm is compared to that of the budgeted and expected performance and variances are computed. This method lets the management know if they have successful in achieving the target or they are getting behind. If they are ahead in terms of goals achieved then they would need to compare results individually too to know if all employees and divisions have achieved results. Negative variances in results are particularly important because , the same would set the firm back as compared to its competitors and also at the same time the root causes must be found out so that perfect migration measures could be put in place including more balanced training methods for the low skilled and less skilled employees. Also the same would allow the firms to examine if their marketing and distribution strategies are correct or their pricing is perfect. This is also immensely helpful in achieving the right kind of product mix and innovative research (M.Datar & Horngren, 2012). The approaches taken by both Apple and canon showed that performance measurement would allow them to plan ahead.

c) Strategic management system

Management accounting systems all over the world is known to draw data form the current business environment alongside probable market data to enable the management of their organizations to analyze them and take certain decisions which can benefit their firm. This is by far the most productive MAS that is used for decision making. The data obtained by the Strategic system is used to make decisions which can enhance the reputation and credibility of the business. Spur higher growth of revenue and profits. The same can also be organized to make visible growth in the human resource productivity. Decisions like what to produce (iMac for Apple) and the mini for the Canon is taken with the help of this system. However it must be ensured that the management and the management accounting system remains committed in the long run and watch the strategic management decisions with an eye to evaluate and make flexible changes (Horngren, et al., 2011).

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Q2. HOW MANAGEMENT ACCOUNTING CONTRIBUTES TO THE INNOVATION PROCESS.

Innovation is all about creating new products and new services to present the clients and customers an viable alternative which might be able to give them the best bang for their money. Innovations are always the need of the hours and the same is a very long and arduous and continuous process. Mostly ideas regarding innovative products and services comes from an internal process named as employee social interaction and the same is highlighted in the article. In all of the processes the role of the management accounting is defined and discussed as follows:

1.Management accounting system is tasked with gathering all the data needed and preparing the relevant reports.

2.issues and problems get recognized with the help of management accounting reports and the same prompts the management of the companies to think out of the box.

3. Economic and market trends are summarized and analyzed by the management accounting system before they were presented to the management and board of directors for decisions to be made. This optimizes the decision making process and brings out the best of innovative ideas.

4. innovative ideas to be carried out further for getting implemented needs specific evaluation form the management accountants and needs validation. Unless the MAS gives the go ahead most ideas can't be implemented.

5. thus not only management accounting system helps in idea generation but also makes sure internal social interactions take place and the same is validated for implementation. So they play a very important role in the ideas being implemented.

Q3. WHAT ARE THE FOUR SPECIFIC OUTCOMES THAT CAN BE LEARNT?

The 4 outcomes which can be implemented by firms in Australia are summarized as shown below:

a. Both the Japanese and US companies have developed a sustained means of creating and sustaining a great deal of innovative practices and more so the Japanese firms have a lead in this as they have a more settled look of skilled manpower and also they were able to increase the rate of social interactions. The example established by a company like Canon showed that even when there are utter confusion and chaos , the management of the Japanese firms were able to motivate their work force to sit-down and go though a process of idea generation to benefit the firm because the employees of these firms were found to be involved in the overall development process of the firms they were working for.

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b. To be successful the situation does not need to be chaotic all the time. So the motive of the firms and management was not to create artificial chaos but effectively create a process under which the management is able to provide a more social and democratic way of interacting with each other, to argue with each other so that the best idea can be argued upon and be accepted. In some of the times the final idea might not be an original idea bit a mere combination of different ideas that has come out of idea generating social interaction process. For the same to be developed, Australian and other firms need to create a platform in which the employees and skilled personnel are free to present their cases and opinions without fearing for being published. The best ideas sometime can be outrageous but they would eventually be the best and create cost effectiveness (Nonaka & Kenney, 1991).

c. The article also highlights the critical role played by the leaders in the respective organizations. The leadership teams were feeling the heat and they decided to undergo innovations to bring down the cost not only for them but also for the consumers as well. Leaders were not behaving arbitrarily but they have effectively shown to be mere moderators of the technical ideas. They let the skilled personnel come to a conclusion and based on the inputs took decisions to pursue certain agendas. Be democratic and provide opportunities is the catchword for future leaders.

d. The article also highlighted the fact that organizations shall take steps to create skilled core teams who would take the leading generating new ideas and can complement the senior leaders in strategic product development guidelines and positioning etc. this team would also be tasked with bringing in new innovation and ideas. Further these teams would be needed to be self-organized and self-regulating as well for demonstrating higher commitment and getting better results.

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