Posted: September 13th, 2017

Accounting Project

Paper, Order, or Assignment Requirements

 

4. THE PROJECT OUTLINE
   The industry project will require you to choose a UK industry for research and undertake three main tasks.
   (i) You will be expected to undertake a PEST analysis on the Industry and summarise the key environmental factors that have and are currently affecting the Sector and Sub-sector.
   (ii) You should analyse the financial performance of at least 3 companies within the Sector and Sub-sector. Your analysis would typically include summary financial ratios, share price graphs and other information to reach conclusions on performance
   (iii) Finally you are asked to inter-relate the environmental forces in your PEST analysis with the best and worst performing company in your selection. You should indicate how well or how badly the company has taken advantage of opportunities or dealt with threats evident within the industry.

   Marking Criteria-Please note word limit of 2500 words (excluding bibliography and any appendices) Marks Awarded
   1. Introduction and Rationale Introduction and rationale for sector/sub-sector and firm choice. Discussion of economic importance, main product/service lines, markets and size of businesses 10% /10
   Grade: Excellent Good Satisfactory Lacking V. Limited
   Comments:

   2. Research Question, Aim and Objectives of the project to include Research question, clear aims, objectives and project layout 10% /10
   Grade: Excellent Good Satisfactory Lacking V. Limited
   Comments:

   3. Critical Competition Analysis
   Competitive analysis of the industry. The use of Porter’s Five Forces model is expected. Correct referencing of published works essential. 10% /10
   Grade: Excellent Good Satisfactory Lacking V. Limited
   Comments:

   4. Critical Environmental Scan/PEST to include; Detailed and comprehensive environmental scan of relevant industry with reference to published works. Identify and discuss the critical success factors for the sector. 35% /35
   Grade: Excellent Good Satisfactory Lacking V. Limited
   Comments:

   5. Calculation and Justification of Financial (at least 110) and Non-Financial Ratios (at least 3) for five years for the chosen companies. Justification and presentation of the ratios to be used to determine success/failure of the company offer. Undertake these calculations and tabulate data. Make sure you use some non-financial ratios. Ratios should cover all the main ratio groups and also incorporate market data. No analysis expected in the interim. 20%
   /20
   Grade: Excellent Good Satisfactory Lacking V. Limited
   Comments:

   5.Plan and Timetable to complete the project 5%
   Clear indication of project plan and dates for submission of draft. This has to be agreed with the supervisor and acts as a contact for managing the project. /5
   Grade: Excellent Good Satisfactory Lacking V. Limited
   Comments:
   6. Presentation, Bibliography and Referencing
   Presentation of documents tables and diagrams. Correct referencing of published works essential. Penalties will be applied for poor referencing and exceeding word limit. 10% /10
   Grade: Excellent Good Satisfactory Lacking V. Limited
   Overall Comments:

   /100

   Grade

   Second Marker Comments

   Grade

   the three companies i have chosen is bg group , bp and royal dutch shell.

   the sector i have chosen is oil and gas producers

   C. THE PROJECT OUTLINE (Refer to Grading Form for more details)

   A good project should normally include:
   • Title page; 100-200 word abstract (not included in word count).
   • Contents page (not included in word count).
   • Introduction; objectives including the rationale for sector and sub-sector choice.
   • The Environmental Scan. The purpose of this is to place your idea in the context of the appropriate field of study.
   • The Financial Appraisal. Review ratios of three/four companies and analyse performance relative to each other
   • Results and their analysis; including reasons for the selection of the best/worst performing companies. Use of the appropriate statistical techniques.
   • Discussion and Conclusion; including a full evaluation of the results of the study.
   • References; only for references cited in the main body of the project. Ensure that all are included. Normally the Harvard system is used
   • Appendices; these should include any material in support of primary research and any other material which is of interest but which is peripheral to the main thrust of the project e.g. share price graphs. These will not count towards the word length of the project.

Assessment overview

The purpose of this assessment task is to work in teams to apply management accounting

techniques and consider the role of the management accountant in decision-making.

Assessment details

In teams of 2-3 students, complete parts A, B and C below. Use your answers to prepare a

structured report for submission.

Part A: W. White’s Chemicals (48%)

1. White’s Chemicals produces chemicals for industrial use. One plant specialises in the

production of chemicals used in the copper industry. At this plant two compounds are produced:

compound V-312 and compound T-415. W. White’s developed and held the patent for compound

V-312 which is used in copper extraction from low-grade ore. The patent has recently expired and

competition has increased as more companies have entered the market. Five years ago William

White, the founder and head chemist, added compound T-415. Compound T-415 was more

difficult to manufacture and required special handling and setups. In the last two years the plant

has faced intense competition and its sales of V-312 have dropped. The plant showed a small loss

in the most recent reporting period.

The plant manager, Jess, believes competitors have been selling V-312 below the cost to produce

it – perhaps with the objective of expanding their market share. The following conversation

between Jess and the divisional marketing manager, Clare, reflects the concerns about the future

of the plant and its products.

Clare: We can’t afford to carry plants that don’t show a profit. We shut down one last month

because it couldn’t handle the competition.

Jess: Our compound V-312 has a reputation for quality and value – we have a very pure

product. It has been a mainstay for years. I don’t understand what’s happening.

Clare: I just received a call from one of our major customers concerning V-312. He said that

a sales rep from a competing firm had offered the chemical at $10 per kg – about $6 less

than our price. It’s hard to compete with prices like that. Perhaps the plant is simply obsolete.

Jess: No. I don’t agree. We have good technology and I think we’re efficient. It’s costing us

just over $10 to produce V-312 and I don’t see how competitors can afford to sell it so

cheaply. I’m not convinced we should match their price. Perhaps we should produce and sell

more of T-415 as it has a high margin and we have virtually no competition for it. We

recently increased the price per kg, and our customers didn’t blink an eye. 2

ACC20007 Management Accounting for Planning and Control

Clare: You may be right. I think we could raise the price of T-415 further and not lose

business. I contacted a few customers to see how they would react to a 25% increase, and

they all said they would purchase the same quantity as before.

Jess: It sounds promising. However, before making a major commitment to T-415, I think we

should explore other possible explanations. The market potential for T-415 is much less than

V-312. I want to know how our production costs compare to our competitors. Perhaps we

could be more efficient and find a way to earn a better return on V-312. Besides, my

production people hate producing T-415, as it’s difficult to produce.

After this meeting Jess requested an investigation of the production costs and comparative

efficiency. Independent consultants were hired. After three months, the consulting group provided

the following information on the plant’s production activities and costs associated with the two

products.

V-312 T-415

Production (kilograms) 1,000,000 200,000

Selling price $15.93 $12.00

Overhead cost per unit* $ 6.41 $ 2.89

Prime cost per kg $ 4.27 $ 3.13

Number of production runs (number of set ups) 100 200

Receiving orders 400 1,000

Machine hours 125,000 60,000

Direct labour hours 250,000 22,500

Engineering hours 5,000 5,000

Material handling (number of moves) 500 400

* Calculated using a plant-wide rate based on direct labour hours, which is the current way of

producing the plant’s overhead to its products.

The consulting group recommended switching the overhead assignment to an activity-based

approach. It maintained that activity-based costing assignment is more accurate and will provide

better information for decision making. To facilitate this recommendation, the plant’s activities were

grouped into homogenous sets based on common cost drivers. The costs of these pooled

activities follow: 3

ACC20007 Management Accounting for Planning and Control

Overhead pool *

Setup costs $ 240,000

Machine costs $1,750,000

Receiving costs $2,100,000

Engineering costs $2,000,000

Material handling costs $ 900,000

$6,990,000

* The pools are named for the major activities found within them. All overhead costs within each

pool can be assigned using a single driver (based on the major activity after which the pool is

named).

Required:

1. Verify the overhead cost per unit reported by the consulting group using direct labour hours

to assign overhead. Compute the $per unit gross margin per product.

2. Using Activity Based Costing recompute the unit cost of each product and the $/per unit

gross margin for each product.

3. Should the company switch its emphasis from the high volume product to the low volume

product? Why? Comment on the validity of the plant manager’s concern that competitors are

selling below the cost of producing compound V-312.

4. Explain the apparent lack of competition for T-415. Comment also on the willingness of

customers to accept a 25% increase in price for this compound.

5. Describe what actions you would take based on the information provided by the activity

based unit costs.

Part B: Mosby Design and Manufacturing (20%)

Mosby Design and Manufacturing is currently manufacturing part RB911, producing 40,000 units

annually. The part is used in the production of several products made by Mosby. The cost per unit

for RB911 is as follows:

Direct materials $ 9.00

Direct labour $ 3.00

Variable overhead $ 2.50

Fixed overhead $ 4.00

l $18.50 4

ACC20007 Management Accounting for Planning and Control

Of the total fixed overhead assigned to RB911, $88,000 is direct fixed overhead (the lease of

production machinery and salary of a production line supervisor – neither of which will be needed

if the line is dropped). The remaining fixed overhead is common fixed overhead. An outside

supplier has offered to sell the part to Mosby for $16. There is no alternative use for the facilities

currently used to produce the part.

Required:

1. Should Mosby make or buy part RB911? Justify
2. What is the most Mosby would be willing to pay an outside supplier?
3. If Mosby bought the part, by how much would income increase or decrease?

Now suppose that all of the fixed overhead is common fixed overhead.

4. Should Mosby make or buy part RB911? Justify why/why not.
5. What is the most Mosby would be willing to pay an outside supplier?
6. If Mosby bought the part, by how much would income increase or decrease?

Part C: Role of management accounting (20%) 500 words

Based on your findings in Part A and B, comment on the role of the management accountant in

decision making. Include a discussion on the importance of unit costs, accurate costing, choosing

the best method of assigning overhead costs and relevant costs.

Presentation (12%)

Suggested report structure:

1. Title Page
2. Executive Summary
3. Introduction and Purpose of Analysis
4. Part A: W. White Chemicals
5. Part B: Mosby Design & Manufacturing
6. Part C: Role of Management Accountant and Conclusion
7. Appendices
8. Bibliography

The Executive Summary should be no more than 250 words and should include:

 a brief discussion of the aim and scope of the report

 a brief discussion of each company

 a brief discussion of key findings and recommendations.

All sources should be appropriately cited and referenced in the Harvard style.

5

ACC20007 Management Accounting for Planning and Control

Assessment criteria

1. Correct answers:

 Part A: W. White Chemicals (48%)

 Part B: Mosby Design & Manufacturing (20%)

 Part C: Role of Management Accounting (20%)

 

2. Presentation (12%)

 All sources should be appropriately cited and referenced in the Harvard style.

 Marks will be awarded for clear and professional report structure, style, grammar,

spelling and punctuation.