Research School of Accounting
BUSN7031
Management Accounting & Cost Analysis
TEAM CASE STUDY (25%)
Due Date:
4 p.m. Wednesday 10th May 2023
Aston
BUSN7031 Management Accounting & Cost Analysis Semester 1 2023 Team Case Study
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TEAM MEMBERSHIP
This Team Assignment must be submitted in teams of either TWO, THREE or FOUR
members. The final submission will be assessed on its merits irrespective of the number of
members in a team.
Individual assignments will NOT be accepted unless there are exceptional circumstances
and prior approval. All requests for completing the assignment as an individual MUST be
made in writing, with reasons, to the course coordinator by 1st May 2023.
LEARNING OUTCOMES
The primary objectives of the assignment are to examine your ability to:
(a) analyse and provide recommendations to improve the operations of organisations through
the application of management accounting techniques,
(b) apply techniques associated with costing systems, cost management systems, budgeting
systems and performance measurement systems,
(c) appreciate the need for a balance between financial and non-financial information in
decision making, control and performance evaluation applications of management
accounting,
(d) learn within teams – to cooperate with team members, to assume leadership and to manage
differences and conflicts, and
(e) tolerate ambiguity in managerial and organisational problem-solving
Consequently, you should be able to analyse complex issues, to formulate well-reasoned and
coherent arguments and to reach well-considered conclusions. Also, you should be able to present
these conclusions via a written format appropriate for the real-life business environment, and be
able to perform the necessary processes to prepare internal reports for decision-making purposes.
MARKS ALLOCATION - REPORT
Requirements 1 to 4 80 marks
Overall format, language and presentation 20 marks
TOTAL MARKS 100 marks
NOTE: All submissions are assessed on a team basis, i.e., all members of the team will receive
the same score.
SUBMISSION
This group assignment is due no later than 4 p.m. on the due date. ALL assignments are to be
submitted via Turn-it-in on Wattle by 4.00 pm on the due date. A group assignment cover sheet
should be attached to the assignment. Do not submit your assignment to your tutor or lecturer;
assignments delivered in this manner may be deemed non-submissions. Non-submission of an
assignment will preclude you from qualifying for further assessments.
BUSN7031 Management Accounting & Cost Analysis Semester 1 2023 Team Case Study
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POLICY ON EXTENSIONS
All requests for assignment extensions must be made in advance of the due date to the course
coordinator. Significant reasons must exist for an extension and supporting medical evidence may
need to be provided.
LATE ASSIGNMENT
Late assignments attract a 5% penalty per working day or part thereof and are not accepted after
the tenth working day after the due date.
GENERAL INSTRUCTIONS
 This assignment can be completed in teams of either 2, 3 or 4 students. It is expected that each
team will manage the tasks required for the assignment in a way that ensures all members
contribute fully and effectively to the completion of the assignment. All members of the team
will receive the same score.
 Only ONE assignment is required to be submitted per team.
 Please remember to retain the original computer file (including the completed cover page)
for your own reference and as insurance in the event that a copy of your assignment is
requested.
FORMAT AND PRESENTATION
You should ensure that your assignment is well-presented and is as clear and concise as possible.
Presentation includes formatting and layout considerations to suit a professional business report,
which assist in conveying information to the reader in a manner that is easy to follow. Ensure that
you appropriately cross-reference your work. Also, if you draw on information from other
sources, ensure that you apply an appropriate referencing style consistently.
Your assignment must be word-processed, on one side of the page, using the Times New
Roman font size 12 (or equivalent). The line spacing must be at least a line and a half and there
must be a minimum page margin 2.5 cm on all sides. Round figures to 2 decimal points
where necessary. Please use the Group Assignment Cover Sheet (available from Wattle)
when submitting your assignment.
QUERIES
All the necessary information you require to complete this assignment is provided in this
document and the case study itself. It is recommended that you use Microsoft Excel or equivalent
to complete this assignment due to its mathematical nature. Please do not directly approach
individual staff with queries about the assignment. Should it be necessary to ask a question
about the assignment, you should email your question to your course coordinator Dr. Alex Wang
(alex.wang@anu.edu.au). Please note that any queries received after 12pm Friday 5th May 2023
will not be answered.
BUSN7031 Management Accounting & Cost Analysis Semester 1 2023 Team Case Study
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INTRODUCTION
You are part of a team of consultants employed by AB Consultants. The principal, Rebecca
Wong, calls a meeting with your team to brief you on a new client, Aston.
THE CLIENT: Aston1
Aston Ltd. is a subsidiary of Empire Group, a large manufacturer of glass products headquartered
in Europe. Although originally established as an industrial-glass producer, Aston reinvented itself
after the Second World War as a producer of fine glass and crystal ware, including tableware and
other similar products. The company enjoys an international reputation as a high quality producer
of glass at affordable prices owing to the skills of its master craftsmen, as well as the application
of innovative technology in the manufacturing process. Aston-ware is used in fine restaurants,
hotels, and residences throughout the world.
Several years ago, management at Aston Ltd. recognised that growth in the glass tableware
market was beginning to slow, forcing the company to search for other growth opportunities.
After extensive research, management concluded that expanding into glass ornaments would
allow the company not only to continue to grow, but also to take advantage of Aston Ltd.'s unique
capabilities and capitalise on its high quality reputation and innovative technology. The company
started Aston and leased a small manufacturing facility in Australia. Aston produces three
products at this manufacturing facility: small glass ornaments, large glass ornaments, and
specialty glass ornaments. Some basic information about the three products is provided in Table 1.
Table 1: Product Information
Product
Number of ornaments
(Planned Production) Ornaments per Box Selling Price per Box
Small coloured glass 840,000 12 A$ 9.00
Large coloured glass 600,000 6 A$ 11.00
Specialty ornaments 200,000 1 A$ 17.00
Costing at Aston
Currently, the sales department sets Aston's prices for the three products after benchmarking
against the prices of similar products available in the marketplace. The General Manager of
Aston, Tom Higgins, wonders if the prices set are sufficient to ensure that the individual product
lines are profitable. He thinks that the company needs to prepare an analysis of unit-product costs
for each of Aston’s three products. He thinks this might be helpful in determining whether any
adjustments in the product prices are warranted.
Tom’s nephew, Richard, is currently gaining work experience as an intern at Aston. Richard’s
long term ambition is to be an accountant and has attended a few book-keeping courses while
finishing high school. Tom thinks that this is a great opportunity for Richard to learn about cost
accounting and asks him to collect as much information as he can about the manufacturing
processes and costs at the company.
1 Adapted from a case by Allen et. al. (2005).
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Richard has collected quite a bit of information, including the factory’s annual overhead cost
(Table 2), and information on each of the three products (Table 3), but does not know what to do
with all this information. He presents these tables to Tom. Tom praises Richard for the good work
in collecting the information but he himself is unsure what to make of the information. He thinks
Richard now needs to go and speak to the manufacturing department and the book-keeper to
gather more insights into the manufacturing process and the costing of the products.
Table 2: Factory's Annual Overhead Costs
Item Annual Cost
Production Scheduling $170,000
Machine Setups $320,000
Equipment depreciation $440,000
Factory depreciation $300,000
Quality inspection $140,000
Packaging $670,000
Factory administration $300,000
Total $2,340,000
Table 3: Additional Information for each Product
Product Number
of
batches
Machine
Operations
per Ornament
Inspections
per Box
Factory Area
per Box
(m2)
DM & DL
per Box
Small coloured glass
1,600 4 1 0.090 $4.00
Large coloured glass
1,500 4 2 0.045 $5.00
Specialty ornaments
1,000 5 4 0.018 $7.00
First, Richard decides to speak to Anna, the book-keeper. Anna tells him that historically, the cost
per box of each product, is calculated using a volume-based costing system. Specifically,
budgeted overhead has been allocated to each product line based on the planned production of
ornaments. More recently, Anna has tried to allocate overhead to each product based upon the
total of direct material and direct labour costs as she thinks this approach better approximates the
actual use of the overhead resource by each product line.
After meeting with Anna, Richard speaks to Jackson, the head of the manufacturing department.
Richard learns that, while all three ornaments are made on the same production lines, specialty
ornaments require an additional painting process. In the specialty-painting department, 24 workers
are fully utilised for hand-painting intricate designs on the inside of each specialty ornament.
Aston also discusses the types of overhead at Aston and the specific activities that could be
generating the company's overhead costs. From these discussions, Richard discovers that both
production scheduling and machine-setup costs appear to be driven primarily by the number of
BUSN7031 Management Accounting & Cost Analysis Semester 1 2023 Team Case Study
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batches required for the annual production volume. Because the number of batches varies by
product type, Jackson concludes that total yearly batches might be an appropriate means of
allocating production-scheduling and machine-setup costs to the different product lines. However,
Jackson has some difficulty ascertaining the cause of equipment depreciation as it is unclear
whether this depreciation occurs because of the number of machine operations performed or
because of the number of hours of machine use. After much deliberation, Jackson decides that the
number of machine operations performed per ornament is the better indicator of equipment
depreciation. Jackson also thinks that factory depreciation could reasonably be based on the
factory area used to manufacture, paint, and store each box. Furthermore, Jackson says that the
number of inspections performed drive inspection costs, while the number of boxes used drive
packaging costs. However, factory administration costs (which include other overheads such as
facilities management, clerical costs, warehouse personnel and activities, and security costs)
appear to be problematic. Jackson is not able to decide how best to allocate these costs but is able
to provide Richard with some historical data that may help with this conundrum (Tables 4 and 5).
Table 4: Historical Data on Possible Allocation Bases
Months Total Factory
Administration
cost
Factory
Personnel
Ending
Inventory
Cost
Number
of
Customers
Total Direct
Labour
Costs
% of Factory
Capacity
Used
1 $25,250 11 $9,998 101 $43,767 71
2 $24,830 11 $9,781 106 $43,346 76
3 $23,988 10 $4,392 93 $46,713 86
4 $23,567 12 $5,892 68 $45,450 91
5 $24,409 10 $6,292 51 $42,084 96
6 $24,750 11 $8,910 99 $42,900 69
7 $24,338 10 $6,643 104 $42,488 74
8 $23,513 10 $5,982 91 $45,788 84
9 $23,100 8 $5,363 66 $44,550 89
10 $23,925 10 $9,405 50 $41,250 94
11 $25,742 10 $9,545 107 $45,955 75
12 $24,410 10 $7,216 50 $42,080 95
Table 5: Factory-related Data
Small Large Specialty Total
Ending Inventory Cost $26,100 $51,300 $12,600 $90,000
Factory Personnel
Non-specialty - - - 98
Specialty - - 24 24
Number of Customers 600 420 180 1200
Total Direct Labour Costs $83,200 $93,600 $343,200 $520,000
% of Factory Capacity Used 70%
BUSN7031 Management Accounting & Cost Analysis Semester 1 2023 Team Case Study
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Richard returns to his uncle’s office in a state of confusion. Tom calms him down and says
because they do not know what to do with all this data, he will enlist outside help. Tom recalls
playing golf with Rebecca Wong, the principal of AB Consultants. After rummaging around to
find Rebecca’s business card, he calls him to set up a meeting to discuss Aston’s situation.
The Job
Tom invites Anna, Jackson and Richard to attend the meeting with Rebecca. At the meeting, Tom
explains Aston’s costing system as described above and alludes to the possibility of expanding its
operations to Singapore. Apart from the issues relating to expansion, Tom’s other concern is
whether the company’s pricing process is appropriate. Anna also raises concerns about the way
the company calculates the cost per box of each product. Specifically, is the volume-based
approach currently being used by the company (based on planned production) or is her approach
(based on the total of direct material and direct labour costs) more appropriate? Rebecca ponders
this for a moment and, reflecting on the additional information collected by Ricard, suggests there
may a third alternative – Activity-Based Costing.
Besides Activity-Based Costing, Enterprise Resource Planning (ERP) system is also discussed in
the meeting. Richard has recently learnt about ERP system from his cousin who is in university
and Tom is also curious about the possibility of implementing the system, especially given the
increasing pressures on prices that Aston is facing nowadays. Rebecca gives a brief introduction
about ERP system and explains in details how ERP system generally works. However, Tom
seems not like the idea and rules out the possibility of adopting ERP system within Aston. As
Tom says “this system looks fancy, but are not suitable to us”. Rather, Tom directs the attention of
the participants towards the discussion of sustainable issues. More and more Aston’s competitor
companies are adopting sustainable practices, which is utilised in the marketing of their products.
This makes Tom worry about whether Aston’s ornament products will lose some competitive
advantage. Tom expresses his worry to Rebecca in the meeting and the general manager wants to
seek Rebecca’s opinion about whether Aston should follow their competitors to adopt sustainable
practices. After listening to Rebecca, Tom exclaims “It sounds like you know what Aston should
do. The job is yours”. Rebecca accepts the assignment, and says she and her team will finish the
job by 10th May 2023.
BUSN7031 Management Accounting & Cost Analysis Semester 1 2023 Team Case Study
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REQUIREMENTS
Your team is required to write a business report to the management, responding to Aston’s
requirements and other issues listed below. Ensure that you follow the format and presentation
guidelines outlined on page 4. The report should be no more than 2,500 words (excluding the
executive summary).
1. Provide the following calculations in suitable report format (Use schedules to show your
calculations): (35 marks)
a. Total manufacturing cost per box for each product using planned production as the
allocation base;
b. Total manufacturing cost per box for each product using the total of direct material and
direct labour costs as the allocation base;
c. Total manufacturing cost per box for each product using Rebecca’s suggestion of
Activity-Based Costing. As part of this calculation, you will need to ascertain the most
appropriate base to allocate factory administration cost, using simple regression. You
may use Excel or a statistical software package. As part of your deliberations, you must
evaluate the suitability of each base using the following criteria to evaluate the
regressions:
- economic plausibility
- goodness of fit
- significance of independent variable (use a t-critical value of 2.228)
- specification analysis: linearity.
In your report, discuss the evaluations for each of the five possible allocation bases
suggested by Aston and, based on your discussion, indicate the allocation base that you
think is most appropriate of the five options.
2. Comparing your calculations using (i) planned production volume, (ii) the total of direct
material and direct labour costs, and (iii) activity-based costing, what comments can you
make about total manufacturing costs and the profitability of the three products? (5 marks)
3. Should Aston adopt an activity-based costing system for its products? As part of your
discussion, you should explain the processes involved in implementing activity-based costing
and consider the advantages, disadvantages and implications of activity-based costing and
activity-based management. (20 marks)
4. Provide a discussion on ERP. As part of your discussion, you should explain the inherent
weaknesses in the design and functionality of ERP system and how ERP vendors can do to
overcome these weaknesses; the barriers that may hinder organizations to implement ERP
system and corrective mechanisms that can mitigate those barriers; how management
accounting information/systems/processes affect or are affected by ERP system and finally
how ERP system can contribute to the development of sustainable business. Besides ERP, are
there any other software/technologies/systems that can be used to improve the management of
Aston and please provide explanations? To complete these questions, you are required to
search relevant scholarly papers or business articles to get some ideas. (20 marks)
__________________________________________________
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ASSESSMENT CRITERIA
Your assignment will be assessed based upon the following criteria:
- compliance with relevant management accounting principles and internal accounting
practices.
- depth and breadth of coverage, critical elements and structure (e.g., level of analysis, level of
research, relevance of discussion), and language and conventions (e.g., consistency with a
professional presentation). See Grade Related Descriptors below. Note: A well written,
structured, and organised report will receive low assessments if it is not relevant to the given
problem and circumstances.
The criteria listed above are not mutually exclusive but are complementary in the overall
assessment of the assignment.
Grade Related Descriptors
Grades Depth and Breadth of
Coverage
Critical Elements Structure, Language
and Conventions
High
Distinction
80% - 100%
All aspects of the issue(s)
were covered in a thorough
way.
The report shows great
depth of thought,
excellent development of
discussion, logical
analysis and insight into
the subject.
All aspects of the report
conform to a high
professional standard.
Distinction
70% - 79%
Most aspects of the
issue(s) were addressed in
great depth.
The report shows some
evidence of analysis,
supported by logical
discussion and insight
into the subject.
Most aspects of the
report conform to a
high professional
standard.
Credit Pass
60% - 69%
Most aspects of the
issue(s) were addressed
adequately.
The report shows
evidence of elementary
analysis and the
development of
discussion.
Most aspects of the
report conform to an
acceptable professional
standard.
Pass
50% - 59%
Key aspects of the issue(s)
were addressed adequately.
The report demonstrates
basic understanding of the
topic.
The report displays
basic report structure.
Fail
<50%
Responses were superficial
and / or inadequately
addressed the issue(s).
The report demonstrates
limited understanding of
the topic.
The report is not of a
professional standard.