ACCT1102:
Introduction to Management
Accounting
Course Workbook
s1 2023
Essential accompaniment for classes and study.
You need a HARD COPY of this document.
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Table of Contents
Topic 1: Management and Cost Accounting ............................................................................... 1
Topic 2: Overhead and Job Costing ............................................................................................ 4
Topic 3: Cost Volume Profit Analysis ......................................................................................... 7
Topic 4: Budgets - Responsibility Accounting & Introduction ................................................... 12
Topic 5: Budgets - Operating Budgets ...................................................................................... 14
Topic 6: Budgets - Financial Statements and Cash ................................................................... 15
Topic 7: Budgets – The Group Assignment ............................................................................... 17
1. LEARNING OBJECTIVES ................................................................................................. 18
2. ADMINISTRATION - INSTRUCTIONS ............................................................................. 18
3. PEER ASSESSMENT SCORING SYSTEM ........................................................................ 20
4. GROUP ACTION PLAN ..................................................................................................... 21
5. THE ASSIGNMENT TASK ................................................................................................. 22
Topic 8: Traditional Overhead Allocation ................................................................................. 35
Topic 9: Variance Analysis and Standard Costing .................................................................... 41
Topic 10: Performance Measurement and Compensation ......................................................... 44
Topic 11: Strategy, Balanced Scorecard and Sustainability ....................................................... 47
Topic 12: Ethics ....................................................................................................................... 50
ACCT1102 Topic 1 – Management and Cost Accounting
1
Topic 1: Management and Cost Accounting
Learning objectives:
❑ Understand key differences between financial accounting and management accounting.
❑ Explain the concept of the control cycle.
❑ Classify costs as direct or indirect.
❑ Analyse costs using the classifications commonly used in manufacturing businesses.
❑ Explain the different definitions of product costs used in external accounting reports and for
internal decision making.
❑ Describe the cost flows in a manufacturing business and prepare a schedule of cost of goods
manufactured, a schedule of cost of goods sold and an income statement for a manufacturer.
❑ Broadly understand how management accounting and systems can relate to effective
organizational behaviours such as value creation, and to business strategies and value chain.
Textbook:
❑ Chapter 1
❑ Chapter 2
Self-Study Questions: 1-1, 1-4, 1-9, 1-19, 1-22, 2-1.
Tutorial Questions: 2-2, 2-7, 2-10, 2-12, 2-21, 2-33, 2-35, 2-37.
Lecture quick check 1
Management accounting:
a. is strictly bound by AASB standards
b. is only relevant for external stakeholders
c. is boring
d. none of the above
Lecture quick check 2
Can you think of an example of when you might have been involved in management accounting
information or a management accounting system?
ACCT1102 Topic 1 – Management and Cost Accounting
2
Lecture quick check 3
What industry sector are each of these businesses in (services, merchandising or manufacturing)?
Business Industry Sector
Kmart
University of Queensland
Nestle
PwC
Kikki.K
Castlemaine Perkins Brewers
Interactive Excel activity 1a
Download and use the Interactive Excel Activities.xlsx
Lecture quick check 4
1. i. Determine the missing amount in each of the independent cases above.
ii. Explain the components of cost of goods manufactured
Case A Case B Case C
Beginning inventory of finished goods 120,000 ? 7,000
Cost of goods manufactured during period 400,000 960,000 ?
Ending Inventory of finished goods 40,000 160,000 25,000
Cost of goods sold ? 1,000,000 280,000
ACCT1102 Topic 1 – Management and Cost Accounting
3
Interactive Excel activity 1b
Download and use the Interactive Excel Activities.xlsx
Lecture demonstration question 1
Direct material (DM) $20
Direct labour (DL) $24
Factory overhead (MOH) $30
Cost-Plus markup 120% of manufacturing cost
Calculate:
a) unit manufacturing cost
b) prime cost
c) conversion cost
d) selling price
Lecture demonstration question 2
Conversion costs amount to 60% of the unit manufacturing cost.
The unit manufacturing cost is $40.00
Direct labour is equal to 40% of prime cost.
Calculate:
a) The unit cost of DM, DL and MOH
ACCT1102 Topic 2 Overhead and Job Costing
4
Topic 2: Overhead and Job Costing
Learning objective checklist
❑ Outline the flow of costs through the manufacturing accounts used in product costing
❑ Use basic techniques to allocate manufacturing overhead costs to products.
❑ Distinguish between job costing and process costing, and understand situations where
these costing systems may be most appropriately used.
❑ Prepare a schedule of cost of goods manufactured and a schedule of cost of goods
sold, and understand the relationship between these reports and external accounting
reports.
Textbook:
Chapter 4
Self-Study Questions: 4-11, 4-12.
Tutorial Questions: 4-1, 4-2, 4-9, 4-13, 4-16, 4-17, 4-19, 4-24, 4-26.
Lecture quick check 1
King Living manufactures different types of lounge chairs. Separate assembly lines are used
for each type of lounge chair. Classify each cost as a direct (D) or indirect (I):
Cost Direct/Indirect?
Cost of fabric used on a specific lounge chair
Salary of public relations manager for King Living
Electricity costs (single bill covers whole factory)
Wages paid to assembly-line worker (paid on hourly basis)
Insurance for factory
Lecture quick check 2
Manufacturing overhead is overapplied when actual manufacturing overhead is:
a. greater than budgeted manufacturing overhead
b. less than budgeted manufacturing overhead
c. greater than applied manufacturing overhead
d. less than applied manufacturing overhead
ACCT1102 Topic 2 Overhead and Job Costing
5
Lecture demonstration question 1
Actual manufacturing overhead $680,000
Budgeted machine hours 15,000
Budgeted direct labour hours 30,000
Budgeted manufacturing overhead $700,000
Actual machine hours 18,000
Actual direct labour hours 29,000
Required:
a) Calculate the predetermined OH rate using:
I. Machine hours
I. Direct labour hours
b) Calculate the over-applied or under-applied OH for the year using each of the cost
drivers.
c) Which cost driver is the most appropriate?
ACCT1102 Topic 2 Overhead and Job Costing
6
Interactive Excel activity 2a
Download and use the Interactive Excel Activities.xlsx
Lecture quick check 3
Which of the following companies are likely to use a process costing system:
❑ Law firms
❑ Custom-designed home builders
❑ Plastic manufacturers
❑ Electricity providers
❑ Food and beverage manufacturers
Lecture quick check 4
Costs added to the production process are accumulated in which account?
a. Raw materials inventory
b. Work in process inventory
c. Finished goods inventory
d. Cost of goods sold
Interactive Excel activity 2b
Download and use the Interactive Excel Activities.xlsx
Interactive Excel activity 2c
Download and use the Interactive Excel Activities.xlsx
ACCT1102 Topic 3 Cost Volume Profit Analysis
7
Topic 3: Cost Volume Profit Analysis
Learning objectives:
❑ Apply the classification of variable and fixed costs.
❑ Apply the concept of relevant range and understand its implications.
❑ Understand and apply the concepts of cost pools, cost objects and cost drivers.
❑ Use Cost-volume-profit analysis to calculate a breakeven point.
❑ Calculate contribution margin and understand the relationship with gross profit and
profit.
❑ Apply CVP analysis to determine effect on profits of changes in fixed costs, variable
costs, sales prices and sales volume.
❑ Include income taxes in CVP analyses.
Textbook:
❑ Chapter 3
Self-Study Questions: 3-4, 3-7, 3-9, 3-10, 3-13.
Tutorial Questions: 3-1, 3-2, 3-3, 3-8, 3-15, 3-16, 3-17, 3-18, 3-19, 3-20, 3-26, 3-51.
Lecture quick check 1
Production Level Total Costs
1 $200
2 $300
Extending the above example, for a Production Level of 3 units, how much would be the VC
per unit, the FC per unit, the total cost (TC) per unit, and the TC?
a. $100 VC per unit, $33 FC per unit, $133 TC per unit, and $400 TC.
b. $100 VC per unit, $100 FC per unit, $200 TC per unit, and $400 TC.
c. $100 VC per unit, $100 FC per unit, $150 TC per unit, and $400 TC.
d. $100 VC per unit, $200 FC per unit, $166 TC per unit, and $500 TC.
ACCT1102 Topic 3 Cost Volume Profit Analysis
8
Lecture demonstration question 1a
Calculate the CM and profit using the following data.
Data:
SP = $5.00
VC = $2.00
FC = $30,000
Units sold = 5,000
Sales Revenue
Less: Variable Costs
Contribution Margin
Less: Fixed Costs
Net Profit/(Loss)
Lecture demonstration question 1b
Calculate the CM Ratio:
Lecture demonstration question 1c
Calculate the Breakeven point in quantity.
Calculate the Breakeven point in sales revenue.
Lecture demonstration question 1d
Use the following data to calculate the number of units that need to be sold in order to earn an
after-tax profit equal to $4,000.
Data:
SP = $5.00
VC = $2.00
FC = $30,000
Tax Rate = 40%
ACCT1102 Topic 3 Cost Volume Profit Analysis
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Lecture demonstration problem 2
The Rich Coffee Company is a single product firm which manufactures and markets
granulated coffee in large containers exclusively for commercial use. The company has
manufacturing capacity of 120,000 units per annum. Details relating to the past 12 months
are as follows
Sales (80,000 Units) $3,600,000
Cost of Sales 2,500,000
Gross Profit 1,100,000
Operating Expenses 620,000
NPBT 480,000
Tax (30%) 144,000
NPAT $336,000
An analysis of manufacturing, selling and
administration costs has revealed that
Variable Costs are $25 per unit sold, while
fixed operating expenses amount to
$220,000 per annum.
i. Restate the above income statement in a Contribution Margin format clearly showing fixed
and variable costs and profits before and after tax. Show any necessary workings.
ii. Calculate the breakeven volume in units for the last period
iii. Calculate the sales volume necessary to achieve an after-tax profit of 10% on the sum of
total cost of sales and operating expenses (based on a selling price of $42 per unit).
Sales (80,000 Units) $3,600,000
Variable Costs
Contribution Margin
Fixed Costs
NPBT 480,000
Tax (30%) 144,000
NPAT $336,000
ACCT1102 Topic 3 Cost Volume Profit Analysis
10
Lecture demonstration problem 3
A firm is considering replacing some of its labour with automated machinery in one of its
product divisions. The machines will cost $800,000 and will be depreciated over 10 years
(straight-line method). Direct labour is expected to be reduced by 50%. The selling price of
the product is $70. Other cost information is as follows:
Direct Materials $5 per unit
Direct Labour $20 per unit
Factory Overheads $86,000 + $4 per unit
Selling & Admin $54,000 + $6 per unit
Required:
i. Determine whether this would increase profit based on the current output of 9,000 units per
year.
Current Proposed
Sales Revenue
Variable Costs
Contribution
Margin
Fixed Costs
Net Profit/(Loss)
ACCT1102 Topic 3 Cost Volume Profit Analysis
11
Interactive Excel activity 3a
Download and use the Interactive Excel Activities.xlsx
Interactive Excel activity 3b
Download and use the Interactive Excel Activities.xlsx
Interactive Excel activity 3c
Download and use the Interactive Excel Activities.xlsx
ACCT1102 Topic 4 Budgets: Part 1 of 4
12
Topic 4: Budgets - Responsibility Accounting & Introduction
Learning objectives:
❑ Understand how budgeting fits into the wider strategic planning processes of an organisation.
❑ Explain the major purposes of the budgeting process.
❑ Understand how budgets are developed and used in responsibility accounting systems.
❑ Understand the various components that make up an annual budget.
❑ Describe a typical organization’s processes of budget administration.
❑ Discuss human aspects of budgeting: budgetary slack, kaizen budgeting and stretch goals.
Textbook:
❑ Chapter 6 (including appendix)
Self-Study Questions: 6-1, 6-2, 6-4, 6-11, 6-13, 6-22, 6-32, 6-33.
Tutorial Questions: 6-4, 6-5, 6-9, 6-19, 6-21, 6-23, 6-25, 6-26, 6.39.
Lecture quick checks 1 - 3:
1. Budgeting is the common accounting tool companies’ use for planning and controlling. Budgets
a. provide a measure of planned financial results.
b. are prepared independent of the company’s long-term strategies.
c. do not usually reflect actual results, so they are a useless exercise.
d. serve as the financial expression of management’s plans for the upcoming period.
2. Which of the following is not a major benefit of budgets?
a. Compels planning
b. Eliminates innovation
c. Provides performance criteria
d. Promotes coordination and communication
3. The master budget consists of operating budgets and financial budgets. The operating budgets
include:
a. sales budgets and various cost budgets
b. sales budgets and budgeted cash flow
c. income budget and budgeted cash flow
d. income budget and various cost budget
Interactive Excel activity 4a
Download and use the Interactive Excel Activities.xlsx
ACCT1102 Topic 4 Budgets: Part 1 of 4
13
Lecture quick checks 4 - 7:
4. Which of the following is true of responsibility accounting?
a. It is a system that measures the plans, budgets, actions, and actual results of responsibility
centers.
b. It is an arrangement of lines of responsibility and authority within a responsibility center.
c. It is a process of fixing blame for unexpected poor results.
d. It examines how a result will change if the original plan is not achieved.
5. The major cost management concept used in Kaizen budgeting is that of
a. eliminating inventories of every type but materials.
b. refinements in the indirect-cost categories for costing systems.
c. continuous improvement.
d. sensitivity analysis using computer-based financial planning models.
6. Controllability
a. is always clear cut as to who has responsibility for a cost.
b. is another term for responsibility.
c. is the responsibility of the corporate controller.
d. is the degree of influence a specific manager has over costs, revenues, and other items.
7. Budgetary slack
a. is going to be included in budget estimates, so it should just be ignored.
b. provides managers with a hedge against unexpected circumstances.
c. should be totally eliminated from the budget.
d. is not found in governmental budgets.
Interactive Excel activity 4b
Download and use the Interactive Excel Activities.xlsx
ACCT1102 Topic 5: Budgets: Part 2 of 4
14
Topic 5: Budgets - Operating Budgets
Learning objective checklist:
❑ Understand how an operating budget fits into a master budget and financial statements
budgets.
❑ Understand how the various components make up an operating budget:
▪ Sales (or revenue) budget
▪ Production budget in units
▪ Direct materials budget
▪ Direct labour budget
▪ Manufacturing overhead budget
▪ Ending inventory budget
▪ Cost of goods sold budget
▪ Selling and administration budget
❑ Produce a basic operating budget based on information provided.
Textbook:
Chapter 6 (including appendix)
Self-Study Questions: 6-16, 6-17, 6-18.
Tutorial Questions: 6-8, 6-27, 6-28.
Download and use RoyalCo Operating Budget.xlsx.
Interactive Excel activity 5a
Download and use the Interactive Excel Activities.xlsx
This is the Try It exercise from the Textbook
Interactive Excel Exercise: WindowCo operating budget
Download and use the WindowCo Operating Budget.xlsx.
In the next topic we will finish this exercise for the financial statement budgets.
ACCT1102 Topic 6: Budgets – Financial Statements and Cash
15
Topic 6: Budgets - Financial Statements and Cash
Learning objectives:
❑ Understand how financial statements and cash budgets are related to master budgets.
❑ Understand and produce basic:
• Income statement budgets
• Balance sheet budgets.
• Cash budgets.
Textbook:
Chapter 6 (including appendix)
Self-Study Questions: 6-20.
Tutorial Questions: 6-10, 6-15, 6-42, 6-43.
Download and use RoyalCo Financial Budget.xlsx.
Lecture quick check 1
a. If we record a transaction to increase an Asset account, is it a debit or credit?
b. If we record a transaction to increase a Liability account, is it a debit or credit?
c. If we record a transaction to increase a Revenue account, is it a debit or credit?
d. If we record a transaction to increase an Expense account, is it a debit or credit?
e. If we record a transaction to increase an Equity account, is it a debit or credit?
f. Do we debit or credit accounts for the cash flow statement?
Interactive Excel activity 6a (cash budget)
Download and use the Interactive Excel Activities.xlsx
Interactive Excel activity 6b (cash budget)
Download and use the Interactive Excel Activities.xlsx
Interactive Excel Exercise: WindowCo financial statements
Download and use the WindowCo Financial Budget.xlsx
This finishes this exercise from last topic where we did the operating budget for WindowCo.
Interactive Excel activity 6c (master budget)
ACCT1102 Topic 6: Budgets – Financial Statements and Cash
16
Download and use the Interactive Excel Activities.xlsx
ACCT1102 Topic 7 - Budgets: GROUP ASSIGNMENT
17
Topic 7: Budgets – The Group Assignment
Interactive Excel Exercise: Stylistic Master Budget from Textbook
Download and use the Stylistic Master Budget Draft 1.xlsx
Redrafting the Stylistic Furniture Master Budget
Textbook:
❑ Chapter 6 (including appendix)
Tutorial Questions: RoyalCo Budget Redraft Tutorial Exercise.xlsx
Before your group starts working on the group assignment:
• Re-watch the recording for Lecture 7 and do all the activities.
• Do all the Tutorial Questions for Tutorials 4 – 7.
ACCT1102 Topic 7: Budgets - GROUP ASSIGNMENT
18
Group Assignment (30%)
CONTENTS
1. LEARNING OBJECTIVES ....................................................................................... 18
2. ADMINISTRATION - INSTRUCTIONS ................................................................... 18
3. PEER ASSESSMENT SCORING SYSTEM .............................................................. 20
4. GROUP ACTION PLAN ........................................................................................... 21
5. THE ASSIGNMENT TASK ....................................................................................... 22
1. LEARNING OBJECTIVES
1. Gain experience in preparing a ‘real-world’ master budget.
2. Develop skills in using Excel spreadsheet functionality to design and organize a
complex budget model that is presentable, easy to navigate, and configured to easily
perform sensitivity analysis and goal seek.
3. Develop skills in business style communication by preparing Word and PowerPoint
files for the budget.
4. Gain experience in working in a group to perform a ‘real-world’ activity.
2. ADMINISTRATION - INSTRUCTIONS
You MUST complete the learning activities for Topics 4-7 (all four budgeting topics)
before starting the assignment.
2.1 Key dates:
April 5th Seminar for Topic 7 includes an assignment overview.
April 5th Deadline to form groups.
May 2nd Formative feedback window opens.
May 9th @ 3pm Formative feedback window closes.
May 12th @ 3 pm Deadline to submit three files by email and to TurnItIn.
May 22nd – 26th Student Presentations in Tutorials
ACCT1102 Topic 7: Budgets - GROUP ASSIGNMENT
19
2.2 Files:
Your tutor will email your group a Stylistic Budget Draft 1.xlsx individualized
with distinct nuances (no cheating between groups will be tolerated).
From BlackBoard, download Essential Excel Functions for Management
Accounting.pdf. This is a must for all students.
2.3 Groups:
• See Announcements on BlackBoard for instructions on forming groups.
• Your final submission must include Peer Assessment Scores (see below).
2.4 Formative feedback window
• During the formative feedback window, your group can send a SINGLE email
of your draft file(s) to your tutor (you do not have to submit all three files).
• The formative feedback uses the Marking Rubric (see end of this document) –
you will receive a score for each marking criteria and out of the total of 30.
• This formative feedback from your tutor is in addition to the automated
formative feedback panels in the Excel file (discussed later).
2.5 Submission process for May 19th:
Email submission:
• One group member emails the three submission files (Excel, Word and
PowerPoint) to your tutor in an email that MUST cc in all group members.
TurnItIn submission:
• One group member submits to TurnItIn (see BlackBoard for instructions).
Late submissions:
• Late submissions, for which no extension was granted prior to the due date,
will incur a penalty of 10% of the total assessment mark per calendar day late.
2.6 Peer assessment scores:
• You MUST complete the first worksheet in your Assignment Template.xlsx -
the Peer Assessment Scores (discussed next page in this document).
2.7 Discussion Board and where/how to ask questions:
• Please ask questions on the Discussion Board on BlackBoard.
GROUP ASSIGNMENT
20
3. PEER ASSESSMENT SCORING SYSTEM
The table below is in the first worksheet of the your Stylistic Budget Draft 1.xlsx (emailed to your group by your Tutor)
Group work is an important part of business education. The purpose of group work goes beyond the requirements of the group project itself. Group work is also intended to develop awareness
of the dynamics of teamwork and your role in a team environment. In undertaking group work it is expected that each team member will communicate with other team members in a
professional and courteous manner. Resolving any conflict or difficulties that arise within the team is also part of the group dynamics that may emerge during the project.
It is expected that each team member will take responsibility for managing and reducing any conflict that may arise. If the team members are unable to resolve tensions or conflicts then this
MUST be discussed with your tutor as soon as it becomes obvious that a resolution within the team cannot be agreed. In the learning environment of group work we are seeking to ensure that
you develop and demonstrate both academic skills and important group work skills such as:
• Commitment to working with others (e.g., undertaking a fair share of the work, sharing ideas, doing the tasks allocated, attending meetings)
• Collaboration and inclusiveness (e.g., encouraging and respecting others; recognising skills and valuing the contribution of others, helping resolve conflicts)
• Contribution to establishing and working towards a common outcome (e.g., establishing and supporting team goals, plans, rules, roles, decisions)
First Name Last Name
Student
Number
(a)
Student 1
(b)
Student 2
(c)
Student 3
(d)
Student 4
(e)
Average of (a):(d)1
1 % % % % %
2 % % % % %
3 % % % % %
4 % % % % %
Total = 100% Total = 100% Total = 100% Total = 100% Total = 100%
If you have assigned group members non-equal percentages, you must be prepared to provide a statement explaining why you believe a group member/group members have not contributed
their fair share to the project, a breakdown of tasks you and others have completed in the project, an estimate of the time you think each of those tasks has taken and any other positive or
negative contributions made by you and others. This information will be shown to other group members so that they have an opportunity to respond. While each group member’s comments
will be taken into consideration, the final decision on how the marks are awarded will remain the right of the tutor.
1 The averages in this column are weights for distributing the group mark for the assignment. For example, if there is a group of 4 students, and each has an average of 25% in this
column, with a group mark for the assignment of 20, each student would receive an individual mark of 20. For example, if there is a group 2 students, and in this column student one
has an average of 66.67% and student two has an average of 33.33%, with a group mark of 20, student one would receive an individual mark of 26.67 and student two would receive
an individual mark of 13.33. With this method, a student can receive an individual mark higher than the maximum possible (i.e., 100%) group mark.
GROUP ASSIGNMENT
21
4. GROUP ACTION PLAN
As the first step in your group assignment, you are strongly advised to prepare a group action
plan. This will help your group stay on task and coordinate different subtasks. The process of
group action planning encourages team members to:
• Explicitly articulate their expectations of the substantive content of each subtask of the
assignment.
• Decide upon the subtasks required to complete the assignment.
• Arrive at shared expectations amongst the team about the content of your assignment.
• Have a clear sense of what the group is trying to achieve and who is responsible for what.
It is up to you how you structure your group action plant. At least include:
a. A list of the tasks and subtasks required to complete the assignment
b. Designation of who is responsible for each task and subtasks
c. Expected completion date for each task and subtask
d. Communication commitments: how and when communication will take place, what is the
maximum allowable reply/response time to emails/texts.
e. Managing under-performance: what will you do if someone feels that others are not doing
their job? Consider agreeing to the following processes:
• The concerned group member(s) will approach the relevant under-performing
member one-on-one, offline and discuss their concerns in a calm, respectful manner.
• The concerned group member(s) will seek to understand the reasons why the under-
performing group member is not fully participating.
• If the one-on-one meeting does not resolve the issue, the concerned group member(s)
can request that the issue be included on the agenda for discussion at the next group
meeting.
• In the event that one or more group members continues to not live up to
responsibilities, the group agree that the under-performing group member(s) will
receive a negative peer evaluation from other group members.
Do not submit your group action plan – it is for your group only.
GROUP ASSIGNMENT
22
5. THE ASSIGNMENT TASK
Redrafting the Stylistic Furniture Budget
You are a group of trainee management accountants working for the CFO at Stylistic Furniture.
Your assignment task has three requirements:
1) Redraft the budget Excel model using information provided.
2) Concisely communicate the redrafted budget in a business style Word report.
3) Concisely communicate the redrafted budget in a PowerPoint presentation.
Context
Stylistic is trying to finalize a 2024 budget that aligns with its strategic plan profit aspiration. Draft
1 of the budget was rejected by the board of directors. The following is a recent conversation between
the CEO and CFO about needing to do draft 2 of the budget.
Sally (CEO): “I have news. The board of directors has just agreed we can change the business
strategy from two product to single product in 2024. They want us to go ahead and propose
to them a draft 2 of the 2024 budget on that basis.”
John (CFO): “Hopefully this transformative change to our business strategy will give us a workable
basis for achieving the strategic plan profit aspirations in 2024.”
Sally: “You and I must present budget draft 2 at the next board of directors meeting and hopefully
get their approval for it. As usual, I want to email the board of directors a Word report for pre-
reading before the meeting. And then of course we need a PowerPoint presentation for you
and I to present at the board meeting. You really must make these documents as concise and
comprehensive as possible. And, of course, it goes without saying, that the Excel model better
be calculated correctly. I want the board of directors to be totally comfortable with what we
are presenting and be left with no doubts. With this strategic change we are already facing
some doubts from some directors about our managerial competencies.”
John: “In the report and presentation we need to make clear several points. The two product strategy
differentiator was losing competitive fitness because all of our main competitors were
pursuing a similar strategy. That opens up the opportunity for us to make a rapid change to a
single product cost leadership strategy. The report and presentation need to communicate how
we are proposing to implement the strategic change explicitly in dollar terms. At the end of
2023 we will cease selling both Casual and Deluxe tables. On day one of 2024 we will start
only selling Casual tables, we will drop the selling price, and change some fixed marketing
expenses for advertising. We have more than enough spare manufacturing capacity that we
can use to increase our manufacturing and sales volumes. Currently we have high fixed costs
that we are not spreading over enough sales volume, and this is what is really holding us back
from hitting our strategic plan profit aspirations. This will hopefully help us achieve the cost
leadership capability to rapidly grow sales volumes and unexpectedly and aggressively take
market share.”
Sally: “With our change to a single product cost leadership strategy we do not need to design new
products – so cut those costs out of the budget. Our current products are currently quite
innovative. Over time they will become less innovative relative to the new product designs
GROUP ASSIGNMENT
23
our competitors will likely introduce but that is consistent with us taking a single product-
based cost leadership strategy.”
John: “Profitability will depend on absorbing the higher fixed costs across more sales volume. We
need to concisely and comprehensively communicate what fixed costs are being added to
implement the cost leadership strategy, and we need to clarify which are committed costs, like
capital expenditure, and which are discretionary, like advertising, that we can avoid in future
if things don’t go to plan.”
Sally: “We need to know how the updated draft budget compares to this year’s full year forecast, and
to the budget draft 1, and to the strategic plan. We need to present four cases. First, the base
case is for Casual tables only, to align with the 2024 strat plan profit. Second, for Deluxe
tables only, to align with the 2024 strat plan profit. Third, for Casual tables only, to breakeven.
Second, for Deluxe tables only, to breakeven.”
John: “No worries, boss. Hopefully my management accountants will manage their time effectively
and have the ability to do some supplementary analysis and some graphs to help inform us
about some of these profitability uncertainties. We need to analyse the volume and cost
changes in detail between draft 1 and draft 2. It is good to know that we have ample
manufacturing and distribution capacity for the new strategy.”
Sally: “Are you sure management accountants are up to this task?”
John: “Well if they don’t do it effectively it will be me who is ultimately responsible. It’ll be my
head on the chopping block. I will have to check it thoroughly. I have already sourced all the
information we need for draft 2, so we can start working on it straight away.”
GROUP ASSIGNMENT
24
Requirement 1: Redraft the Budget Excel Model
Your group’s individualised Excel file (emailed to you by your tutor) will have the same numbers
as the Stylistic Master Budget.xlsx from the Textbook and Lecture 7. This is draft 1 of the budget
and it is the basis for you to develop draft 2. It will have four more inserted worksheets:
Worksheet #1: Strategic Change Information
Contains data for draft 2.
Worksheet #2: Sensitivity Analysis Table
For designing the Excel model to be ‘driven’ by the Live Case. Use goal seek for all cases.
To populate, copy and paste-values from the Live Case. (See the recording of Lecture 7 for
how to do this – BEFORE you start your Excel modelling).
When you submit your Excel file set the Live Case in worksheet #2 to the Base Case – then
all the other tables in the workbook (e.g., Executive Summary) will also have the Base Case
(the Base Case is Casual tables with a volume that aligns the draft 2 budget profit to the
2024 Strategic Plan profit).
Worksheet #3: Executive Summary Tables
Contains two tables that you need to dynamically link to feed off the Live Case modelling.
Worksheet #4: Supplementary Analysis (for Tables and Graphs)
Design no-more-than two Supplementary Analysis Tables, and no-more-than two
Graphs/Charts (quality not quantity). Some suggestions for Tables and Graphs are provided
in Worksheet #4. See Marking Rubric criteria 1.6 and 1.7. Add extra worksheets if needed.
Suggested sequence of steps:
Step 1: Use the data in worksheets #1 and #2 to convert the model to draft 2 – link it into
relevant tables by adding cells/rows/columns and updating existing formulas. Preserve the
structure and formatting of the Excel model - the CFO will be confused and angry if you
change or rearrange it. Use the automated formative feedback panels (discussed later).
Step 2: Complete the goal seek process for the Base Case in Worksheet #2. Use the formative
feedback panels (discussed later).
Step 3: Link your Executive Summary tables in worksheet #3 into the model. Use the
formative feedback panels (discussed later). When you submit, set the Live Case to be the
Base Case (so your model is reporting the base case for draft 2).
Step 4: Design and add Supplementary Analysis tables and graphs.
Note: When you transition to developing your Word and PowerPoint files you may find you
need to redevelop and refine your Supplementary Analysis tables and graphs.
GROUP ASSIGNMENT
25
Automated Formative Feedback Panels - in the Excel file.
There are automated formative feedback panels in five worksheets:
• Cashflow
• Net Income Statement
• Balance Sheet
• Sensitivity Analysis
• Executive Summary
The panels have cells shaded red with white font. Aim to get all these to have zero error
variances - then you will have calculated the draft 2 budget correctly!!! Do not delete any of the
panels - your Tutor needs them for marking.
Tips on producing a business style Excel model.
Your Excel model should be detailed but well organized. It takes time and refinement to format financial
tables to a high standard. Apply the following guidelines:
• Use consistent formats within and across tables.
• Do not use colour shading: stick to ‘plain and simple black and white.’
• Use $ very sparingly.
• Excel table extracts should be appropriately formatted, e.g., present figures in $M (for example,
$0.18M for $180,000, or $1.2M for $1,180,000).
• A general rule is that the minimum font size of tables in the Word report should be size 10.
• Limit the use of decimal points (every number in a table takes time and attention to read and it is
very easy for a reader to quickly get information overload and lose sight of what is essential high-
level information versus what is just low-level detail). Do not use 'rounding' functions in Excel.
Excel defaults to calculating based on ~15 decimal points. When you format the cells in Excel,
minimize the presentation of decimal figures as much as possible (e.g., a value of
'2.12345678912345000000000' might be used for calculating but format the decimal points to
show that value as '2.1'). Use the formatting protocols that come with the Financial Model
Template File and use the Format Painter function.
• Cut out duplication in your model (to avoid it being unnecessarily complicated and large).
• Be consistent with using $000's.
• Tidy up the formatting when you have 'fresh eyes'.
GROUP ASSIGNMENT
26
Requirements 2 and 3: Communication of the Redrafted Budget
The CFO will be the immediate audience for your updated draft budget. They will need to be
comfortable that the calculations are correct and concisely communicated. When they are comfortable
they will pass it onto the CEO. Assume that the CEO will only look at the Word and PowerPoint files
(only the CFO will look at the Excel model).
The aim is to clearly communicate the redrafted budget in terms that address the points of interest
and concerns raised by the CEO and CFO in the Context section at the beginning of this document.
The sensitivity analysis and any further analysis should inform this communication.
Requirement 2: Written Report
The report must be based on tables and information you extract from your Excel model.
Use a formatting style similar to this document – aim for 4 to 7 pages in length (this length does
not include Appendices).2 Your report should be concise and comprehensive:
• Choose words deliberately and precisely.
• Refer to and discuss key numbers from tables extracted from Excel.
• Construct paragraphs and sentences carefully to eliminate unnecessary words.
• Use grammar properly.
• Get straight to the points in ways the audience can easily comprehend.
• Use white space strategically to help readers understand how the parts make up the whole.
Use the following report structure:
Cover page (page 0): title plus student names/numbers
Executive summary (page 1): including copies of the two executive summary tables from
the Excel model.
• Start with a purpose that clearly summarizes the ‘what, how, why and when’ for the report:
the first sentence should start with “The purpose of this report is...”.
• Use positive language.
• Include and refer to the executive summary table. For example, text you might include is,
“With the increase in volumes, revenue has increased by M$a.aa (yy.y%) and profit has
increased M$b.bb (xx.x%) ….”
• The executive summary including tables should be no more than one page.
• When writing the report it is recommended you do the Executive Summary last – because
then you can summarise what is already in the report.
2 Aim for a report length that is concise and comprehensive. Read the marking rubric to see what is required. There is a
lot of flexibility in how a business style report format might be produced. You might use few or many tables. You might
use few or many bullet points. You could use varying degrees of white space. You might let the tables do a lot of the
communication, or you might have minimal tables and write lots of text. Some of the best reports are short and have
effective tables with very clear and concise writing. Some of the worst reports are also very short, but have poorly designed
tables and text that misses the main points. At the same time, some of the best reports are very long but well designed,
while some of the worst reports are also very long but poorly designed.
GROUP ASSIGNMENT
27
1.0 Introduction (page 2):
Provide a brief quantified overview of what has changed from the draft #1 budget.
2.0 Draft financial statements
Include the tables from Excel and discuss and refer to them, e.g., “Table 2 presents the
redrafted income statement, showing an expected $3.1m in full-year profit…”
3.0 Sensitivity analysis
Include the table from worksheet #2 and discuss and refer to it, e.g., “Table 6 presents
sensitivity analysis. For sensitivity case #1 the profit is $1.1m (25.2%) more than the base
case…”
4.0 Further analysis and considerations
If you designed and added new tables insert them here and refer to and discuss them.
5.0 Summary
Start by concisely restating the purpose of the report.
Restate the key numbers.
Do not include any new financial information or tables.
Appendix (only for significantly detailed tables if required).
Consider including significantly detailed tables only in the appendix - alternatively, leave
them only in the financial model file.
GROUP ASSIGNMENT
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Tips on producing a business style Word report
This document is in a business style format, with clear headings, tables, bullet points, carefully
constructed paragraphs, and simple short sentences. Avoid long paragraphs that are 'hard-to-quickly-read.'
Presentation quality
If your Word report lacks attention to detail, you could give the impression that your financial
modeling and analysis also lack attention to detail. You need your audience to be confident that the
calculations are correct.
Arrangement
The content development and organization of ideas must clearly reveal the purpose and
implications of the analysis. You should:
• Use tables in the body, and place detailed tables in an appendix (but consider if those detailed
tables do indeed provide information useful for the decision-makers).
• The flow should be logical and organized.
• Keep similar information together.
• Keep each section or paragraph about one main idea. Each paragraph should start with a key
sentence that summarizes the idea of that paragraph.
• Use graphics (charts, graphs, diagrams, and tables) where appropriate.
• Eliminate unnecessary and/or obvious information given your audience.
Style
So that your writing is confident and clear, bear in mind the following:
• Turn nouns into verbs (e.g., instead of “We would like to make a recommendation that…” write
“We recommend that…”).
• Use simple terms (e.g. rather than "utilize" write "use").
• Use an active instead of passive voice (e.g., instead of “The report was submitted by the team
to the CEO” write “The team submitted the reports to the CEO”).
• Use simple sentences (e.g., instead of “Obviously, this means we will need to raise prices, which
could reduce sales,” write “Our need to raise prices could reduce sales”).
• Do not refer to sources (i.e., references) for this draft budget assignment.
Formatting
• Headings can skilfully underscore the main points, form white space, and make it easy for
readers to scan the document.
• Bullet points work well for series of items. They can convert large amounts of information into
small parts, making the reading experience smooth and the file easier to navigate.
• Italics and bold face emphasize specific points.
• Tidy up the formatting when you have 'fresh eyes'.
Tables
Tables are essential when presenting financial information. Apply the following:
• Tables must have a clear heading that concisely frames the information in the table for the
reader.
• Some tables can be high-level (e.g., in the Executive Summary) while others can be more
complex and detailed.
• Text must refer to important information in tables text (e.g., ‘as per Table 2, the profit is $1.0m’).
Maps, flowcharts, and diagrams
Only use these if needed for complex data or concepts, to show connections that text alone cannot
explicate clearly.
GROUP ASSIGNMENT
29
Requirement 3a: PowerPoint file
PowerPoint is the conventional presentation tool in practice (managers tend to stick very
conservatively to conventions). The PowerPoint file you design must be based on tables from your
Excel file - it should be a condensed version of the information from your Word report but prepared
in a style and format that is effective for PowerPoint.
Your PowerPoint file should have 5 to 7 slides (including a Title slide). The analysis and
information should flow smoothly and give a parsimonious summary of the updated draft budget.
Consider using these structural elements:
• Title slide
• Executive summary slides: with purpose and background.
• Body slides: explanations and illustrations of major parts and analysis.
• Conclusion slide: summarize main numbers and points.
Importantly:
• Include Excel table extracts and information (including executive summary tables),
headline statements and all the critical information about the nature of the strategic and
financial performance impacts. Do not include detailed tables.
• Communicate high level financial information in tables with normal font sizes - do not
use small font sizes. Do not provide insignificant details in tables.
• Use clear headline statements on slides, e.g., ‘The sales volume of 53,500 is expected to
enable $15.1m of revenue and $2.1m of profit.’
• Outline and discuss strategic issues.
Tips for producing a business style presentation file.
Presentation quality
If your PowerPoint presentation is unclear, then you will give the impression your Excel modelling
and analysis lack competence – the audience must be confident that the calculations are correct.
Arrangement
• The headline of a slide should have one message.
• A typical slide should have a single table or image.
• Use textboxes where appropriate to point the reader to key information in tables.
• Keep the structure and style simple and professional – go for a conservative rather than a
colourful style.
• Use the largest font only for the most important information on the slide.
• Tidy up the formatting when you have 'fresh eyes'.
GROUP ASSIGNMENT
30
Requirement 3b: In-class Presentation
Present your PowerPoint file from requirement 3a in your tutorial class in the last week. Imagine
it is to the CFO and CEO.
Rules:
1. The strict maximum time per group presentation is 4 minutes.
2. Each group decides how many of its students will be ‘presenters’ of their PowerPoint.
3. If a ‘presenter’ is enrolled as an INTERNAL they must present face-to-face (that is, they
must attend the Tutorial classroom for the presentation).
4. If a ‘presenter’ is enrolled as an EXTERNAL they must present over Zoom.
5. A group presentation can combine face-to-face and Zoom ‘presenters’. But be careful about
who will click through the slides during the presentation.
6. All students are expected to attend the presentation tutorial even if they are not a ‘presenter’.
Students who are not a ‘presenter’ can attend face-to-face or on Zoom (regardless of their
being INTERNAL or EXTERNAL).
7. Only the PowerPoint file that the group submitted by email to their Tutor can be presented.
8. For each group, the PowerPoint file must be brought to the tutorial on a USB stick or else
shared by a 'presenter' on Zoom.
9. 'Presenters' who present over Zoom must show their face over video camera.
10. The presentation will marked only on the Marking Rubric criteria: 3.4 Smoothness of in-
class presentation delivery (2.0 marks); 3.5 Presenter(s)' level of familiarity with important
details (2.0 marks)
11. The Google spreadsheet has the order of group presentations in each tutorial.
Tips for your in-class presentation
Bear in mind these important criteria when presenting in-class:
• Focus on the audience: make eye contact with audience members - do not read or focus on the
computer screen. Do not use speaker notes.
• Use clear and understandable speaking: use a reasonable pace, not too slow or fast; use inflection
in your voice.
• Overall, if your presentation is unclear, you will give the impression your financial modelling and
analysis lack competence – the audience must have confidence in you in order to have confidence
your calculations in the updated draft budget are correct and reliable for them to use in decision
making.
GROUP ASSIGNMENT
31
Hint for your Group Work: Have a Transition Meeting
Here are some points for your group to discuss about transitioning from the Excel model to the
Word and PowerPoint files. Effective transitioning requires a reiterative process: going back and
forwards a few times to develop the supplementary analysis tables and graphs that best draw out from
the Excel model information for communicating concisely and comprehensively in the Word and
PowerPoint files. Your group should have a ‘transition meeting’ and also emails and talks for
collaboratively discussing between you these points:
1. From analysing the Excel model and the conversation between the CEO and CFO, what
is the most important information to be drawn out into supplementary tables and graphs?
2. For the supplementary analysis, what information is most effectively presented in a table
and/or a graph? Looking through the Excel model, what are the big changes between draft
1 and draft 2? What are the surprises? What are the main profitability uncertainties with
the cost leadership strategy?
3. Do we need to get detailed 2023 draft figures for our analysis?
4. What is the plan for the structure of the Word report - what tables will go where, what
graphs will go where, what is the headings structure, what paragraphs will be there and
where and what is the main theme or idea of each of those paragraphs?
5. What is the plan for the structure of the PowerPoint presentation - what tables will go
where, what graphs will go where, what is the headings structure, what slides will be there
and where and what will be the headline statements on each of those slides?
6. Who is going to refine and review each of the files and when. How much time do we need
to allow for this important process before final submission? (Several days of collaborative
dynamic review and refinement is ideal).
GROUP ASSIGNMENT
32
Group Assignment: Marking Rubric (total out of 30)
Excel Model
Marks
Far below expectations
0% - 20%
Below expectations
21% - 49%
Satisfactory
50% - 69%
Very Good
70% - 89%
Outstanding
90% - 100%
15.0
1.1 Correctness of Cashflow 0.5 Far too many mistakes. Serious mistakes. Materially correct. Mostly correct. Correct.
1.2 Correctness of Income Statement 0.5 Far too many mistakes. Serious mistakes. Materially correct. Mostly correct. Correct.
1.3 Correctness of Balance Sheet 0.5 Far too many mistakes. Serious mistakes. Materially correct. Mostly correct. Correct.
1.4 Sensitivity Analysis: correctness
and Live Case works if changed
4.5 Far too many mistakes. Serious mistakes. Materially correct. Mostly correct. Correct.
1.5 Correctness of Executive
Summary tables
1.0 Far too many mistakes. Serious mistakes. Materially correct. Mostly correct. Correct.
1.6 Effectiveness of any
Supplementary Analysis tables (2
tables maximum)
4.0 Not applicable – you did
not add any.
What you added is
ineffective.
What you added is
satisfactory.
What you added is quite
effective
What you added is highly
effective.
1.7 Effectiveness of any extra graphs
(2 graphs maximum)
2.0 Not applicable – you did
not add any.
What you added is
ineffective.
What you added is
satisfactory.
What you added is quite
effective
What you added is highly
effective.
1.8 Formatting and presentation:
Consistency
1.0 Very inconsistent. Inconsistent. Some inconsistencies. Consistent. Very consistent.
1.9 Formatting and presentation:
Attention to detail
1.0 Very unrefined, does not
adhere to the tips provided.
Unrefined, barely
adheres to the tips
provided.
Inconsistently adheres to
the tips provided.
Quite refined, mostly
adheres to the tips
provided.
Very refined and formatting
adheres to the tips provided.
GROUP ASSIGNMENT
33
Marking Rubric (continued)
Word Report
Marks Far below expectations
0% - 20%
Below expectations
21% - 49%
Satisfactory
50% - 69%
Very Good
70% - 89%
Outstanding
90% - 100%
8.0
2.1 Executive summary:
comprehensiveness and
conciseness
2.0 Missing or fails to
communicate the required
information.
Poorly communicates the
required information.
Satisfactorily communicates
the required information.
Communicates the required
information.
Clearly and concisely
communicates the required
information.
2.2 Quality of the
‘business style'
presentation
1.5 The wrong style; it lacks
clear and appropriate
headings and bullet points,
and the format makes it
very difficult to quickly
read.
Lacks the concise
communication required of a
business style - failing to use
headings, bullet points, and
effective formatting.
Only partially uses a business
report style; fuller use of
appropriate headings, bullet
points and formatting would
make it much easier to quickly
read.
Generally has a business
style format with
appropriate headings, bullet
points and an effective and
consistent formatting style.
A high quality business style,
with clear and appropriate
headings, bullet points and
consistent, tidy and simple
formatting.
2.3 Integrated inclusion of
Excel tables in the body of
the report
1.5 The tables and discussion
of them fail to
communicate the essential
numbers.
The tables and discussion of
them insufficiently
communicate the numbers.
The tables and discussion of
them are satisfactory.
The tables and discussion of
them communicate the
important numbers.
The tables and discussion of
them concisely and
comprehensively
communicate all the important
numbers.
2.4 Readability and quality
of writing: Grammar and
sentence construction.
1.5 Extremely badly written
and time-consuming to
read, due to grammatical
mistakes and to very weak
sentence construction.
Very badly written and time-
consuming to read due to
grammatical mistakes and
weak sentence construction.
Badly written and time-
consuming to read due to
numerous grammatical
mistakes and some poorly
constructed sentences.
Some minor instances of
spelling mistakes and
unclear sentences.
No spelling mistakes and
clearly written short
sentences.
2.5 Readability and quality
of writing: Paragraphs
start with a summary
sentence.
1.5 Very poorly constructed
paragraphs that do not
communicate a single
overarching idea or theme.
Paragraphs do not
communicate a single
overarching idea or theme.
Half of the paragraphs start
with a summary sentence and
contain a single overarching
idea or theme.
Most paragraphs start with a
summary sentence and
contain a single overarching
idea or theme.
All paragraphs start with a
summary sentence and the
paragraph contains a single
(but perhaps broad)
overarching idea or theme.
GROUP ASSIGNMENT
34
Marking Rubric (continued)
PowerPoint
Marks Far below expectations
0% - 20%
Below expectations
21% - 49%
Satisfactory
50% - 69%
Very Good
70% - 89%
Outstanding
90% - 100%
7.0
3.1 Clarity of explanation of
the main numbers
1.0 The slides fail to
communicate essential
information about the
draft budget.
The slides insufficiently
convey the draft budget
The slides present too little
or too much information and
the layout and
communication lack
conciseness.
The slides are generally
concise in communicating
the draft budget.
The slides very concisely and
comprehensively communicate
the draft budget.
3.2 Effectiveness of
explanation of the main points
of interest and concerns raised
by the CEO and CFO.
1.0 The slides seriously fail
to communicate the main
points of interest.
The slides barely
communicate the main
points of interest.
The slides satisfactorily
communicate the main
points of interest.
The slides communicate the
main points of interest well.
The slides concisely and
comprehensively communicate
the main points of interest.
3.3 Slides have clear headline
statements that summarise a
single idea or theme
communicated by the slide.
1.0 No slides have this
quality.
This quality is barely
present.
Half of the slides have this
quality.
Most slides have this
quality.
All slides have this quality.
3.4 Smoothness of in-class
presentation delivery
2.0 The presenter(s)
appeared to have
undertaken no
preparation.
The presenter(s) appeared
to have undertaken very
little preparation nor
thought through what they
would say.
The presenter(s) appeared to
have undertaken some
preparation but not fully
thought through what they
would say.
The presentation delivery
quality was a standard that
would be acceptable to the
CFO and CEO of a real-life
business.
The presentation delivery
quality was a standard that
would be impressive to the
CFO and CEO of a real-life
business.
3.5 Presenter(s)' level of
familiarity with important
details
2.0 The presenter(s) gave the
impression of only a
superficial understanding
of the draft budget
modelling.
The presenter(s) gave a
weak impression of their
understanding of
important details of the
draft budget modelling.
The presenter(s) did not give
a strong impression about
their knowledge of important
details of the draft budget
modelling.
The presenter(s) gave a
satisfactory impression
about their knowledge of
important details of the draft
budget modelling.
The presenter(s) gave a strong
impression about their
knowledge of important details
including beyond that
contained in the slides.
ACCT1102 Topic 8 Traditional Overhead Allocation
35
Topic 8: Traditional Overhead Allocation
Learning objectives:
❑ Describe the general principles for allocating indirect costs to cost objects.
❑ Allocate overhead costs to products, using a plantwide rate.
❑ Use the two stage allocation process to estimate departmental overhead rates and allocate
overhead costs to products.
❑ Allocate support department costs to production departments using the direct method
(the step-method and reciprocal method are NOT part of ACCT1102).
Textbook:
❑ Chapter 16 to page 669.
Self-Study Questions: 16-4, 16-7.
Tutorial Questions: 16-19 part 1 (a) only, 16-21 part 1 only, 16-30 part 2 and part 3 (b)
only.
Lecture quick check 1
1. A plantwide overhead rate:
a. applies overhead to units of product using a number of different allocation rates
b. uses total costs multiplied by a denominator level of activity (DLA) to calculate an
allocation rate
c. pools all costs into a single cost pool
d. pools all costs into multiple cost pools
Lecture quick checks 2 - 4
2. A cost pool is:
a. a collection of costs to be assigned.
b. the joint result of several subunit activities.
c. the primary function of a responsibility accounting system.
d. a performance report of the lowest level manager.
3. The process of assigning the costs in a cost pool to the cost objects is called:
a. cost allocation.
b. segmented profit and loss statement.
c. variance.
d. absorption costing.
4. An allocation base may also be referred to as a:
a. cost object.
b. common cost.
c. cost driver.
d. joint base.
ACCT1102 Topic 8 Traditional Overhead Allocation
36
Departmental method - example problem
Based on the following information, calculate the OH Rate for each Department, then
calculate the OH allocated to each product.
Lecture quick checks 5 - 7
5. The support department cost allocation method that completely ignores reciprocal services
between support departments is called the:
a. direct method.
b. step-down method.
c. reciprocal method.
d. direct method AND step-down method.
6. The support department cost allocation method that recognises some of the reciprocal
services between support departments is called the:
a. step-down method.
b. reciprocal method.
c. dual cost allocation method.
d. joint cost method.
7. The support department cost allocation method that fully accounts for the mutual
provision of services between support departments is called the:
a. direct method.
b. step-down method.
c. reciprocal method.
d. dual cost allocation method.
ACCT1102 Topic 8 Traditional Overhead Allocation
37
Lecture demonstration problem 1
TopCo manufactures 2 products, A & B, in two departments; Assembly & Finishing. They
use normal costing. Costs and Direct Labour Hours (DLH), by department and product, are
tabled below.
(i) Calculate budgeted OH costs of the products using a plant-wide OH rate based on DLH.
Is this an accurate reflection of the costs used by the products in the manufacturing process?
Does the costing system reflect actual usage?
(ii) Calculate budgeted OH costs of the products using departmental rates based on DLH.
Plant-wide rate leads to product cost cross subsidisation. Which product is over-costed and
which is under-costed?
Manufacturing
Dept.
Budgeted
OH
Budgeted
DLH
ProductA
DLH required
Product B
DLH required
Assembly 976,000 10,000 4 1
Finishing 574,000 10,000 1 4
Total 1,550,000 20,000 5 5
ACCT1102 Topic 8 Traditional Overhead Allocation
38
Lecture demonstration problem 2
The Tasty Treats Company has departmentalised its operations into two Service Departments
(Factory Office and Factory HR) and three Production Departments (Mixing, Fabricating and
Finishing). For the year ending December 31 the firm budgeted the following DIRECT
DEPARTMENTAL COSTS (all values are in $000’s):
Note: Remember that only production overhead costs are included in the departmental
method. The costs above are “direct” costs to the department, but “indirect” (overhead) costs
to the product.
Tasty Treats has one main INDIRECT DEPARTMENT COST, insurance of $300. It is
allocated to departments on the basis of equipment values:
Factory Office is allocated first on the basis of labour hours and Factory HR is allocated
second on the basis of number of employees.
All production department overheads are allocated to products based on machine hours. The
company provides the following estimated data to use in this allocation:
See requirements on the following page.
Factory Office Factory HR Mixing Fabricating Finishing Total
Depreciation 200 400 3,500 4,000 5,000 13,100
Supplies 100 500 1,800 1,600 2,000 6,000
Other Overheads 4,000 7,000 18,000 21,000 25,000 75,000
4,300 7,900 23,300 26,600 32,000 94,100
Factory Office Factory HR Mixing Fabricating Finishing Total
Equipment Values 5 6 20 30 39 100
Factory Office Factory HR Mixing Fabricating Finishing Total
Labour Hours 10 12 23 26 19 90
Employee #’s 6 3 14 23 17 63
Machine Hours 635 1,050 8,50 2,535
ACCT1102 Topic 8 Traditional Overhead Allocation
39
Use the DIRECT method to allocate service departments overheads. Develop OH rates per machine hour
Direct Dept. Costs Factory Office Factory HR Mixing Fabricating Finishing Total
Other Overheads 4,000 7,000 18,000 21,000 25,000 75,000
Depreciation 200 400 3,500 4,000 5,000 13,100
Supplies 100 500 1,800 1,600 2,000 6,000
Direct Dept. Costs 4,300 7,900 23,300 26,600 32,000 94,100
Insurance
(Equipment Values)
Total Factory OH
DIRECT METHOD
Factory Office
(Labour Hours)
Factory HR
(Employee Numbers)
Total OH in Producing Departments
Denominator Level of Activity (Allocation Base = MH)
Predetermined Overhead Rate
ACCT1102 Topic 8 Traditional Overhead Allocation
40
Interactive Excel activity 8a
Download and use the Interactive Excel Activities.xlsx
Interactive Excel activity 8b
Download and use the Interactive Excel Activities.xlsx
Interactive Excel activity 8c
This is a repeat of Lecture Demonstration Problem 2 (see the Question and the Answer
Templates on previous pages of this Workbook).
Download and use the Interactive Excel Activities.xlsx
ACCT1102 Topic 9 Variance Analysis and Absorption Costing
41
Topic 9: Variance Analysis and Standard Costing
Learning Objectives:
1. Understand static budgets and static-budget variances.
2. Examine the concept of a flexible budget and learn how to develop it.
3. Calculate flexible budget variances and sales-volume variances.
Textbook:
❑ Chapter. 7 to p. 270.
Self-Study Questions: 7-12, 7-13, 7-21.
Tutorial Questions: 7-1, 7-3, 7-4 , 7-5, 7-22, 7-23, 7-24 (requirements 1 and 2).
Lecture quick checks 1 - 10:
1. For revenue items, F means actual revenues exceed budgeted revenues. True or False?
2. For cost items, F means actual costs are less than budgeted costs. True or False?
3. For revenue items, U means actual revenues are less than budgeted revenues. True or
False?
4. For cost items, U means actual costs exceed budgeted costs. True or False?
5. A variance is the difference between actual results and expected performance. The
expected performance is also called budgeted performance. True or False?
6. Management by exception is a practice whereby managers focus more closely on
areas that are not operating as expected and less closely on areas that are. True or
False?
7. The static budget is another name for the master budget. True or False?
8. The static budget is based on the level of output planned at the start of the budget
period. True or False?
9. It is called a static budget because the budget is developed around a single (static)
planned output level. True or False?
10. The static-budget variance is the difference between the actual result and the
corresponding budgeted amount in the static budget. True or False?
Interactive Excel activity 9a
Download and use the Interactive Excel Activities.xlsx
Lecture Quick Check 12
a. How much was the static budget sales price per unit?
ACCT1102 Topic 9 Variance Analysis and Absorption Costing
42
b. How much was the flexible budget sales price per unit?
c. How much was the actual sales price per unit?
d. How much was the variance per unit for sales price, and was it favorable or
unfavorable?
Lecture Quick Check 13
a. How much was the static budget variable cost per unit?
b. How much was the flexible budget variable cost per unit?
c. How much was the actual variable cost per unit?
d. How much was the variance per unit for variable cost, and was it favorable or
unfavorable?
Lecture Quick Check 14
a. How much was the static budget for fixed costs?
b. How much was the flexible budget for fixed costs?
ACCT1102 Topic 9 Variance Analysis and Absorption Costing
43
c. How much was the actual fixed costs?
d. How much was the variance for fixed costs, and was it favorable or unfavorable?
Interactive Excel activity 9b
Download and use the Interactive Excel Activities.xlsx
Lecture Quick Check 15
An unfavourable sales-volume variance could result from:
a. an inappropriate assignment of labour or machines to specific jobs
b. an inefficiency of a purchasing manager in bargaining with suppliers
c. a decrease in actual selling price compared to anticipated selling price
d. competitors taking market share
ACCT1102 Topic 10 Performance Measurement and Compensation
44
Topic 10: Performance Measurement and Compensation
Learning objectives:
1. Examine and calculate return on investment (ROI)
2. Examine and calculate residual income (RI)
3. Examine and calculate economic value added (EVA).
4. Have an awareness of investment centre performance measurement and manager
compensation.
Textbook:
❑ Chapter 24 pp. 941-953 and pp. 957-961.
Self-Study Questions: 24-3, 24-4, 24-5, 24-6, 24-7, 24-21.
Tutorial Questions: 24-16, 24-17, 24-18, 24-26, 24-28, 24-29, 24-38 (requirements
1-3 only).
Interactive Excel activity 10a
Download and use the Interactive Excel Activities.xlsx
Interactive Excel activity 10b
Download and use the Interactive Excel Activities.xlsx
Lecture Quick Check 1:
Soni Gamestation Ltd. generated operating income of $400,000 on $3,200,000 in sales.
The company had $1,800,000 in assets on July 1, 2021 and $2,200,000 in assets on 30 June,
2020.
What was the company’s ROI for the year?
a. 12.5%
b. 18.2%
c. 20.0%
d. 22.2%
Lecture Quick Check 2:
Which of the following actions will not automatically increase ROI ?
a. Reducing variable selling and administrative expenses by 15%
b. Selling $100,000 in unused assets (@ book value)
c. Selling an additional 20,000 units at a profit
d. Purchasing a $100,000 piece of equipment on sale for $75,000
ACCT1102 Topic 10 Performance Measurement and Compensation
45
Lecture Quick Check 3:
Luminex Ltd’s Lighting Division currently generates a 16.5% ROI.
The Divisions Director has just received several new contracts to provide stage lighting for
shows at the Globe Theatre.
Which of the following contracts would they most likely not accept?
a. A contract that generates a 22% ROI
b. A contract that generates $5,000 in operating income on an investment of $20,000 in
lighting fixtures
c. A contract that generates a Return on Sales of 10% and an asset turnover of 1.2
d. All of the above
Lecture Quick Check 4:
Redmond Awnings, a division of Vangard Corp., has a net operating income of $60,000 and
average operating assets of $300,000. If the manager of the division is evaluated based on
ROI, will she want to make an investment of $100,000 that would generate additional net
operating income of $18,000 per year?
a. Yes, because the division’s ROI is 20%
b. Yes, because the division’s ROI increase to 26%
c. No, because the division’s ROI decrease to 19.5%
d. No, because the division’s ROI decrease to 18%
Lecture Quick Check 5:
Redmond Awnings, a division of Vangard Corp., has a net operating income of $60,000 and
average operating assets of $300,000. The company’s required rate of return is 15%. Would
the company want the manager of the Redmond Awnings division to make an investment of
$100,000 that would generate additional net operating income of $18,000 per year?
a. No, because the division’s ROI would be lower than 20%.
b. No, because the return on the investment is lower than the minimum required rate of
return.
c. Yes, because the return on the investment exceeds the minimum required rate of
return.
d. Yes, because the division’s ROI would increase to 19.5%.
Interactive Excel activity 10c
Download and use the Interactive Excel Activities.xlsx
ACCT1102 Topic 10 Performance Measurement and Compensation
46
Lecture Quick Check 6:
Redmond Awnings, a division of Vangard Corp., has a net operating income of $60,000 and
average operating assets of $300,000. The required rate of return for the company is 15%. If
the manager of the Redmond Awnings division is evaluated based on residual income, will
she want to make an investment of $100,000 that would generate additional net operating
income of $18,000 per year?
a. Yes, because the return on the investment exceeds the minimum required rate of
return.
b. Yes, because this is an increase of $3,000 in the residual income.
c. Yes, because this is an increase of $18,000 in the operating income.
d. No, because the residual income decrease.
Interactive Excel activity 10d
Download and use the Interactive Excel Activities.xlsx
Lecture Quick Check 7:
Waldorf Company has two sources of funds:
1. long-term debt with a market and book value of $10 million issued at an interest rate
of 12 percent, and
2. equity capital that has a market value of $8 million (book value of $4 million).
The cost of equity capital is 12 percent, while the tax rate is 25 percent.
Waldorf Company has three investment centres:
Operating Income Total Assets Current Liabilities
St.Louis $960,000 $4,000,000 $200,000
Cedar Rapids $1,200,000 $8,000,000 $600,000
Wichita $2,040,000 $12,000,000 $1,200,000
What is the EVA for St Louis?
a. $720,000
b. $392,540
c. $327,460
d. $255,740
ACCT1102 Topic 11 Strategy, Balanced Scorecard and Sustainability
47
Topic 11: Strategy, Balanced Scorecard and Sustainability
Learning objectives:
1. Develop awareness of business strategy concepts
2. Recognise cost leader versus product differentiation (business unit strategies)
3. Understand the purpose of a balanced scorecard
4. Understand the four perspectives of a balanced scorecard
5. Identify specific performance measures for the four balanced scorecard perspectives
6. Apply the balanced scorecard to corporate social responsibility (sustainability)
Textbook:
❑ Chapter 13 to p. 551.
Self-Study Questions: 13-1, 13-2, 13-3, 13-9.
Tutorial Questions: 13-6, 13-17, 13-21, 13-29, 13-41.
Lecture Quick Check 1:
Ramsden Ltd manufactures toys. It plans to grow by producing good quality toys at a very
low cost that are delivered in a timely manner. There are a number of other manufacturers
who produce similar toys. Ramsden believes that continuously improving its manufacturing
processes and having satisfied employees are critical to implementing its strategy.
Ramsden’s strategy is:
a. Product differentiation
b. Downsizing
c. Reengineering
d. Cost leadership
ACCT1102 Topic 11 Strategy, Balanced Scorecard and Sustainability
48
Lecture Quick Check 2:
Elements that derive from the competitive strategy and are essential to the success of the
organisation are called:
a. key performance indicators.
b. critical success factors.
c. key performance factors.
d. critical success drivers.
Lecture Quick Check 3:
On which of the following does a balanced scorecard approach focus on?
a. Strategic objectives
b. Critical success factors
c. Performance measures at all levels of the business
d. All of the given answers
Lecture Quick Check 4:
On which of the following is the framework for developing a balanced scorecard based?
i. Financial perspective
ii. Customer perspective
iii. Learning and growth
iv. Internal processes
a. i, ii and iii
b. ii, iii and iv
c. i, iii and iv
d. All of the given answers
Lecture Quick Check 5:
The number of products returned by customers, the number of product defects and on-time
delivery are measures related to:
a. financial perspective.
b. customer perspective.
c. internal business processes.
d. learning and growth.
Lecture Quick Check 6:
Employee satisfaction, absenteeism and employee suggestions implemented are measures
related to:
a. financial perspective.
b. customer perspective.
c. internal business processes.
d. learning and growth.
ACCT1102 Topic 11 Strategy, Balanced Scorecard and Sustainability
49
Lecture Quick Check 7:
Performance measures, which include cost, product quality and manufacture cycle time, are
related to:
a. financial perspective.
b. customer perspective.
c. internal business processes.
d. learning and growth.
Lecture Quick Check 8:
Performance measures, including shareholder value, residual value and cash flow are related
to:
a. financial perspective.
b. customer perspective.
c. internal business processes.
d. learning and growth.
Lecture Quick Check 9:
Measures that monitor the progress towards the organisation's goals are called:
a. lead indicators.
b. lag indicators.
c. benchmark indicators.
d. progress indicators.
Lecture Quick Check 10:
Measures that monitor the factors that drive outcomes are called:
a. lead indicators.
b. lag indicators.
c. benchmark indicators.
d. cause and effect indicators.
ACCT1102 Topic 12 Ethics
50
Topic 12: Ethics
See the materials in the Topic 12 folder on BlackBoard.
Learning objectives:
1. Develop awareness of the importance of ethics in preparing and using management
accounting information.
• Develop that awareness by understanding ethics from a pragmatist philosophical
perspective.
2. Understand the Institute of Management Accountants (IMA) Ethical Professional Practice
Standards
3. Apply rational analysis and the IMA Ethical Professional Practice Standards to discuss Case
Studies of ethical dilemmas.
Textbook:
❑ Chapter 1 pp. 33-36.
Self-Study Questions: 1-26, 1-27, 1-31, 1-32, 1-34, 1-35, 1-36, 1-37.
There is no Tutorial for this topic - we will be using the tutorial classes for the Group
Assignment In-Class presentations.
The End ☺