Acc 8802 inventory assignment

Question

ACC 8802 Inventory Assignment

Purpose for Assessment 2

The purpose for this assessment is to assess you on (1) your knowledge and understanding the course content, (2) your application of that knowledge, (3) your critical analysis of information provided in the four (4) case studies.

The case study answers will relate to material covered for modules 3, 4 and 5.

1. To demonstrate a theoretical knowledge of the role of strategic management accounting in supporting strategy development and the day-to- day operations of a sustainable organisation

2. To apply strategic management accounting tools and techniques to improve the contribution and sustainability of value creating activities

3. To utilise strategic management accounting tools and techniques skills to ensure the role of performance measurement and control systems in value creation is achieved, strategies are implemented and performance monitored and adjusted to improve the success of the strategies.

Question 1.

Black Falcon Pty Ltd makes premium range dog biscuits used to provide high level nutrition for dogs, which it introduced to the market in 2016 in the highly competitive premium dog food market. Black Falcon realises that it would be competing against well-known brands that have held market share based on their reputation for many years. From the feedback received at trade fairs during 2017, Black Falcon has been generally regarded as an equal standard of quality as the other premium providers. However, the product was initially provided at a low introductory price to encourage customers and retailers to purchase Black Falcon's dog food. Black Falcon is now seeking to increase the price each year as the firm's reputation grows.

Black Falcon produces very few defective products and insists upon the highest quality materials from its suppliers. Conversion Costs in each year depend on production capacity defined in terms of units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Black Falcon can support, not the actual number of customers it serves. See Table 1 below for information.

Table 1 - Performance and cost details for 2-year period	2018	2019
Number of bags produced and sold	13500	15000
Selling price	$125	$135
Direct materials (20 kilograms per bag)	540,000	630,000
Direct materials cost per kilogram	$2.00	$2.10
Units of Manufacturing practical capacity	15,000	15,000
Total conversion costs	$129,000	$132,000
Conversion indirect overhead cost per unit of capacity (Standard fixed capacity cost per unit)	$8.60	$8.80
Customer number capacity for selling and customer-service	4,300	4,200
Total selling and customer-service costs	$8,200	$7,600
Selling and customer-service capacity cost per customer (Standard fixed capacity cost per unit)	$1.91	$1.81

REQUIRED:

1. Identify the business strategy adopted by Black Falcon Pty Ltd and explain briefly how you reached your decision on the type of business strategy adopted.

2. Calculate the operating profit for the two accounting years.

3. Prepare the variances for the change in profit between the two years due to the growth strategy.

4. Prepare the variances to reconcile the change in profit between for the two accounting years due to the productivity strategy.

5. Discuss the change in Black Falcon's operating profit for the two accounting years.

Question 2.

Using the information below about Black Falcon Pty Ltd earlier, see Table 2 below. (This data is not related to Table 1 above).

Table 2 - Financial and Non-financial measure for other 3 perspectives
Details of activity levels and costs included in above figures	2018	2019
Production staff training costs	$5,000	$8,000
Order and checking costs for returning materials to suppliers	$3,300	$500
Late delivery penalty of product delays caused by suppliers	$125	$25
Measures of activity levels	2018	2019
Turnover of staff numbers	3	1
Number of staff training hours	15	35
Number of late deliveries of the product	3	1
Number of times faulty materials returned to suppliers	5	0
Number of new customers	1,000	1,500
Number of repeat order purchases by existing customers	10	20
Number of useable suggestions from employees	10	25

REQUIRED:

1. Identify one Critical Success Factor (CSF) that could be used by Black Falcon for each perspective of the Balanced Scorecard. Provide at least 2 Key Performance Indicators (KPIs) that could measure each of the 4 CSFs. Comment on the linkage between the measures and the CSF. (Ensure that your KPIs consider Black Falcon's strategy).

2. If Black Falcon P/L had an additional strategy of appealing to their environmental and social stakeholders, list three (3) KPIs that could be used to measure this performance. State the BSC perspective that each of your 3 KPIs above would be placed into.

3. If Black Falcon P/L wished to set up their operations in Chile (South America), using Hofstedes' cultural dimensions, select two (2) KPIs, and describe how these KPI measures would be used in different ways to motivate staff to improve their performance. (For example, if you selected Hofstede's ‘Long Term Orientation', your measure would reward staff for meeting short term goals in Australia (e.g. monthly), and your measures would cover a longer period of time to reward staff in Chile).

Hofstede's cultural dimensions: Australia is Blue: Chile is purple.

Question 3.

Green Batteries Pty Ltd is considering the purchase of a wind turbine generator in order to generate electricity and to reduce the electricity costs for their offices, which are located in Toowoomba. Currently the business uses 40,000 kilowatt hours (kWh) per quarter (3 months) at an average cost of $0.40 per kWh, supplied by the local coal fired power station. The current required rate of return used to evaluate projects is 6%, with a required payback period of 4 years.

The Queensland government started a scheme to provide an incentive for business to use alternative sources of renewable power. The incentives are 5% immediate reimbursement of the purchase and installation costs. This reimbursement can be paid to the supplier providing and installing the equipment. Therefore, the net cash flow from Green Batteries Pty Ltd is the purchase cost plus the installation cost less the 5% incentive back from government to offset these costs.

Project details:

	Turbine 1	Turbine 2
Cost of wind turbine generator	$10,000	$9,000
Cost to install turbine and generator (by supplier)	$750	$850
Expected cash incentive back from government to offset cost of the panels, paid immediately the wind turbine generator installed	5% of total costs	5% of total costs
Turbine expected (on average) generated kilowatt	300 kW per month	350 kW per month for first 5 yrs, then 295 kW/month for next 10 years
Generator's expected life (in years)	15 years	15 years

Requirements

1. Calculate the total initial investment and the net annual savings from installing the wind generator for each of the 2 projects.

2. Calculate the payback period of each wind generator.

3. Comment on whether either project meets the company's Payback Period requirements and whether you should base your decision only in the payback period calculation.

4. Calculate the net present value (NPV) of the project with a required rate of return at 6%. Where the savings are the same each year, use the present value table in Appendix 1. Where the savings differ in different time periods, you may need to subtract one NPV factor index from another NPV factor index.

5. Comment on whether Green Batteries should proceed with either project using the Net Present Value method.

6. Comment on one limitation with the payback period method compared to the NPV method.

7. What qualitative, non-financial factors (not included in the quantitative analysis) would influence your opinion on whether the investment in the wind generator should proceed.

Question 4.

Chad Pty Ltd is preparing to design and implement sustainability systems and processes. You find (as the environmental director) that energy is a key resource for business operations; first for heating water and second for operational and security lighting. Management of these key resources for business operations can save the company money. Therefore the first step is to measure the water flow at the premises. The company only operates their fruit and vegetable cleaning and production for 260 days of the year. You report directly to William South, the CFO.

Chad P/L is interested in saving water costs, so they have installed large underground water tanks that collect the rainwater from the roof system. These tanks are now full and operational.

The daily rinsing process for fruit and vegetables requires the tap to run for 40 minutes per day and use 11 litres of water flow per minute. The water is heated to 60oC. The table below provides the number of kWh required to heat one kilolitre of water to various temperatures.

Hot Water Temperature	kWh required make one kilolitre of hot water
45oC	56 kWh
50oC	62 kWh
60oC	77 kWh
70oC	98 kWh

Required: Please note all your answers should be to two decimal points (cents)

a) If the business uses water heated to 60oC, assuming the electricity cost per kilolitre is $0.40 per kWh, calculate the annual electricity cost to the business associated with the heating of water used to 60o.

b) If the business uses water heated to 50oC (assuming the electricity cost per kilolitre is $0.40 per kWh), calculate the dollar saving if this lower temperature is used.

c) You are considering fitting the tap with a high pressure flow restrictor that will reduce water flow to 5 litres of water flow per minute. You expect run the tap still for 40 minutes per day. Calculate the electricity cost and cost savings if the reduced water flow was heated to (i) 60 degrees and (ii) to 50 degrees.

d) Compare and describe the cost results, and provide an informal report (memo email) to your supervisor giving your recommendations of how your organisation should proceed. Discuss any non-financial factors that need to be considered. (You will be marked on spelling and grammar for this section d).

Appendix 1: for Question 3. Present Value of an Ordinary Annuity of $1

n	1%	2%	3%	4%	5%	6%	8%	10%	12%
1	0.990	0.980	0.971	0.966	0.952	0.943	0.926	0.909	0.893
2	1.970	1.942	1.913	1.887	1.859	1.834	1.783	1.736	1.690
3	2.941	2.884	2.829	2.775	2.723	2.673	2.577	2.487	2.402
4	3.902	3.808	3.717	3.630	3.546	3.465	3.312	3.170	3.037
5	4.853	4.713	4.580	4.452	4.329	4.212	3.993	3.791	3.605
6	5.795	5.601	5.417	5.242	5.076	4.917	4.623	4.355	4.111
7	6.728	06.472	6.230	6.002	5.786	5.582	5.206	4.868	4.564
8	7.651	7.325	7.020	6.733	6.463	6.210	5.747	5.335	4.968
9	8.566	8.162	7.786	7.435	7.108	6.802	6.247	5.759	5.328
10	9.471	8.983	8.530	8.111	7.722	7.360	6.710	6.145	5.650
11	10.368	9.787	9.253	8.760	8.306	7.887	7.139	6.495	5.938
12	11.255	10.575	9.954	9.385	8.863	8.384	7.536	6.814	6.194
13	12.134	11.348	10.635	9.986	9.394	8.853	7.904	7.103	6.424
14	13.003	12.106	11.296	10.563	9.898	9.295	8.244	7.367	6.628
15	13.865	12.849	11.938	11.118	10.380	9.712	8.559	7.606	6.811
16	14.718	13.578	12.561	11.652	10.838	10.056	8.851	7.824	6.974
n	1%	2%	3%	4%	5%	6%	8%	10%	12%

Format your assignment according to the following formatting requirements:

1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.

2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.

3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.