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  Arab Open University BE211/4 – Introduction to Managerial Accounting TMA – First Semester 2017 - 2018 Cut-Off Date: As decided by the Deanship About TMA: The TMA covers the management accounting concepts and practices in the businesses. It is marked

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تاريخ التسجيل : 21/03/2016

مُساهمةموضوع: Arab Open University BE211/4 – Introduction to Managerial Accounting TMA – First Semester 2017 - 2018 Cut-Off Date: As decided by the Deanship About TMA: The TMA covers the management accounting concepts and practices in the businesses. It is marked   الثلاثاء أكتوبر 24, 2017 3:09 pm


Arab Open University
BE211/4 – Introduction to Managerial Accounting
TMA – First Semester 2017 - 2018
Cut-Off Date: As decided by the Deanship

About TMA:
The TMA covers the management accounting concepts and practices in the businesses. It is marked out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’ understanding of some of the learning points within chapters 16, 20, 22 and 24. This TMA requires you to apply the course concepts. The TMA is intended to:
 Assess students’ understanding of key learning points within chapters 16, 20, 22 and 24.
 Increase the students’ knowledge about the reality of the cost and management accounting as a profession.
 Develop students’ communication skills, such as essay writing, analysis and presentation of material.
 Develop the ability to understand and interact with the nature of the managerial accounting tools in reality.

The TMA:
The TMA requires you to:
1- Review various study chapters of ’Financial & Managerial Accounting’ Book and apply some of the concepts within it.
2- Conduct a simple information search using the internet.
3- Present your findings in not more than 1,200 words (800 words for Part A and 400 words for Part B). The word count excludes headings, references, title page, and diagrams.
4- You should use a Microsoft Office Word and Times New Roman Font of 12 points.
5- You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment.

Criteria for Grade Distribution:
Criteria Content Referencing Structure and Presentation of ideas Total marks
Part A Part B
Global Management Accounting Principles & CVP analysis Budgeting & Performance evaluation for Milestone Enterprises
Marks 60 40 (5) (5) 100





Part A
Global Management Accounting Principles

(a) Management Accounting

CIMA defines management accounting as “Management accounting is the sourcing, analysis, communication and use of decision-relevant financial and non-financial information to generate and preserve value for organizations”

The above definition makes it clear that management accounting is not about preparation of essential financial statements rather collecting, analyzing and communicating financial and non-financial information to organization which will facilitate top management to make good decisions and through which they can create and sustain value. Organizations work for achieving results and achieving results require appropriate decisions taken and decision making needs to be based on information provided. So, management accounting is pre-dominant in these areas.

(b) Global Management Accounting Principles

The practice of management accounting across different organisations is varied. The Chartered Institute of Management Accountants (CIMA), alongside the American Institute of Certified Public Accountants (AICPA), has launched a set of Global Management Accounting Principles to help organisations across the world ensure that they have the very best management accounting systems.” (CIMA, 2014). The principles are summarized as given below:


(Source: cimaglobal.com)

(c) Reporting for Merchandising and Manufacturing Companies

Information Merchandising Company (A) Manufacturing Company (B)
For the year 2017
($) Beginning of 2017
($) End of 2017
($) For the year 2017
($) Beginning of 2017
($) End of 2017
($))
Sales 400,000
800,000
Merchandising Inventory 70,000 60,000
Stock of Materials
35,000 35,000
Purchases of inventory 350,000
Purchase of Materials 350,000
Direct Labor
169,000
Manufacturing Overheads 83,000
Work in Progress inventory
80,000 27,000
Finished Goods inventory 0 (zero) 55,000
Administration Expenses 25,000 30,000

(d) Operating Leverage for Company A & Company B

Estimations concerning sales, variable cost and fixed costs for two companies (A & B) and the actual results obtained by both the companies (A & B) are given below:

Estimations for 2018 for Company A & B

Information Company A Company B
Sales (units & price) 2,000 units @ 50 per unit 2,000 units @ 50 per unit
Variable Cost per unit ($) $ 20 per unit $ 30 per unit
Fixed Cost ($) 20,000 12,000

(e) Breakeven Analysis for Mathew Anderson Florist Shop

Mathew Anderson owns a florist shop. He buys each bunch of flowers for $ 4.47 and special wrapping paper for $ 9 per roll. Each roll of wrapping paper will wrap 270 bunches of flowers. Rent of his premises is $ 3,150 per month and he pays monthly insurance of $ 600. Mathew sells each bunch of flowers for $ 7.50


Required

(1) Management accounting has got now globally accepted principles suggested by CIMA & AICPA.

In this context, based on your understanding on management accounting, discuss the global management accounting principles suggested by CIMA. (Note: some internet search required) (20 marks)

(2) Based on the information given above in (c), prepare an income statement for manufacturing and merchandising company separately (15 marks)


(3) Based on the information given above in table (as given in d), compute the following:

(i) Operating Income for both the companies (A & B) (5 marks)

(ii) Operating leverage at 2,000 level of activity (for both the companies). Comment on the results (10 marks)


(4) Based on information given above in (e), compute the following:

(i) Mathew Anderson Florist shop’s Break Even Point (5 marks)

(ii) Profit that Mathew florist shop would make if the company would sell 2,000 bunches of flowers (5 marks)

(20 + 15 + 15 + 5 + 5 = 60 marks)

PART B

Budgeting & Performance Evaluation for Milestone Enterprises

Milestone Enterprises is planning to decentralize its operations. The top management of Milestone Enterprises is seriously thinking about decentralizing its activities. It provides following information:

(i) Milestone Enterprises needs a cash budget for December 2017. The cash balance at the beginning of December is expected to be $ 18,000. The actual sales for August and September and expected sales for October are:

Information October ($) November ($) December ($)
Cash Sales 26,000 21,000 30,000
Sales on Account 80,000 120,000 160,000
Total Sales 106,000 141,000 190,000

Sales on account are collected over a three-month period in the following ratio:
20% in the month of sale,
50% in the month following sale
30 % in the second month following sale

Additional information includes:

(a) Purchases of inventory will total $ 100,000 for December; 20% will be paid for in December. Accounts payable from November's inventory purchases is $ 64,000, all of which will be paid in December.
(b) Selling and administrative expenses are budgeted at $ 52,000 for December; of which $ 16,000 is for depreciation.

(c) An Equipment costing $ 72,000 will be purchased for cash during December, and other miscellaneous cash expenses of $ 12,000 will be paid during December.


(ii) One of the divisions of Milestone Enterprises provides following information pertaining to December 2017:

Information Amount ($)
Operating Income 5,800,000
Average Total Assets 64,400,000
Net Sales 106,000,000

Required

(1) Prepare a Cash Budget for December for Milestone Enterprises. Show all working clearly (as given above in (i) Part B) (18 marks)


(2) Based on the information (in (ii) Part B) given above for one of the divisions of Milestone Enterprises, compute Profit Margin Ratio, Asset Turnover Ratio and ROI for the division of Milestone Enterprises (12 marks)


(3) Define Decentralization and explain how decentralization will help Milestone Enterprises in achieving its objectives? (10 marks)


(18 + 12 + 10 = 40 marks)




END OF TMA QUESTIONS

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Arab Open University BE211/4 – Introduction to Managerial Accounting TMA – First Semester 2017 - 2018 Cut-Off Date: As decided by the Deanship About TMA: The TMA covers the management accounting concepts and practices in the businesses. It is marked
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