Planning tools used in management accounting

College of Banking and Financial Studies

Assignment Brief – BTEC

Higher National Diploma in Business (Level 5)

Student Name /ID Number 
Unit Number and Title Unit 5 Management Accounting
Academic YearSpring 2019 -2020
Unit AssessorsMr. Gnanendran ,Ms. Sujata Suresh, Dr.Roslin
I. V. NameLIVT -Dr. Niranjan Shetty
Assignment TitlePlanning tools used in management accounting
Issue Date25th Feb 2020
Submission DateFor formative feedback: 25th March 2020For summative feedback: Within 7 days from receiving formative feedback  
Date 
Submission Format:
ASSIGNMENT: The submission is in the form of an individual numerical/written report.This should be written in a concise, formal business style using single spacing and font size 12.You are required to make use of headings, paragraphs and subsections as appropriate, and all work must be supported with research and referenced using the Harvard referencing system.Provide working notes wherever required.The document must be submitted to Turnitin in word document.Please provide a bibliography using Harvard referencing system if you referred any sources for theoretical parts or questions.The numbers/numerical statements and calculations must be neatly/clearly shown so that the assessor assess the work of the learner appropriately.The recommended word limit is 2000-2500 words, although you will not be penalised for exceeding the total word limit.The file must be saved in the format: student ID-MA-Formative -A1, for formative submission and student ID-MA-Summative   -A1.In case of extenuating situations, the relevant college policies apply. 
Unit Learning Outcomes:
   LO3 Explain the use of planning tools used in management accounting LO4: Compare ways in which organisations could use management accounting to respond to financial problems.
Assignment Brief and Guidance:
Case ScenarioXYZ Company manufactures and sells two different brands of electronic products, known as ‘Pebble 101’ and ‘Stone 101’. ‘’Pebble 101’is produced in department 1 and ‘Stone 101’ in department 2. The business has a capital investment of more than RO 700,000, with 450 employees working in manufacturing and administrative units of the company. The financial statements of last two years (FY 2019 & FY 2018) of XYZ Company has revealed an overall decline in sales, profitability and liquidity position. The directors of XYZ Company are concerned about this sudden decline in the performance and prospects of the Company.You have recently joined as a trainee management Accountant in XYZ Company and are now a part of the Management Accounting team.Directors  want company’s management accounting team to prepare functional & master budgets   for the financial year 2020, calculate relevant financial ratios considering benchmarks, key performance indicators and budgetary targets, identify variances for last two financial  years ,  apply relevant strategic planning tools , financial governance to monitor strategy, management accounting skill sets and effective strategies and systems and compare the ways in which Company can respond to financial problems effectively and efficiently.XYZ Company’s budgeted information (FY 2020) & financial statements of last two years (FY 2019 & FY 2018) are given below: –A. Sales Budget information for FY 2020.               Finished product ‘Pebble 101’‘Stone 101’ Forecasted Sales (Units)9,5002600 Selling price per unit in RO400300 Ending inventory required (units)2,870100 Beginning inventory (unit)27095 B. Information for the FY 2020 of Standard material cost per unit and labour costs per hour:                                           ROMaterial ‘A’2.8 Material ‘B’5 Direct labour4 Overhead is recovered on a direct labour hour basis. C. Information for the FY 2020 of the standard material and labour usage for each product is as follows: Finished product  ‘Pebble 101’‘Stone 101’ Material ‘A’ in Units209 Material ‘B’ in units610 Direct labour in hours2025 D. Information for the FY 2020 of Direct Material Material ‘A’Material ‘B’ Beginning inventory (unit)9,5009,000 Ending inventory required (unit)20,2002,700 E. Factory overhead budget information for the FY 2020  Department 1Department 2     RO    ROBudgeted variable overheads rates(Per direct labour hours)Indirect materials0.40.3Indirect Labour0.40.4Power (Variable Portion)0.250.2Maintenance (Variable Portion)0.060.2Budgeted fixed overheadsDepreciation35,00030,000Supervision35,00020,000Power (fixed portion)20,000600Maintenance (Fixed portion)21,400899 F. Non-manufacturing overheads budgeted Information for the FY 2020:Information of Estimated non-manufacturing overheads:ROStationary etc. (Administration)2000Salaries sales28,500Salaries office8,000Commissions25,000Car expenses (Sales)6,500Advertising30,000Miscellaneous (Office)4,000TOTAL104,000G. Opening cash balance is RO 9500 for the financial year 2020H. Cash flows Budgeted Information for the FY 2020 are as follows:Quarter 1Quarter 2Quarter 3Quarter 4ROROROROReceipts from customers650,000700,000880,000846,250Payments:Materials300,000320,000250,000336,996Payment for wages303,406330,000360,000235,094Other costs and expenses30,00025,000218,004333,409I. Budgeted balance sheet for the previous year ended 2019 was as follows:RORORONon-current assets:Land262,772Building and equipment523,000Less: Depreciation63,750459,250722,022Current assets:Stock of finished goods136,500Stock of Raw materials71,600Debtors82,250Cash          9,500299,850Less current liabilitiesCreditors72,200227,650Net assets949,672Equity: Represented by shareholder’s interest:700,000 ordinary shares of RO 1 each700,000Reserves249,672Equity949,672J. Actual Statements of financial position as at 31st Dec                                                                                          Amt in RO                                                                                 2019RO‘000’2018RO‘000’Non­current assets (carrying value)390,000360,000Current assets   Inventory90,00063,000Receivable102,00053,200Cash65,00070,000Total Assets647,000546,200  Equity and Liabilities   Ordinary share capital ($100 per share)389,000356,000Reserves60,00066,600     Non­current liabilities   10% Loan notes120,00060,000Current liabilities   Accruals42,00033,600Trade payables36,00030,000Total Equity and liabilities647,000546,200K. Actual Statements of profit or loss for the year ended 30th Dec                                                                                                                                              Amt in RO                                                                                                                  2019RO‘000’2018RO‘000’Sales320,000224,000 Cost of sales204,800140,000Gross profit 115,20084,000Administration expenses48,96024,640Distribution costs7,6005,440Operating profit 58,64053,920Interest8,0004,000Profit before taxation 50,64049,920Taxation2,2001,000Profit after taxation 48,44048,920Other relevant information:L. Benchmarks – Average data for companies similar to XYZ CompanyRatios for financial year ended 31st DecBenchmarkGross profit ratio38%Operating profit margin15%Return on Capital Employed (ROCE)13%Current ratio2.2:1Quick ratio1.5:1Inventory days40 daysReceivables days45 daysPayable days50 daysGearing ratio30% M. XYZ Company – Budgeted information for the financial year 2019 & 2018, no change in actual units & budgeted units produced and sold:                                                                                                            Amt in $                                                                                                                                         20192018Sales revenue310,000230,000Cost of sales204,900100,000Administration expenses48,60024,540Distribution costs7,4005,600Interest8,2004,100As a member of Management accounting team of XYZ Company, you are required to evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organization to sustainable success.                      (For details refer to Grades given in page 6 of the assignment)

Learning Outcomes and Assessment Criteria

Pass MeritDistinction
LO3 Explain the use of planning tools used in management accounting    D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organisations to sustainable success.
P4 Explain the advantages and disadvantages of different types of planning tools used for budgetary control.M3 Analyse the use of different planning tools and their application for preparing and forecasting budgets.
LO4: Compare ways in which organisations could use management accounting to respond to financial problems
P5Compare how organisations are adapting management accounting systems to respond to financial problems.M4 Analyse how, in responding to financial problems, management accounting can lead organisations to sustainable success.

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When submitting evidence for assessment, each learner must sign a declaration confirming that the work is their own.

Please list the evidence submitted for each task. Indicate the page numbers where the evidence can be found or describe the nature of the evidence (e.g. video, illustration).

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