BE131: Advanced Management Accounting
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BE131: Advanced Management Accounting
CW 1 AU/SP 23/24 WEIGHTING 30%
PART A
(Part A, 30 marks)
After participating in a management accounting workshop few months ago, the owners of Klark Ltd are considering two alternatives for a specific subsidiary which produces portable and research grade biological microscopes.
Alternative A - To outsource production and logistics
Alternative B - To implement a just-in-time (JIT) production system
Based on a five-year investment, the financial manager at Klark Ltd estimates that Alternative A would generate a net present value (NPV) of £X0,000.i
The financial benefits and costs from implementing a JIT system were assessed by KMP Consulting. Consultants charged £10,000 for their services. The new JIT system will require annual tooling costs of £300,000. Additional information is provided below:
· Reduced raw material inventory levels and accompanying stock-outs will cost the subsidiary about £15,000 per year.
· Insurance, materials handling and set-up costs, which currently total £250,000, would decline by Y0%.ii
· Better quality would enable the company to raise the prices of its products by £5 per unit. The subsidiary of Klark Ltd sells 10,000 units each year. This price is expected to increase annually by 5% from year two.
· The present written-down value of the current equipment is £85,000 and it has a remaining life of five years.
· Two warehouse employees whose services are no longer needed will be transferred to the purchasing department of the Service Division at the start of the JIT program. Their total annual cost is £ 30,000, which will continue to be charged to the indirect labour portion of the fixed overhead.
· The emphasis on quality inherent in JIT systems would reduce rework costs by 20%. The subsidiary currently incurs £300,000 on rework.
· Average stock will decline from £1,000,000 to £300,000 (freed-up funds can be invested). The freed-up funds can be invested elsewhere for a yearly return equivalent to Klark’s required rate of return of 1Z%. iii
NOTES
i) Replace X with the second number of your student ID. For instance, if your student ID is AA24212, the Alternative A would generate a net present value (NPV) of £40,000. However, if the second number of your student ID is two (e.g., BB12437), please use X=2 in your calculation, that is, the Alternative A would generate a net present value (NPV) of £20,000. If the second number of your student ID is 0, please use X=1 in your calculations.
ii) Replace Y with the third number of your student ID. For instance, if your student ID is CC12345, the insurance, materials handling, and set-up costs, would decline by 30%. However, if the third number of your student ID is eight (e.g., DD12879), please use Y=8 in your calculation, that is, the insurance, materials handling, and set-up costs, would decline by 80%. If the third number of your student ID is 0, please use Y=1 in your calculations.
iii) Replace Z with the last number of your student ID. For instance, if your student ID is FF12345, the required rate of return on stock and other investments is 15% per year. However, if the last number of your student ID is eight (e.g., DD12378), please use Z=8 in your calculation, that is, the required rate of return on stock and other investments is 18% per year.
Required:
1. Calculate the net present value associated with the implementation of JIT (Just-In-Time) production by Klark over the next five years, considering both benefits and costs. [10 mark]
2. Based on your calculation for part 1), comment on which alternative (if any) should be accepted on financial criterion alone. [10 mark]
3. What additional information would you consider important before making this decision? What other financial, non-financial, and qualitative factors should Klark Ltd consider in their decision-making process? Explain. [10 mark]
[Total Part A, 30 Marks]
PART B
(1.000 words)
(Part B, 70 marks)
Read the following academic paper listed below:
· Fang, Bin, Xinming Liu, Chen Ma, and Yusang Zhuo. "Blockchain technology adoption and accounting information quality." Accounting & Finance (2023).
Required:
1. CRITICALLY DISCUSS the results presented in the paper and evaluate its findings within the context of other research papers in related areas that have been published in the last three years in the fields of accounting or management literature. To achieve this, you should CREATE A FRAMEWORK to explain how this paper fits and adds to the literature you have reviewed.
Hint: The papers below present diagrams (maps) that could inspire you:
· “Luft, J., & Shields, M. D. (2006). Mapping management accounting: graphics and guidelines for theory-consistent empirical research. Handbooks of management accounting research, 1, 27-95” and
· “van der Kolk, B. (2022). Performance measurement in the public sector: Mapping 20 years of survey research. Financial Accountability & Management, 38(4), 703-729.” [50 mark]
2. CRITICALLY EVALUATE and REFLECT on how the literature you read for PART B could influence the accounting methods and decision-making processes discussed in Part A (above). [20 mark]
[Total Part B, 70 Marks]
Important notes and instructions:
1. Please ensure that the calculations in Part A are detailed and presented in a clear table format. Make sure to use your student number for Part A. Enter your student number on the title page of your assignment.
2. The report and essay should not exceed 1500 words in total (excluding title page, references, bibliography, and appendices) and must be typed using 12pt font, double spaced. Use Microsoft Word document for submission. Any other format could result in you not receiving a mark for this piece of assessment.
3. All coursework must be submitted via FASER by the published date. Details are available on Moodle and in your student handbook. More information concerning late submission of coursework or absence from in-class tests, can be found here:
https://www.essex.ac.uk/student/attendance-and-engagement/absence
4. Note that this coursework invites you to reflect and provide your own opinion/argument on the topic, which means that there is no right or wrong answer. You are advised to refer to materials from the relevant lectures plus recommended readings to get a basic understanding on the topic. You should then carry out additional research by searching for relevant research articles, practitioner literature, published case studies, and news and media reports that can help you develop an opinion/argument on the topic. There is no minimum requirement regarding the number of references that you must use but essays that are well-researched will normally attract a higher mark than those that are not. All sources used must be properly cited in-text and referenced (Harvard referencing style is required).
5. The overall quality of your writing may affect your mark. You should therefore aim to present your ideas in an organised manner and demonstrate coherence in your argument. A basic essay structure should normally consist of an introduction, body, and a conclusion.
6. The assessment will follow the criteria indicated in the EBS Marking Scheme (see MOODLE) with a view to the structure, coverage, and analysis developed in the assignment.
7. All coursework will be anonymous (unless otherwise specified in the ‘Assessment’ section of this module outline), so you should ensure that only your registration number is included in the header.
8. Under the University’s zero tolerance rules, late work will receive a grade of ZERO. More information concerning late submission of coursework or absence from in-class tests, can be found here: https://www1.essex.ac.uk/students/exams-and-coursework/late-submission.aspx
9. University Regulation 6.21: It is an academic offence for a student to engage in unfair academic practices or to cheat in any examination, or in any other submitted part of his or her University work, whether or not such work is formally assessed. A student may be found guilty of an academic offence whether or not there has been intention to deceive; that is, a judgement that negligence has occurred is sufficient to determine guilt. See more information of academic offences here: https://www.essex.ac.uk/student/exams-and-coursework/about-academic-offences
10. University Regulation 6.21: It is an academic offence for a student to engage in unfair academic practices or to cheat in any examination, or in any other submitted part of his or her University work, whether or not such work is formally assessed. A student may be found guilty of an academic offence whether or not there has been intention to deceive; that is, a judgement that negligence has occurred is sufficient to determine guilt. See more information of academic offences here: http://www.essex.ac.uk/about/governance/regulations/affairs.aspx#cheating
11. Students requiring support may contact EBS learning team: [email protected]
2023-12-02