ACCT618 Managerial Accounting

ACCT618 Managerial Accounting

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ACCT618 Managerial Accounting

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ACCT618 Managerial Accounting

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Course Code: ACCT618
University: American Public University System

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Country: United States

Question:

Firms compete with each other on the basis of the relative merits of their respective supply chains, so management accounting practices must support this reality rather than provide information that is rooted in traditional organisational settings. Management accountants need to work with their management colleagues to support development of greater supply chain competitive advantage. All organisations, small or large, operate in this environment and must develop management accounting practices that facilitate their long-term sustainability. The second assessment is based on a case study that requires analysis of the case provided and further research of relevant articles and other publications.
 
The output of this assessment is a Case Study Report in which the case information and additional relevant material sourced by research is synthesised and interpreted through well-reasoned arguments and discussion that lead to logical recommendations and conclusions, including
 
Evaluating the return on investment (ROI) methodology and the influence of logistics activities on working capital, cash flow and cash to cash cycle of a business;
 
Critically examining costing models for their benefit in improving supply chains and logistics;Assessing and discussing traditional management accounting approaches against the cost information needs for analysing supply chains and logistics; andEvaluating the methodology and structure of an annual budget and critically evaluating the basis of an annual budget verses a continuous budget for logistics operations.
he report will be assessed as followsExplaining the relevant linkages between logistics / supply chain concepts and management accounting concepts (10 marks)Explaining the benefits of applying management accounting techniques to improve the management of supply chains and logistics in organisationsIdentifying the pitfalls (i.e. risks) associated with adopting management accounting techniques to improve the logistics / supply chain management of an organisation Report structure with introduction, background, discussion, to arrive at a conclusion and recommendations based on clear concise reasoning Using appropriate conventions of report writing and academic writing 

Answer:

Introduction
Accounting Policies used by the JB HI-Fi Company is in accordance with the Australian Accounting Standards and the principles and guidelines laid down by the same were taken into view and account. The interpretation for the accounting policies were used in accordance with the Corporations Act 2001. The financial report for the company was prepared in accordance to the IFRS and the compliance with the same was taken into account.
Depreciation Methods
The depreciation methods taken into account for the JB HI-Fi Company’s Plant and Machinery was for the year 2016. The Depreciation provided on the plant and equipment and the leasehold improvements were noted I the financial statements of the company at the historical cost less any accumulated. The depreciation on all the non-current assets of the company was provided. The method for depreciation is provided on a straight line basis where the cost of each assets or the value of the assets is distributed among the useful life of the asset and the following depreciation per year was calculated by the company. The company reviews and overviews the different factors of the assets such as the useful or total life of the asset or the market value and the suitable depreciation method. If the management of the company felt regarding changes that needs to be done on the factors than the changes are made. The oversight and annual review of the non-current assets of the company once annually which will help a company helps them in better forecasting and maintaining better operational efficiency in the business (Qian et al.  2016).
Useful life of the Assets.
The useful life of the assets was one in order to review and study the assets of the company in brief. The estimated life selected and evaluated for the non-current assets of the company were defining two key assets of the company (Kawasmi, Brown & Shell, 2018). The leasehold improvements of the company was taken ad the useful life of the asset was considered to be around 1-15 years of total time frame. The plant and equipment on the other hand useful life for the asset was considered to be around 1.5years of time frame to 15 years of time frame. The intangible assets of the company comprises the intangible assets like the goodwill. The intangible assets of the company that have an indefinite useful life is are carried and reported down at cost of acquisition less if any accumulated impairment charges arising from the same. The viability of non-current assets of the company is generated with the help of annual testing of impairment of assets for the company. The plant and equipment of the company is charged with the impairment charges if the company observes that the book value or the carrying value of the assets is greater than the fair market value of the assets and the same assets amount is not expected to be recoverable then the company charges the impairment charges on the following is charged to shows the economic viability of the assets.

Payment Spend/incurred on Purchase of Plant and Machinery Evaluation and the return derived from the same.

Particulars

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Cash Flows

52343

19404.70852

19404.709

19404.70852

19404.709

19404.71

19404.71

19404.71

19404.71

19404.71

19404.71

Return on Investment

14.00%

Asset Useful Life

10 Years

Maturity Amount of Amount. Invested

194047.1

{Equals: 52343*(1.14)^10}

 

 

 

 

Minimum Average Annual Net Cash Flow
 
The average net annual cash flow is calculated with the help of the amount invested in the assets of the company multiplied by the required rate of return for the company. The required amount of investment was derived by the company in the form of the assets invested and the return required in the due course of the time. The approximate cash flows was then estimated using the maturity amount divided by the useful life of the assets.
Payback Period
The payback period was calculated as the recovery of the initial amount invested into the assets and the time in which the amount was invested. The key factor to notice in this cases is that the payback period ignores the time value of money (Lin, Chang & Chung, 2015).

Payback Period Calculations

Particulars

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Cash Flows

52343

19404.70852

19404.709

19404.70852

19404.709

19404.71

19404.71

19404.71

19404.71

19404.71

19404.71

Recoverable Amt.

-52343

1904.7085

21309.417

40714.12555

60118.834

79523.54

98928.25

118333

137737.7

157142.4

176547.1

Payback Year

0

1

1

1

1.87

1

1

1

1

1

1

Payback Period

0

1

2

3

4.87

 

 

 

 

 

 

Accounting Rate of Return

Accounting Rate of Return (Average Annual Profit/ Average Investments)

Particulars

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Cash Flows

52343

19404.70852

19404.709

19404.70852

19404.709

19404.71

19404.71

19404.71

19404.71

19404.71

19404.71

Depreciation

10 yrs

5234.3

5234.3

5234.3

5234.3

5234.3

5234.3

5234.3

5234.3

5234.3

5234.3

Average Annual Profit

 

14170.40852

14170.409

14170.40852

14170.409

14170.41

14170.41

14170.41

14170.41

14170.41

14170.41

Accounting Rate of Return

27.07%

(14170/52343)

 

 

 

 

 

 

 

 

 

Comparison of Average Payback Period
The average payback period calculated for the company was around 4.87 years the payback period of 4.87 years shows the initial amount recovery of the total investment done by the company in the acquisition of the assets. The payback period is a useful method of calculating and devaluating the recovery of the non-current assets of the firm over the useful life of the assets (Christodoulou, Clubb & Mcleay, 2016). The useful life of the non-current assets of the firms was calculate as the average useful life of the non-current assets of the firms which comprises of the lease hold improvements and plant and equipment’s is as follows the useful life of the leasehold improvements is around 1-15 years. The Plant and Equipment which is a major component of the non-current assets of the firms which is having a useful life of 1-15 years. The different useful life of the assets of the company and the payback period will actually help the company in investing decisions and let them know the recoverable amount in the asset when compared to the useful life of the assets. The depreciation of the non-current asset of the firms were calculated down on a straight line basis of depreciation for assessing the actual value of the assets (Richard, 2014).
Supply Chain Management Consultant
 Return on Investment = (Net Profit/Total Investments):  The return on investment is a financial ratio that evaluates the profitability of the company in terms of the profit the company generates on the total assets or investment of the company (Dekker, 2016). The company should use the return on investment as a important ratio to assess the financial performance of the company. The return on investment will help assess the financial position of the company whether the company is able to generate and utilize the assets and the investments of the company (Formentini & Taticchi 2016). The stakeholders of the company asses this financial ratio as an important ratio for assessing the financial wealth creation done by the company in the due course of the time. The return on investment for the JB Hi-Fi Company was calculated taking into view of the financial report for the year 2016. The company’s return on investment for the year 2015 was around 15.25% while the same ratio for the year 2016 was around 15.33% which shows the growing return on investment for the stakeholders of the company (Mylan et al. 2015).

Return on Investment

Particulars

2016

2015

Net Profit

152181

136511

Total Assets

992381

895013

Return on Investment

15.33%

15.25%

Objective of the Study
There are several places where company can influence the financials improvement of the JB Hi-Fi Company through improvement in the working capital and cash flow of the company. The company should view logistics supply management as a process and a cycle which influences the basic operations of the company. The calculation of requirement of the working capital of the company significantly depends on the logistics process of the company. The most important portion and a significant portion of the working capital of the JB Hi-Fi Company is the Inventory of the company (Kozlenkova et al. 2015). The amount of days it takes to clear the inventory which is present in the warehouses of the company the greater the amount of expenses a company may have to bear in terms of logistic handling charges. This in fact turns out to be a greater problem for the JB Hi-Fi Company which gives rise to the operational expense of the company in the form of rising working capital and rising cash outflow of the company. Thus there are different reasons why the company needs to account for improvement in the logistics cycle and managing the supply chain for the company. The management of the supply chain can be done by properly and carefully evaluating the amount of goods it should produce and analyse the average inventory turnover ratio for the company which will suggest the company with the times the company takes in actually clearing the stocks or the inventory of the company. The working capital shows the amount available for the company in meeting the daily expenses of the company and the same should be carefully analysed by the company in order to maintain the operational efficiency of the company. The important factor which can be implemented by the company for improvement in these filed are:

Evaluating the Warehouse Capacity and location
Does the company pay late fine on delivery
The collection cycle and the payment cycle of transactions for the company
The velocity of the inventory
Treatment of stagnant inventory ad taking action on the same.

These are the key steps for the JB Hi-Fi Company to evaluate and the steps which could provide an improvement in the financials of the company.
Critical Examination of the Costing Model
The designing of an optimal and an efficient supply chain by utilizing or implementing the supply chain costing model could be useful for the company. The utilization and implementation of the model could improve supply chains and logistics management at JB Hi-Fi Company. The key features and the challenge of such an model would be that the model ability and the utilization should be such that is able to adapt and capture the movement of the supply chain and the network or the process which supports it and the infrastructure, changing customers and other developments in the field of economic and technological field. The supply chain model developed could help the management of the company in implementation of important managerial decisions via executing or deploying a communication model which would bring out financially efficiency in the optimization of the company’s services and products and the supply chain of the company. Whereas it is crucial to note that the traditional costing model does not incorporate the several factors which are included in the modern supply chain costing model. The traditional models just used to treat costs under variable and fixed heads and the recommendations and the distributions and the ways for reducing the fixed and variable expenses of the company were stated that gave a minimum exposure in proving and interacting with the business environment for the company.  The benefits of using and implementation of the supply chain costing model would be that it would depict a clear and a much transparent costing structure of the company and the sensitivities of the different components involved in the same. Maximizing of the net profits for the company by reducing the operational expenses of the company are some of the key factors and benefits of the supply chain costing model.
Methodology and Structure of the Annual Budgeting Process
The JB Hi-Fi Company needs to use an annual budgeting process the annual budget for the company will help the company determine and evaluate the financial goals of the company relating to operating and investing activities of the company. In creation of values or value creation for both the suppliers and the customers of the company it will be the role of logistics and the management of the same. Time and place will be expressed as the functions and key factors of the budgeting (Grossi, Reichard & Ruggiero, 2016).
 The annual budgeting process or the continuous budgeting process will help the JB Hi-Fi Company evaluate the costing nature of the company. The use of continuous budgeting will help the company in easy forecasting of sales, financial and operational expenses quarterly or month instead of the annual process. The key benefits for the company in the implementation of the same will be the proper financial planning and evaluation of the company’s operational and financial goals of the company.
Conclusion
A high quality budgeting system would provide a direction to the company for meeting the operational work of the company. The short term forecasts and targets could be easily and planned with the help of the continuous budgeting for the products and services given by he JB Hi- Fi Company. The key pitfalls for implementation of such a model will be the excess time and resources spent in the planning and implementation of the same.
Reference
Dekker, H. C. (2016). On the boundaries between intrafirm and interfirm management accounting research. Management Accounting Research, 31, 86-99.
Formentini, M., & Taticchi, P. (2016). Corporate sustainability approaches and governance mechanisms in sustainable supply chain management. Journal of Cleaner Production, 112, 1920-1933.
Mylan, J., Geels, F. W., Gee, S., McMeekin, A., & Foster, C. (2015). Eco-innovation and retailers in milk, beef and bread chains: enriching environmental supply chain management with insights from innovation studies. Journal of Cleaner Production, 107, 20-30.
Kozlenkova, I. V., Hult, G. T. M., Lund, D. J., Mena, J. A., & Kekec, P. (2015). The role of marketing channels in supply chain management. Journal of Retailing, 91(4), 586-609.
Qian, C., Fan, X. J., Fan, J. J., Yuan, C. A., & Zhang, G. Q. (2016). An accelerated test method of luminous flux depreciation for LED luminaires and lamps. Reliability Engineering & System Safety, 147, 84-92.
Grossi, G., Reichard, C., & Ruggiero, P. (2016). Appropriateness and use of performance information in the budgeting process: Some experiences from German and Italian municipalities. Public Performance & Management Review, 39(3), 581-606.
Kawasmi, M., Brown, J., & Shell, M. (2018). Wastewater System Selfies: Utilizing Remaining Useful Life for Asset Management of Critical Wastewater Assets. Proceedings of the Water Environment Federation, 2018(1), 257-262.
Lin, W. M., Chang, K. C., & Chung, K. M. (2015). Payback period for residential solar water heaters in Taiwan. Renewable and Sustainable Energy Reviews, 41, 901-906.
Christodoulou, D., Clubb, C., & Mcleay, S. (2016). A structural accounting framework for estimating the expected rate of return on equity. Abacus, 52(1), 176-210.
Richard, P. (2014). The Role of the Accounting Rate of Return in Financial Statement Analysis. The Continuing Debate Over Depreciation, Capital and Income (RLE Accounting), 67(2), 235.

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