Arab Open University B321: TMA – 2nd Semester 2015 – 2016 Cut-Off Date: May 04, 2016 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 compon

Arab Open University
B321: TMA – 2nd Semester 2015 – 2016
Cut-Off Date: May 04, 2016

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 Sessions 1, 3, 6, 8, 9, and 16 beside the supplementary material. This TMA requires you to apply the course concepts. The TMA is intended to:
 Assess students’ understanding of key learning points within Sessions 1, 3, 6, 8, 9, and 16.
 Increase the students’ knowledge about the reality of the Managerial Accounting as a profession.
 Develop students’ communication skills, such as memo writing, essay writing, analysis and presentation of material.
 Develop the ability to understand and interact with the nature of the managerial accounting tools in reality.
 Develop basic ICT skills such as using the internet.

The TMA:
This TMA is based around two cases of “Activity-based Costing (a Hypothetical SME Company)” and “The Balanced Scorecard (BSC) and Long-run performance in a football club”. Marks will be awarded for blending the context of each case and with relevant theory by means of your own interpretation. In addition to this, some research is required.
The TMA requires you to:
1- Review various study sessions beside the supplementary materials.
2- Conduct a simple information search using the internet and the e-library.
3- Present your findings in not more than 1,820 words ± 10% (1,580 words for part A and 240 for part B).
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& e-library Structure and Presentation of ideas
Part A Part B
Marks 75 25 (5) (5)


The TMA Questions
PART A: Activity-based Costing (a Hypothetical SME Company)
“Beware of little expenses. A small leak will sink a great ship.”
-Benjamin Franklin

A small manufacturing Company introduced the past year a new product, called X13, to complement their other products, X11 and X12. The company accountant used to accumulate all overhead in a single cost pool and allocate them based on direct labor hours. Based on the information received, the management noticed that product X12 is not profitable and is considering withdrawing this product. Otherwise the company has raised the price of Product X13 several times, but there has been no apparent loss of sales. The three production managers are paid an annual bonus based on their ability to control the traceable costs to their respective product lines. With the new implementation of an updated computer system, the management is considering to start using the ABC. Table (1) shows the selling prices and direct costs for each of the three products, with the overhead unallocated.
Table (1)
Products Total
X11 X12 X13
Sales (Units) 3,000 2,000 1,000
Selling Price ($) 16 12.5 30
Direct Costs:
Direct material ($/Unit) 5.5 1.475 10
Direct labour:
H/Unit 2 3.5 1
$/H 2.25 1.25 2.5
Indirect Costs 39,200

Before making a final decision about dropping the product, the management has come to you for advice. You collected the following information regarding manufacturing overhead:

Table (2)
Mfg. Overhead Mfg. Overhead Costs Allocation bases
Set-up $ 9,600 Number of set-ups
Ordering materials $ 10,200 Number of material orders
Handling materials $ 5,600 Number of times material was handled
Inspection $ 13,800 Number of inspection hours
$ 39,200




Table (3)
Activity Products
X11 X12 X13
Total Number of set-ups 30 10 80
Total Number of material orders 4 2 14
Total Number of times material was handled 2 4 10
Total Number of inspection hours 3 2 10
Required:
1- Contrast the two methods of calculating the profitability of the three products. Discuss the profitability of the three products. (650 words)
2- As an advisor, provide a recommendation to the management regarding their decision to discontinue product X12. (150 words)
3- Write a memo to the management describing the current costing system, the improvements that you recommend, and discuss how the information may be useful for product line decision. (350 words)
Use the following format for your repot:
Memo
Date: ……………….
To: ……………….
From: ……………….
Subject: Costing System

4- Provides a recommendation along with a justification for which system the company should use for pricing decisions, especially for product X13. (200 words)
5- It has been assumed that the usage of ABC will result in and end-product costing which are fairer, truer and more useful to management than the traditional costing methods. Critically assess this statement and discuss how ABC may also be more 'decision relevant' for SMEs. (100 words)
6- Discuss the problems and challenges face by SMEs to implement and maintain the ABC system. (130 words)



[Marks: (40+6+10+8+5+6) = 75]









PART B: The Balanced Scorecard (BSC) and Long-run performance in a football club

Football teams have become business enterprises; in regards to their income and number of employees. As the new controller of a football team, you have been asked by the club director to comment on any deficiencies of the club. After saying that you believe that the club needs long-run performance measurements, the director says that the long run is really just a series of short runs. He says that if you do a good job of evaluating these short-run performances, that the long run will take care of itself. He sees that you are unconvinced and agrees to keep an open mind if you can make a good case for measuring and evaluating long-run performance.

Required:
Write a report to your director which explains his inquires. In your answer, you should explain each of the following points or inquires separately:
1. Discuss the BSC and explain how the football club should use the concepts in the balanced scorecard. (150 words)
2. List three possible performance measures that would be relevant for each of the balanced scorecard’s four areas. (90 words)

[Marks: (13+12) = 25]
Total Marks: 75 + 25 - 10 Marks of deductions for general presentation and references]


In your answer, you should explain each point or inquiry separately.

All answers should be supported by examples from the case study.

Use the following headings (below) to make up the different sections of your work:


The PT3 form
Title and contents page
Part A Activity-based Costing (a Hypothetical SME Company)
Part B The Balanced Scorecard (BSC) and Long-run performance in a football club
References (Recorded according to the Harvard style - Available on LMS)