Question 1: Management accounting information for resource management (10 Marks)

You have just been appointed as the management accountant for Close Up and Personal (CUP), a company that sells pottery items, jewellery and cool clothing, featuring personal digital photos. This company employs a team of 12 designers who design the pottery items, jewellery and clothing. These products are manufactured by independent companies. CUP then prints the customer ordered photos onto the products and sells them to customers through six sales outlets located in shopping malls.

Required:

1Identify the specific types of management accounting information that may be needed by the following employees, on a monthly basis, to help them control operations:

(a)Manager of each retail outlet.

(b)Manager of the design team.

(c)Marketing manager responsible for planning advertising campaigns and identifying customer needs.

(d)Manager who manages and renegotiates contracts with the outside manufacturers.

2The managing director of CUP is interested in developing more sophisticated planning systems, but has some doubts over the value of undertaking strategic planning. Prepare a report outlining the importance of planning systems. In your report, consider the interrelationships between the objectives of the company, its strategies and short-term planning systems. Explain how management accounting information may assist in improving the planning function of the company.

Question 2: Schedules of cost of goods manufactured and sold; income statement (10 Marks)

The following data refer to Flintoff Fashions for the current year:

Sales revenue$570 000

Work in process inventory, 31 December18 000

Work in process inventory, 1 January24 000

Selling and administrative expenses 90 000

Income tax expense 54 000

Purchases of raw materials108 000

Raw material inventory, 31 December15 000

Raw material inventory, 1 January24 000

Direct labour120 000

Electricity: plant24 000

Depreciation: plant and equipment36 000

Finished goods inventory, 31 December30 000

Finished goods inventory, 1 January 12 000

Indirect material6 000

Indirect labour9 000

Other manufacturing overhead 48 000

Required:

1Prepare the schedule of cost of goods manufactured for Flintoff Fashions.

2Prepare the schedule of cost of goods sold for Flintoff Fashions.

3Prepare the income statement for Flintoff Fashions.

4Construct an Excel spreadsheet to solve all the preceding requirements. Include formulas in your spreadsheet wherever possible. Show how both cost schedules and the income statement will change if:

(a)raw material purchases amounted to $110 400.

(b)indirect labour was $9600.