Management Processes Assignment
After completing the module you should be able to:
LO1 Be able to apply cost concepts to thedecision-making process
LO2 Be able to apply forecasting techniques to obtain information for decision making
LO3 Be able to participate in the budgetary process of an organisation
LO4 Be able to recommend cost reduction and management processes for an organisation
LO5 Be able to use financial appraisal techniques to make strategic investment decisions for an organisation
LO6 Be able to interpret financial statements for planning and decision making
Task 1Applying cost concepts to the decision-making process
You should choose a good or a service, which is generated by an organisation in Hong Kong with which you are familiar. You should then:-
- Explain the importance of costs in the pricing strategy of your chosen organisation.
(Assessment Criterion 1.1)
- Design a costing system for use within your organisation.
(Assessment Criterion 1.2)
- Propose improvements to the costing and pricing systems used by your organisation.
(Assessment Criterion 1.3)
Task 2 Applying forecasting techniques to obtain information for decision making
- Apply forecasting techniques
Suppose your chosen organisation also manufactures a product which has recently increased in its sales. The sales revenue figures for the last 9 months have been prepared as follows:-
Sales revenue $ (HKD)
Moving averages can be used to forecast future performance. Explain what is meant by the term moving average and calculate a three month moving average for the sales figures above. Use that calculation as the basis of forecasting sales revenue for the next two months i.e. January and February. Explain the methodology you have used, making particular references to any assumptions you have made within that methodology.
(Assessment Criterion 2.1)
- The company now wants to expand its business to China and would need a capital investment of HKD 1,000 million. Assess 3 possible sources of funds available to the organisation for this project.Discuss the advantages and disadvantages of each source.
(Assessment Criterion 2.2)
Task 3 Participating in the budgetary process of an organisation
- (i) Discuss what can be considered to be good practice in the construction of a master budget by your chosen organisation.
(ii) Suppose the chosen organisation has recently formed a new manufacturing unit, Forward Ltd and the following information is given. Participate in the creation of a master budget for Forward Ltd.
The following information has been produced to illustrate the manufacturing and other budgets required to support the initial months of trading from June 2014. Firstly the production budget:
|Production Budgets (Units)|
|Add Closing stock of finished goods required||2,000||2,500||2,600||2,700|
|Deduct Opening Stock of finished goods||0||(2,000)||(2,500)||(2,600)|
|Production Required (Units)||2,000||2,500||2,600||2,700|
Each item of production requires 1 item of raw material costing $49 per item. Prepare the raw materials budget as shown below:
|Raw Materials Budgets (Units)|
|Required for Production||2,000||2,500||2,600||2,700|
|Stock of raw materials (units) required at end of month (1 month)||2,500||2,600||2,700||2,800|
|Deduct Opening Stock of raw materials||(2,000)||(2,500)||(2,600)||(2,700)|
|Raw Material Purchase Required ($)||122,500||?||?||?|
Labour production costs are $45 for each item manufactured. Prepare the Labour budget is as follows:
|Labour Budgets ($)|
|Labour cost per unit ($)||?||?||?||?|
|Production Labour Cost Required ($)||90,000||?||?||?|
- All raw materials (other than the initial 2,000 units of opening stock which had already been paid for) will be purchased on credit with suppliers being paid one month after the month of purchase. The purchase of 2,500 units of raw materials in June 2017, therefore, which would cost $122,500, would be paid for in July 2017.
- Labour costs are paid for as incurred. The labour cost of producing 2,000 units in June 2017, therefore, $90,000, would be paid for in that month.
- There is $300,000 of cash available in June 2017, which, after paying the labour costs of $90,000 in that month, would leave a balance of $210,000 at the bank to start the month of July 2017.
- The selling price of the product is $100 and sales are all on credit. Customers are given 2 months in which to pay, so the 2,000 items planned for sale in July 2017, value $200,000, will be paid for in September 2017.
You are also required, for Forward Ltd., to prepare your version of debtors, creditors and cash budgets (or provide the budgeting information in a format of your own choosing). Attach these tables to your answer. Selective figures have been provided for guidance.
|Debtors Budgets ($)|
|Sales in Month||200,000||?||?|
|Receipts from Debtors in Month||0||?||?|
|Creditors Budgets ($)|
|Raw Materials Purchases in Month||122,500||?||?||?|
|Payment to Creditors in Month||0||?||?||?|
|Closing Balances ($)||122,500||?||?||137,200|
|Cash Budgets ($)|
|Receipt from Debtors||?||?||?|
|Payments to Creditors||0||?||?||?|
|Payments to Labour||(90,000)||?||?||?|
|Closing Balance ($)||210,000||?||?||(323,200)|
Comment on the closing balances in hand or overdrawn in the cash budget and indicate how the position might be improved.
(Assessment Criteria 3.2)
- You should select and set some budgeted target figures in your chosen organisation. Justify your selection.
(Assessment Criterion 3.1)
- Compare the actual expenditure and income to the master budget of an organisation for the chosen organisation. Identify the variances between these two sets of figures, discuss how significant you think the variances might be considered to be and their possible causes.
(Assessment Criterion 3.3)
- Evaluate budgetary monitoring processes in the chosen organisation.
(Assessment Criterion 3.4)
Task 4Recommending cost reduction and management processes for an organisation
- Recommend processes that could manage cost reduction in your chosen organisation. Explain with reference to relevant theory and concepts.
(Assessment Criterion 4.1)
- Evaluate the potential for the use of activity-based costing in your chosen organisation.
(Assessment Criterion 4.2)
Task 5Using financial appraisal techniques to make strategic investment decisions for an organisation
Suppose your chosen organisation has HKD$20,000,000 to invest and is considering two possible investment projects. Below is the anticipated cash flows for each project.
Year Project A Project B
0 (20,000) (20,000)
1 1,090 1,020
2 2,600 2,700
3 9,090 5,600
4 7,980 11,590
5 8,470 6,470
Other relevant information is
- the company discounts its investment projects using a 4% discount rate;
- the company depreciates its capital assets on a straight-line basis; for the above project you should assume that the equipment has no scrap value at the end of the 5 year period.
- For each of the above projects you are required to calculate their
- Accounting rate of return.
- Discuss the strengths and weaknesses of each of the investment appraisal techniques above.
- Describe one other investment appraisal technique the company might have used and discuss why.
- Discuss the main differences between investment appraisal in the public sector and the private sector.
(Assessment Criterion 5.1)
- Based upon the calculations in (ai), recommend which project the company should adopt if any. Give reasons for your decision.
(Assessment Criteria 5.2)
- c) Discuss how a post- appraisal audit may help one improve on the effectiveness of investment decision making.
(Assessment Criterion 5.3)
Task 6 Interpreting financial statements for planning and decision making
- Based upon the published financial accounts of your chosen company, apply financial ratios and assess the profitability and liquidity of the company over the last two financial years. Assess the financial viability of the chosenorganisation. You should attach the accounts in the Appendix.
(Assessment Criteria 6.1, 6.2)
- Discuss how the organization might respond to your discussion in 6a) and if necessary, improve its profitability. How could the quality of financial information be improved?
(Assessment Criteria 6.1, 6.2)
- Based on the financial information of your chosen organisation, make recommendations on the strategic portfolio of an organisation.
(Assessment Criterion 6.3)
If you would like feedback on either a draft answer to task 1 OR a plan of how you will approach the entire assignment, please submit the appropriate document 2 weeks before the submission deadline.
- You should write this assignment in essay format with a separate essay being submitted for each task
- You must ensure that the submitted assignment is all your own work and that all sources used are correctly attributed. Penalties apply to assignments which show evidence of academic unfair practice. (See the Student Handbook which is in the Induction Area).
- You MUST underpin your analysis and evaluation of the key issues with appropriate and wide ranging academic research and ensure this is referenced using the Harvard system. The ‘My Study Skills’area contains the following useful resources; Study Skills Guide (containing a Harvard Referencing section) and a Harvard Referencing Interactive Tutorial. You must use the Harvard Referencing method in your assignment
- You should use diagrams and tables of figures where appropriate ensuring to reference their source using the Harvard Referencing method.
- You are suggested to write your assignment within4,000 words in order for your research and summarising skills to be developed, and for effective time management. You are required to ensure that the assignment addresses all of the assessment tasks.
- Your assignment should be submitted as a single document.
Recommended Additional Resources
Drury, C. (2016)Management Accounting for Business, 6th ed.,Cengage Learning
Finch, Brian (2010)Effective Financial Management, In Creating Success. London :Kogan Page.
Marsh, Clive(2012) Financial Management for Non-financial Managers, In Strategic Success Series,London :Kogan Page.
Vernimmen, Pierre (2014) Corporate Finance: Theory and Practice, 4th ed. Chichester, West Sussex : John Wiley & Sons, Inc.
Atrill, P. and McLaney, E. (2012)Management Accounting for Decision Makers,Financial TimesPrentice Hall
Lumby, S. and Jones, C. (2000) The Fundamentals of Investment Appraisal, Thomson Learning
Weetman, P. (2013) Financial and Management Accounting: An Introduction, Pearson
Melville, A. (2013) International Financial Reporting, Financial Times Prentice Hall
Mott,G.( 2012) Accounting for Non-Accountants, 8th ed., Kogan Page
Watson, D. and Head, A. (2013) Corporate Finance: Principles and Practice, 6th ed., Financial Times Prentice Hall
McLaney, E. (2011) Business Finance,Financial Times Prentice Hall
|Assessment Criteria to Pass|
To achieve a pass you must meet all of the assessment criteria as stated below. Failure to cover all of the assessment criteria will result in a referral grade and you will be required to re-submit your assignment.
Further guidance on completion of your assignment can be found in the guidance notes which are posted on the group learning space by your module tutor.
|Learning Outcomes and Assessment Criteria met||Criteria Met|
(you may wish to use this in your preparation for your assignment submission)
|LO1 Be able to apply cost concepts to the decision-making process|
1.1 Explain the importance of costs in the pricing strategy of an organisation
1.3 Propose improvements to the costing and pricing systems used by an organisation
|LO2 Be able to apply forecasting techniques to obtain information for decision making|
2.1 Apply forecasting techniques to make cost and revenue decisions in an organisation
2.2Assess the sources of funds available to an organisation for a specific project
|LO3Be able to participate in the budgetary process of an organisation|
3.1 Select appropriate budgetary targets for an organisation
3.2 Participate in the creation of a master budget for an organisation
3.3Compare actual expenditure and income to the master budget of an organisation
|LO4Be able to recommend cost reduction and management processes for an organisation|
4.1 Recommend processes that could manage cost reduction in an organisation
4.2Evaluate the potential for the use of activity-based costing
|LO5 Be able to use financial appraisal techniques to make strategic investment decisions for an organisation|
5.1 Apply financial appraisal methods to analyse competing investment projects in the public and private sector
5.2Make a justified strategic investment decision for an organisation using relevant financial information
5.3Report on the appropriateness of a strategic investment decision using information from a post-audit appraisal
|LO6 Be able to interpret financial statements for planning and decision making|
6.1Analyse financial statements to assess the financial viability of an organisation
6.2 Apply financial ratios to improve the quality of financial information in an organisation’s financial statements
6.3 Make recommendations on the strategic portfolio of an organisation based on its financial information