ACCT2019 Management Accounting Group Assignment
Semester 1, 2022
Instructions for Parts A & B
There are two parts in this assignment. Part A is a group assessment and Part B is an individual assessment. Part A requires students, as a group, to carry out an analysis of the case study (Gretzky Pty Ltd – described in this document) and submit an executive report in PowerPoint format. Part B requires each student to map the Gretzky Pty Ltd case study data in the SAP accounting system and complete several transactions and reports and submit a document. This assignment requires students to demonstrate their:
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i) Ability to identify and apply relevant management accounting concepts and techniques to practical business contexts and make recommendations with a focus on the usage of qualitative and quantitative information.
ii) Specialist SAP software skills by mapping the business scenario in SAP, determination of relevant master data and transactions, their creation and/or execution and producing relevant reports from the SAP accounting system.
Part A – Case analysis – Group (15%)
Part B – SAP component – Individual (15%)
7th May 2022, Saturday, 11:59 PM AEDT
• Two files should be submitted. One for Part A & one for Part B. • Both files must be saved and submitted in PDF document format.
• Please submit in Canvas in the two folders in the ‘Assessment’ section:
i) Part A – Case analysis – Group
ii) Part B – SAP Component – Individual
Weighting:
Due date: Submission:
Your Part A PDF file should include the cover page, PowerPoint report, appendices and the peer evaluation form.
Hockey Sticks Extraordinaire – Case Study
Composite carbon technology has been used in prosthetics, aerospace, car racing and now in ice hockey sticks. Manufacturing and structural advances in composite technology have allowed manufacturers to combine the best properties of wooden and aluminium sticks while adding innovations that make composite sticks ideal for today’s hockey players.
In the early 1980s, many players, including , the all-time leading scorer in National Hockey League (NHL) history, experimented with aluminium shafts with wooden blades. These sticks gained popularity throughout the 80’s and 90’s due to their unmatched durability, stiffness and stability. The shaft was a rectangular aluminium tubing with a replaceable wooden blade. Although the aluminium sticks were lighter, stronger and more durable than wooden sticks, they did not provide players with a “feel” for the puck. This was the primary reason for their failure.
In the late 1990s, full composite sticks were introduced to the sport. These sticks were made from graphite fibres bound together by polymer resin, which made them extremely light. Composite hockey sticks have soared in popularity and are currently used by more than 80% of players in the NHL. Composite stick technology is ideal because it combines the flexibility of wood to generate hard shots, the stiffness and stability of aluminium for control and a lightness that is unmatched by wood or aluminium. The stick is lighter which means quicker movement and faster release of the puck for passing and shooting.
Upon retirement, and his father formed Gretzky Pty Ltd (GPL) as a manufacturer and supplier of (ice) hockey sticks1. They produce two types of hockey sticks, The Hull and The Howe. The Hull is sold as a stick that is highly effective for slap shots, whereas The Howe is more of a finesse shooter’s stick (i.e. it has less power but greater accuracy). Both products are top-of-the-line and too expensive for non-professional players. Stick cost is not an issue for a professional hockey player even if they did have to buy them, which they don’t. Their team would pay for all equipment costs including for sticks.
A quick Google search provides some insights into GPL’s competition and the hockey stick market.
12 Sticks 2021 Review | Honest Hockey
Sticks 2022 – Top 5 Ice Sticks and Related Info (lifeinhockeywood.com) Do NHL Players Pay for Sticks? – Getting Started with Hockey (startinghockey.com) NHL Equipment Brand Stats – GearGeek
NHL Totals (geargeek.com)
1 Canadians never put “ice” before “hockey”. There’s only one kind of hockey in Canada.
And they never refer to “the boards” as ‘the wall’.
Gretzky Pty Ltd sell The Hull and The Howe directly to professional hockey teams. Wayne’s sales and price forecasts for 2021 are provided in the “Sales and Finished Goods” table below. This table also provides actual inventory count values at the start of 2021. Production costs from 2020 for The Hull inventory is $250 per stick while for The Howe, it is $300 per stick.
SALES FORECASTS and FINISHED GOODS VOLUMES – 2021
The Hull The Volume (units)
50,000 85,000
Selling price/unit
Desired ending inventory (# of sticks) 1,500 2,000
Opening inventory (actual # of sticks)
2,500 2,850
DIRECT MATERIALS – STANDARDS and INVENTORY VOLUMES – 2021
Direct material required for each hockey stick (grams)
Desired Opening
Composite wood
Fibre glass
Carbon fibre
Kevlar $2.50 20
DIRECT LABOUR STANDARDS – 2021 Process
Assembly – direct labour hours per batch Finishing – direct labour hours per batch Total processing hours per batch
Batch size (# of sticks) Direct labour hours per stick Direct labour cost per hour
MANUFACTURING OVERHEAD – 2021
ending inventory inventory (grams)
Cost per gram
250 130 15
45,000 22,400 15,000 4,650 13,000 9,500
$0.12 $0.30 $3.00
240 150 10
35 5,000 4,000
Variable overheads:
Indirect labour
Electricity
Repairs & maintenance Rates & Insurance
Total variable overheads Fixed overheads:
Depreciation Miscellaneous
Total fixed overheads Total overheads
Budgeted cost ($)
540,000 125,000 400,000 750,000 300,000
2,500,000 1,500,000 750,000 4,750,000 6,865,000
2.0 2.3 4.3
50 0.086 $45
Actual costs ($)
570,000 150,000 420,000 760,000 300,750
2,500,000 1,500,000 840,000 4,840,000 7,040,750
2.5 2.2 4.7
36 0.1306 $45
Costs to be charged to
Maintenance Maintenance Maintenance Maintenance Maintenance
Accounting Accounting Accounting
GPL has six departments – Accounting (A###), Maintenance (M###), Sales (S###), Tech. services (T###) and The Hull (L###) production unit and The Howe (W###) production unit within their Gretzky cost centre group (GG###), and all of them are classified as service cost centres in SAP.
The management of GPL (Walter & Wayne) use a traditional volume-based method of allocating overheads with a predetermined rate based on the number of sticks produced. They have recently hired your team as their Management Accountants to prepare various components of their operating budget, cost of goods sold budget and a budgeted income statement. You have been provided with the following information:
• GPL’s actual sales in 2021 were 59,600 sticks for The Hull at an average price of $550 per stick and 80,900 sticks for The Howe at an average selling price of $675 per stick.
• Actual year-end ending inventories were 1,000 sticks and 1,800 sticks of The Hull and The Howe respectively.
• Walter indicates that composite wood was purchased for $0.15 per gram and Kevlar was purchased at $2.25 per gram. The cost of fibre glass and carbon fibre were $0.22 per gram and $3.5 per gram respectively.
• GPL used 7,900 kilograms (the complete purchase amount) of fibre glass for producing The Hull, while they bought and used 11,200 kilograms of fibre glass for producing The Howe. Wayne indicates that they bought and used 525 kilograms of carbon fibre for The Hull and 1,125 kilograms of carbon fibre for The Howe. 14,873.6 kilograms of composite wood were bought and used for The Hull, whereas 19,164 kilograms were bought and used for The Howe. For The Hull, 1452.5 kilograms of Kevlar were bought and used, whereas 3,194 kilograms were bought and used for The Howe.
• Actual direct labour hours for each The Hull produced was 0.108 hours, while for The Howe it was 0.125 hours. Total labour cost for The Hull was $875,400 and for The Howe it was $655,500.
• For 2021, the total actual variable manufacturing overhead spent was $ 2,200,750 and total fixed overhead spent was $4,840,000.
Unfortunately for GPL and other hockey stick manufacturers, stick breakage has been making the news in hockey circles. Several players have been extremely vocal and demonstrative with their complaints (see Appendix A).
While professional hockey players do not worry about the cost of their equipment, they are extremely particular that it functions flawlessly. Sticks breaking at inopportune times can result in missed goals and games lost. Several of GPL’s major competitors have been emphasising the durability of their products. Wayne and Walter have been concerned in recent times with the quality of their sticks.
On the production front, GPL has tried to bring more control over product quality by reducing GPL’s reliance on labour and increasing the use of computerised manufacturing methods. Several aspects of production that required manual labour had been automated. GPL has also been trying to understand the quality of its direct materials. Walter has been talking to various suppliers that can provide higher quality materials at negotiable prices. Given the current
breakage concerns for The Hull and The Howe, this has been an important concern for the two Gretzky’s.
Rent expenses were fixed for the year. Based on an invoice submitted by a Real Estate agent (called ###Realty), monthly payments are made by GPL towards the actual rent. For administrative purposes, GPL management allocates rent costs to various cost centres/departments based on the are occupied by each centre/department using an appropriate method of allocation in their SAP system. Management does not want the identity of this cost to be shown in the receiving cost centres’ report. The area occupied by The Hull (L###), The Howe (W###), Maintenance (M###), Accounting (A###), Sales (S###) and Tech. services (T###) is 450, 350, 200, 100, 300 and 180 square metres respectively.
Management has also noticed the increase in variable overheads. For controlling purposes, it has decided to allocate 25% of the variable overhead costs to each of The Hull (L###) and The Howe (W###) production units, 30% to Maintenance (M###), 10% to technology services (T###) and 5% each for the remaining two cost centres – Accounting (A###) and Sales (S###). Management would like these costs to be shown in the receiving cost centres’ performance reports, as it will give an indication of the variable overheads involved in each department and motivate the departments to reduce the costs. Budgeted variable overheads for the Hull (L###), the Howe (W###), Maintenance (M###), Accounting (A###), Sales (S###) and Tech. services (T###) are $500,000, $560,000, $600,000, $100,000, $120,000 and $235,000 respectively.
Except for rent, all other actual overheads (both fixed and variable) as shown in the ‘MANUFACTURING OVERHEAD – 2021’ table, are posted directly into the general ledger and charged to various cost centres as shown in same the table. In addition, actual direct material costs and direct labour costs are also posted directly in the general ledger every month and charged to their respective cost centres, i.e. The Hull (L###) and The Howe (W###). Even though The Hull (L###) and The Howe (W###) are products, for cost identification and allocation purposes, they are treated as cost centres in the SAP Accounting system and costs are charged to them accordingly. All the budgeted costs are also to be posted in SAP as planned costs.
Management would like to allocate the cost of providing technological service (TS###) by the Technical services (T###) cost centre to the other departments in the company. In the current month, T### has provided 200, 300, 190 and 60 hours of service respectively to The Hull (L###), The Howe (W###), Accounting (A###), Maintenance (M###) and Sales (S###) cost centres respectively. The total planned activity is 675 hours per month and the service rate is $150 per hour. It is important for GPL to see these costs mapped in SAP and shown in the SAP reports for reference for controlling purposes.
You are also provided with the following information with regards to selling and administrative expenses. Wayne takes care of all the sales and other related activities for the company. He incurred $2,450,000 of expenses for GPL in 2021. Walter takes care of all administrative duties (including accounting and maintenance) with $1,715,000 of costs in 2021. They both estimate increases in these costs for 2022 by 15%. Please note that you are not required to map these costs ($2,450,000 and $1,715,000) in SAP.
Walter & Wayne want your team to explain any significant sales, expenses and profit variances. They also want you to conduct a full cost-volume-profit analysis with specific indications on how the results of this analysis can be used to improve operations.
The Gretzky’s forecast a 10% increase in sales in 2022. Expected inventory levels in 2022 will be in the same proportion as last year except for the ending inventory of composite wood and fibre glass which they expect to have 450 and 250 kilograms respectively. Your team notes that GPL’s direct labour cost per hour would increase by $2 per hour in 2022 and that you are required to prepare a forecasted budget for the year 2022.
You and your team are required to generate analytical insights in relation to:
– All the variances (for both sales and costs), the potential reasons behind these variances and what these variances suggest about GPL’s performance.
– The potential issues that might arise from the cost allocation methods currently used at GPL for allocation of overheads, and the potential improvements to these methods.
Also, in relation to all the quantitative and qualitative analyses undertaken, management would like you to provide specific and detailed recommendations for improvements.
Based on the information analysed and the calculations your team has provided, you need to prepare a PowerPoint presentation to report to Walter and Wayne. Your report should contain the following:
a. Executive summary (1 slide limit only) – provides an overall summary of the case including background, analysis, major findings and recommendations and limitations (so that an executive reading the report will have enough detail to attend and participate at a meeting even if he/she has not read the rest of the report in detail). An executive summary needs to be thorough, detailed and also succinct.
b. Background – a full description of all the important issues and their background that are relevant to the case study and your findings.
c. Analysis – provides an overview of all detailed analytical/critical insights generated in light of the results obtained. Significant calculations should not be included here (do so in the appendices), with this section referencing the appropriate appendices.
d. Findings – detail and justify all your key findings/discoveries from the analysis (this should not be a simple repetition/rephrasing of the analysis). Take care to recognise and describe any assumptions or where additional data may be necessary to further understand the situation.
e. Recommendations – detail and justify your recommendations from the analysis and findings. For example, your recommendations may include the need for further specific forms of analysis or research on identified issues. Ensure that your recommendations are reasonable/justifiable and directly address the case and/or the analyses undertaken above.
f. Action Items (Next Steps) – map out a plan that highlights specific/concrete actions to be taken in order to implement any proposed changes based on the findings and recommendations noted. This should not be a simple repetition/rephrasing of the recommendations.
g. Limitations – detail specific limitations from the analyses such as assumptions made, any missing information, limitations underlying the data, calculations and case study context.
h. Appendices – include all other relevant supporting material such as detailed calculation work (that has been referenced in the body of the report). There should be no new material or important material in the appendices.
1. Important note: While your calculations are important, the assignment will be assessed mainly for its critical analysis, depth and creativity.
2. Report: You are required to prepare your report using PowerPoint. The report must meet the purpose of providing details for a manager with sufficient time to sit and read the material (you will not be required to present). The body of the report must not exceed 10 PowerPoint slides. The executive summary has a limit of one (1) slide only, i.e., the executive summary and the report together will be a total of 10 slides. Please also include a title slide in PowerPoint with student names and SIDs (this cover slide will not be counted as one of your 10 slides).
You are encouraged to be detailed but also succinct in your writing style (do not waste space on stating the obvious or including tedious calculations or including definitions of management accounting terminologies). Also remember that management would normally require as much information as would be required to help them make informed decisions, while at the same time they would not prefer information overload. To reflect this, the slides should be sufficiently detailed and informative but not be over-crowded with words and/or diagrams; sufficiently informative dot-points are encouraged. Each slide must be self-explanatory, with proper headings and sub-headings. Make sure to see the Marking Guide for further details.
3. Appendices: You are encouraged to provide all supporting information (including calculations) in the appendices. The appendices do not need to be in PowerPoint format – you may use Word or Excel. The appendices should be no longer than ten (10) A4 pages. Please attach the appendices at the end of the PowerPoint report.
4. Cover page: Please provide a separate cover page for your assignment submission (with student names, SIDs and email addresses). Only one submission required per group. Cover pages can be found in Canvas.
5. Peer evaluation: Each group is required to sign and submit one (1) peer evaluation form that needs to be attached to their assignment. For example, if you were in a group of three – members #1 and #2 would jointly decide the contribution of member #3; members #2 and #3 would jointly decide the contribution of member #1; members #1 and #3 would jointly decide the contribution of member #2. You will not be required to evaluate your own contribution.
Each member should be aiming for 100% contribution. Contributions of 80% and below warrants investigation by the Unit Coordinator and a potential penalty for all group members, whether deemed to have contributed or not. In other words, if you have a non-contributing group member it is your responsibility to get that individual to contribute, and hence this being a group task – you risk being penalised as well.
Part B: SAP component (Individual)
• Your submission should have:
• Your SAP User account, i.e., learn-### & student SID in every page header.
• A cover page with your name, student ID and learn-### number.
• A first page that includes a table of master data elements (G/L accounts, cost centres,
cost elements, activity types, statistical key figures etc.), document numbers or
allocation cycle numbers generated by the system and codes for your allocation cycles.
• Appropriate screen shots of: i) display of actual distribution/assessment basic list after final run with cycle number displayed on screen, ii) di
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