Due Date: 16-Aug-2020 Return Date: 04-Sep-2020 Length:
Submission method options: Alternative submission method
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To provide workplace context to this assignment you are to assume that you have been appointed to a graduate management accounting position within a hypothetical manufacturing company. Jupiter Australasia Ltd. is an extremely successful multinational company. In Australia and New Zealand Jupiter manufacture a range of Fast Moving Consumer Goods (FMCGs) including several well known pet food brands, confectionery brands, and consumer food brands.
You have been appointed to a Management Accounting role within Jupiter Australasia Ltd. commencing in their Albury Wodonga pet food factory. As part of your role you will be expected to provide management accounting advice to management and production teams around strategic and operational issues across a number of Jupiter Australasia Ltd. operational divisions.
Question 1 Manufacturing Statement and Profit and Loss (20 marks)
This question relates specifically to the subject’s 2nd, 5th and 6th learning outcomes. This question relates to prior learning in accounting and the material and readings covered in Topics 1 and 2 of the subject.
This question has been designed to develop and test your capacity to design and work with spreadsheet applications which are a critical tool in all forms of accounting practice, but particularly management accounting. Marks are awarded for the simplicity and effectiveness of spreadsheet design as well as the accuracy of your answer. Your worksheet must have a data input section and a result/report section. An example of the expected report format will be provided in the assignment resources folder on the subject Interact site.
Jupiter Cereal Manufacturing Co is a wholly owned subsidiary of Jupiter Australasia Ltd. Jupiter manufacture a range of breakfast cereals for the Australian and export markets. The company utilises a traditional manufacturing cost flow inventory and accounting system.
Trading data for Jupiter Cereal Manufacturing Co for the 2020 financial year was as follows:
Purchases of Raw Materials & Ingredients
Indirect Labour (including salaried supervisors)
Direct Manufacturing Overhead (including depreciation)
Other Manufacturing Overhead
Factory heat, light and power
Administration Salaries and Costs
Accounting & Audit costs
Interest & other charges
Sales & Marketing Expenses
On June 30th 2020 selected account balances of Jupiter Cereal Manufacturing Co were as follows:
June 30 2020
June 30 2019
Cash & Receivables
Plant & Equipment (at cost)
Land & Buildings (at cost)
Raw Material Inventory
Finished Goods Inventory
Work in Process (WIP):
Jupiter Cereal Manufacturing Co is incorporated and operates in Australia and pays tax at the Australian corporate rate of 30%. There are no adjustments for accruals or prepayments required.
Required: Using Excel prepare a Schedule of Cost of Goods Manufactured, Schedule of Cost of Goods Sold, and an income statement for the Jupiter Cereal Manufacturing Co from the information provided. (20 marks)
Important Note: YourExcel model should include a data input section and appropriate
formulae. WIP calculations should be presented as disaggregated amounts within each of the three cost categories: Materials, Labour and Overhead. Marks will be awarded on the basis of the quantitative accuracy of the report and also the spreadsheet design and appropriate use of Excel formulae.
This question relates to prior learning in accounting and the material and readings covered in Topics1 and 2 of the subject.
This question relates specifically to the subject’s 2nd, 3rd, 5th and 6th learning outcomes.
Jupiter PetCare Ltd has two factories on the one site at their Albury Wodonga Australasian headquarters where they manufacture ‘Maaate’ and ‘Chummy’ wet dog food brands. The company’s production is highly automated and for management accounting reporting purposes manufacturing costs are aggregated into two cost centres for each product. Jupiter PetCare Ltd operates two separate production service departments, Maintenance and Robotics, which support the production lines in the two product departments. The company has decided that the most appropriate basis to allocate Maintenance costs is the number of maintenance jobs each cost centre incurs. The allocation of the Robotics department costs is based on the number of computer driven automated and robotic machines in each cost centre.
Costs for the different cost centres during the month of May 2020 were as follows:
No. of Maintenance Jobs
No. of Robotic Machines
Answer the following questions using spreadsheet models (example formats are available in the Assignment Resources folder on the subject Interact site):
Using the Direct Method allocate the service centre costs (5 marks)
Using the Step Method allocate the service centre costs (7 marks)
Using the Reciprocal Method allocate service centre costs (15 marks)
Briefly discuss the implications of your results and why such an analysis is important (3 marks)
Important Note: when calculating the Reciprocal Method of overhead allocation students may use either the simultaneous equation method or the ‘solver’ function in Excel to resolve this problem. Please show full workings.
Question 3 Strategic Management Accounting Case Study (30 marks)
This question specifically addresses all of the subject learning outcomes.
This question builds on prior studies of Cost Volume Profit (CVP) analysis and relates to learning material and objectives from Topics 1 and 2.
(Important: For assistance on how to answer this question you are advised to undertake the case study from Mars Petcare Ltd which is provided on the subject Interact site)
‘O Sole Mio’ Pasta Sauce STRATEGIC MARKET ANALYSIS
You have been invited to join the cross-discipline Strategic Management Committee of Jupiter Australasia Ltd as the management accounting representative. The key issue facing this top level management committee at the moment is how to improve profitability in several key product categories.
The product currently under discussion is the ‘O Sole Mio’ range of pasta sauces sold through the major supermarket chains in Australia and New Zealand. Internationally, across the whole of the Jupiter Group, the expected Return on Total Assets (ROTA) for every product category is 20%. Despite being a successful brand over a long period of time the ROTA for ‘O Sole Mio’ has fallen below the investment return hurdle rate and the Committee is considering whether to continue with the product or exit this market niche.
As the Management Accounting representative you have provided the Strategic Management Committee with the following breakdown of revenues and costs for the ‘O Sole Mio’ pasta line for the just completed 2020 year:
O Sole Mio Pasta Sauce
Total Assets ‘O Sole Mio’ Factory
Total 2020 Sales (Units)
Wholesale Price (per unit)
Prime Costs (Ingredients and Packaging) (per unit)
Other Manufacturing Costs (per unit)
Logistic Costs (per unit)
Gross $ Margin (Gross Profit) (per unit)
Total $ Margin (Gross Profit)
% Return on Total Assets (ROTA)
The O Sole Mio Marketing team advises you that at the end of the 2020 financial year O Sole Mio’s market share had fallen in 12 months from 80% to 60% of the total Australasian pasta
sauce market of 10 million units. The Marketing team noted that a new product in the market ‘Dullmio’ pasta sauce (manufactured by international FMCG competitor Heinzzze) has grabbed 25% of the total market by aggressively discounting their product and advertising heavily. The total size of the pasta sauce market is expected to remain stable at 10 million units per annum.
The O Sole Mio Marketing team believe that by discounting the current O Sole Mio wholesale price by $0.50 from $4.75 to $4.25 the product will be much more competitive and they predict that O Sole Mio unit sales will increase by 25% from their 2020 levels. The research and development team have identified that by changing suppliers and slightly altering the raw ingredient mix a saving of 10% can be made on prime costs.
The CEO of Jupiter Australasia Ltd who chairs the Strategic Committee advises that, even allowing for the 10% reduction in prime costs, discounting the product by $0.50 per unit will mean that the O Sole Mio product will no longer achieve the firm’s required return on total assets (ROTA) of 20%. ROTA is calculated by dividing Gross Profit by Total Assets and currently sits at 18%. The CEO argues that if this remains the case the previously successful ‘O Sole Mio’ product line may have to be discontinued.
You advise the Committee that you are aware that the ‘O Sole Mio’ manufacturing facility is currently running at only 65% of its practical capacity and that the warehouse facility (logistics) is running at 45% capacity. Because of the high level of automation in manufacturing the pasta sauce, whilst the ‘O Sole Mio’ product Prime Costs are 100% variable, Other Manufacturing Costs and Logistic Costs are made up of 90% Fixed costs and 10% Variable costs.
It can be assumed that this cost break-down between variable and fixed costs will hold consistently across the industry (including for the competitor ‘Dullmio’). Assume 75% of the predicted ‘O Sole Mio’ unit sales increase will be made at the expense of ‘Dullmio’, their main competitor’s unit sales. Finally, assume that ‘Dullmio’ product costs start out the same as ‘O Sole Mio’ and that the competitors make no immediate competitive adjustment to their offering.
You ask if you can be given time to prepare a report for the Strategic Committee on the cost and profit implications of the proposed changes and the resultant increase in sales and production.
Using excel prepare a ‘before and after’ comparative analysis of the revenues and costs of the ‘O Sole Mio’ product line incorporating the 25% predicted sales increase and the 10% predicted savings in prime costs (Ensure you include any impact of the production increase on manufacturing and logistics costs in your analysis). (15 marks)
Prepare a brief report (approx. 300 words) for the Strategic Management Committee outlining the key points of your findings. Include some discussion on:
The likely impact of the changes on the cost and profit structure of the O Sole Mio product line (derived from your answer to (a)).
Calculate and discuss the likely impact of the changes on the cost structure (and profitability) of ‘Dullmio’ our main competitor (use Excel).
Make a recommendation to the Committee on whether to go ahead with the planned changes. Include any other strategic advice that you consider relevant to the Committee’s decision making.
(Please ensure that your answer adequately addresses ALL of the points above) (15 marks)
Question 4 Process Costing (20 marks)
This question relates to prior learning in accounting and the material and readings covered in Topics2 and 3 of the subject.
This question relates specifically to the subject’s 2nd, 3rd, 5th and 6th learning outcomes.
Because of your great work on the Strategy Committee with O Sole Mio Pasta Sauces you have been seconded to a role as management accountant for the O Sole Mio Division of Jupiter Australasia Ltd. Your first task is to prepare month end product costing for O Sole Mio pasta sauce. The factory responsible for manufacturing these products operates continuously 24 hours a day, 7 days a week and utilises a process costing system.
The process for manufacturing O Sole Mio sauce is to first add all of the raw ingredients and condiments which are mixed and then put into glass jars and cooked in steam ovens. For accounting purposes all raw material and packing is assumed to be added at the start of the continuous process. The conversion costs of manufacturing are assumed to occur evenly across the whole of the production cycle which takes several hours.
The following information relates to the production of ‘O Sole Mio’ pasta sauce during the month of June 2020. The Stock Keeping Unit (SKU) adopted for inventory purposes is a single 450 ml jar of sauce.
Work-in-Process: June 1, 2020
Stage of completion
Work-in-Process: June 30, 2020
A total of 535,800 SKUs were commenced during May and the following costs were incurred.
Costs incurred during May 2020:
Using the Weighted Average Cost Method determine the cost value of closing WIP and the cost value of goods transferred out during the period. (10 marks)
Using the First In First Out (FIFO) method determine the cost value of closing WIP and the cost value of goods transferred out during the period. (10 marks)