You were recently hired by HiTec as Assistant Management Accountant reporting directly to Mr Hughes. He has assigned to you the task of putting together a response to the CEO to explain the situation. Specifically, he has asked that you first prepare data tables that will show and help to clarify the following:

1.

a) “product cost per unit” for Q1 and Q2 under the “absorption (full) costing” method (showing the fixed and variable parts of the cost)

b) “product cost per unit” for Q1 and Q2 under “marginal (variable) costing”

c) the fixed and variable parts of selling and administration overheads

d) a “contribution statement” for Q1 and Q2 under marginal (variable) costing

2.

a reconciliation of the “absorption costing” and the “marginal (variable) costing” net operating income figures for each quarter.

Furthermore, Mr Hughes has asked you to produce a draft report (using appropriate numbers from the tables produced above), to explain to the CEO the results of Q2 in comparison with Q1. He is keen that your report should include:

3.

a) a clear explanation of the characteristic of absorption costing that caused the drop in net operating income for the second quarter

b) some suggestions of what Mr Hughes could have said to Mrs Harrison to explain the problem

c) a discussion of the differences between “marginal (variable) costing” and “absorption (full) costing”

d) identification of the advantages and any disadvantages of using the “marginal (variable) costing“ method for internal reporting purposes

Required:

Part 1 (1,500 words, excluding Excel tables)

You are required to prepare a management report to explain the above situation. Your data tables must be clear and complete with workings that show how your numbers were calculated. The written part of your report should be around 1,500 words and use numbers from the question and your data tables to support and illustrate your discussion of the above situation.

Part 2 (500 words)

Write a “personal reflection” based on a separate topic presented in the course and how you may have used – or may plan to use – this topic as part of your role as a management accountant for a business. This should include a brief explanation of the chosen topic, what purpose it is used for and how it is useful for management decisions and for the benefit of the business and decision making. You may invent some numbers to illustrate your example and reflection.

Marking guide:

The following should help guide you on the amount of effort expected for each task:

% of marks
Part 1 – 1,500 words
1Calculations and data tables (from excel and embedded in report)25%
a.“product cost per unit” for Q1 and Q2 under the “absorption (full) costing” method (showing the fixed and variable parts of the cost)
b.“product cost per unit” for Q1 and Q2 under “marginal (variable) costing”
c.the fixed and variable parts of selling and administration overheads
d.a “contribution statement” for Q1 and Q2 under marginal (variable) costing
2.a reconciliation of the “absorption costing” and the “marginal (variable) costing” net operating income figures for each quarter15%
3Written Report25%
a.a clear explanation of the characteristic of absorption costing that caused the drop in net operating income for the second quarter
b.some suggestions of what Mr Hughes could have said to Mrs Harrison to explain the problem
c.a discussion of the differences between “marginal (variable) costing” and “absorption (full) costing”
d.identification of the advantages and any disadvantages of using the “marginal (variable) costing“ method for internal reporting purposes
Part 2: (500 words)25%
4.Your reflection on the role and purpose of a management accountant
General:10%
5.Presentation – excel tables embedded inside written report; quality and neat formatting; spelling and grammar; remember it has to be “useful for the purpose”, not just “look nice”…

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