CASE STUDY QUESTION MANAGEMENT ACCOUNTING

Quality Shopping Rona O'Brien (Sheffield Hallam University) with Jayne Ducker, Antony Head and Susan Richardson This case study is taken from Ducker, J., Head, A., McDonnell, B., O'Brien, R. and Richardson, S. (1998), A Creative Approach to Management Accounting: Case Studies in Management Accounting and Control, Sheffield Hallam University Press, ISBN 086339 791 3.

Appendix One Information: Income for the year Deliveries per year made to the store 500 Charge per delivery 760

Direct materials: packing materials

Boxes Type 1 Material Type 2 Material Closing stock (units) 10,200 1,700 4,000 Opening stock (units) 8,500 5,000 5,200

Direct materials: fuel

Closing stock of diesel: 20,000 litres Opening stock of diesel: 18,800 litres

Standard material and labour costs

Colin Drury, Management and Cost Accounting Quality Shopping

Boxes: 0.80 per box Type 1 packing material: 2.00 per unit Type 2 packing material: 0.50 per unit Direct packing labour: 3.00 per hour Direct driving labour: 6.00 per hour Diesel fuel: 0.60 per litre Standard material and labour usage

Average number of boxes per delivery: 50 boxes Average amount of Type 1 packing material per delivery: 15 units Average amount of Type 2 packing material per delivery: 100 units Packing labour per delivery: 20 hours Driver's time per delivery: 5 hours Diesel fuel per delivery: 35 litres

Overhead costs are absorbed on a direct packing labour hour basis

Variable overhead costs

Indirect materials: 0.30 per hour Indirect labour: 1.50 per hour

Fixed overhead costs

Salaries: 55,000 Depreciation: 63,000 Rent and Rates: 70,000 Light and Heat: 20,000 General costs: 12,000

All information is budgeted not actual Question 1. a) Mr Reap has set up a suggestions box in the Store. He hopes that some of the organization's stakeholders will make suggestions on ways in which the organisation might be improved and has offered substantial prizes for the best suggestions. Examples of stakeholders could include: shop floor workers, office workers, and warehouse staff; managers, such as Shop Floor Managers and the Office Manager; customers. What suggestions might be made by the stakeholders listed above? b) What external and internal factors would have an important influence on the profitability of this type of store? Explain in detail. c) In your answer to (b) what information would you use? Where would you obtain such information from?