QUESTION 11 New Horizons Ltd is a 'High Tech' company producing components for business customers operating in the mobile telecommunications Industry. Product life cycles in the telecommunications industry are relatively short. The company is planning the development and launch of an innovative new product which is expected to have a four-year product life cycle. This will require the acquisition of new production machinery and the training of staff in new working methods. The company currently has a 12% share of the specialised market segment in which it operates. It is hoped that as a result of the launch of this new product the company's market share will increase to 15% The company currently uses a Balanced Scorecard to manage business performance. Due to the highly competitive and dynamic nature of the business environment in which it operates, the CEO is keen to introduce other Strategic Management Accounting (SMA) techniques into the business and wants to apply Life Cycle Costing in the development of the new product. The Finance Director has asked you to determine the unit Life Cycle Cost of the new product. You have also been asked to outline the general characteristics of Strategic Management Accounting and how this differs from Traditional Management Accounting 4 A cross-functional team has been established by the Board of Directors to implement the development and introduction of the new product. As the Management Accountant assigned to this team, you have gathered the following information relating to the proposed new product development project: . A marketing budget of 400,000 has been allocated to the project Customer orders of 300,000 units annually are expected over the four year ife of the project at a sales price of 200 per unit The costs of designing and developing the product are forecast to be 500,000 Costs relating to developing the new production process, including training of production staff, are estimated to be 10,450,000 It is anticipated that manufacturing costs will be 120 per unit Taxes charged in relation to regulatory requirements for the end-of-life safe disposal of potentially hazardous components used in the product will be charged at 5 per unit The company aims to achieve a life cycle profit margin per unit of at least 10% The target launch date is now only nine months away Requirements: a Using the information above 1. Calculate the Life-Cycle Cost per unit of the new product and advise on whether the company will achieve its target unit profit margin (10 marks) Briefly explain why Life Cycle Costing might be a particularly relevant technique for New Horizons Ltd to apply in developing new products (4 marks) bin Abd.MADRIGALA TUCIOUS WORTUP Taxes charged in relation to regulatory requirements for the end-of-life safe disposal of potentially hazardous components used in the product will be charged at 5 per unit The company aims to achieve a life cycle profit margin per unit of at least 10% The target launch date is now only nine months away Requirements: a. Using the information above: i. il Calculate the Life-Cycle Cost per unit of the new product and advise on whether the company will achieve its target unit profit margin (10 marks) Briefly explain why Life Cycle Costing might be a particularly relevant technique for New Horizons Ltd to apply in developing new products. (4 marks) b. Explain FOUR key differences between modern Strategic Management Accounting (SMA) and Traditional Management Accounting techniques. (8 marks) c. Given the specific information in the scenario, for each perspective of the Balanced Scorecard identify one suitable Critical Success Factor (CSF) and an associated Key Performance Indicator (KPI) that would enable New Horizons Ltd to measure the efficiency, effectiveness or economy of the new product development project (12 marks) d. Briefly outline the key capabilities and resources that an organisation would need to have in order to successfully develop a new product (6 marks) QUESTION 11 New Horizons Ltd is a 'High Tech' company producing components for business customers operating in the mobile telecommunications Industry. Product life cycles in the telecommunications industry are relatively short. The company is planning the development and launch of an innovative new product which is expected to have a four-year product life cycle. This will require the acquisition of new production machinery and the training of staff in new working methods. The company currently has a 12% share of the specialised market segment in which it operates. It is hoped that as a result of the launch of this new product the company's market share will increase to 15% The company currently uses a Balanced Scorecard to manage business performance. Due to the highly competitive and dynamic nature of the business environment in which it operates, the CEO is keen to introduce other Strategic Management Accounting (SMA) techniques into the business and wants to apply Life Cycle Costing in the development of the new product. The Finance Director has asked you to determine the unit Life Cycle Cost of the new product. You have also been asked to outline the general characteristics of Strategic Management Accounting and how this differs from Traditional Management Accounting 4 A cross-functional team has been established by the Board of Directors to implement the development and introduction of the new product. As the Management Accountant assigned to this team, you have gathered the following information relating to the proposed new product development project: . A marketing budget of 400,000 has been allocated to the project Customer orders of 300,000 units annually are expected over the four year ife of the project at a sales price of 200 per unit The costs of designing and developing the product are forecast to be 500,000 Costs relating to developing the new production process, including training of production staff, are estimated to be 10,450,000 It is anticipated that manufacturing costs will be 120 per unit Taxes charged in relation to regulatory requirements for the end-of-life safe disposal of potentially hazardous components used in the product will be charged at 5 per unit The company aims to achieve a life cycle profit margin per unit of at least 10% The target launch date is now only nine months away Requirements: a Using the information above 1. Calculate the Life-Cycle Cost per unit of the new product and advise on whether the company will achieve its target unit profit margin (10 marks) Briefly explain why Life Cycle Costing might be a particularly relevant technique for New Horizons Ltd to apply in developing new products (4 marks) bin Abd.MADRIGALA TUCIOUS WORTUP Taxes charged in relation to regulatory requirements for the end-of-life safe disposal of potentially hazardous components used in the product will be charged at 5 per unit The company aims to achieve a life cycle profit margin per unit of at least 10% The target launch date is now only nine months away Requirements: a. Using the information above: i. il Calculate the Life-Cycle Cost per unit of the new product and advise on whether the company will achieve its target unit profit margin (10 marks) Briefly explain why Life Cycle Costing might be a particularly relevant technique for New Horizons Ltd to apply in developing new products. (4 marks) b. Explain FOUR key differences between modern Strategic Management Accounting (SMA) and Traditional Management Accounting techniques. (8 marks) c. Given the specific information in the scenario, for each perspective of the Balanced Scorecard identify one suitable Critical Success Factor (CSF) and an associated Key Performance Indicator (KPI) that would enable New Horizons Ltd to measure the efficiency, effectiveness or economy of the new product development project (12 marks) d. Briefly outline the key capabilities and resources that an organisation would need to have in order to successfully develop a new product (6 marks)
