ACC210 Accounting for Decision Making and Control Assignment Answers SUSS

Accounting for Decision Making and Control ACC210

ACC210 Accounting for Decision Making and Control is based on ACC203e and concerns the role of accounting information in planning, control, and decision-making in organizations. The tools of decision-making that students will obtain in this course include variance analysis, cost-volume-profit analysis, relevant costing, and incremental analysis. 

Moreover, this course will discuss standard costing and capital budgeting for use in planning and control. Although the larger part of this course will remain the same in terms of the decision-facilitating role of accounting, the students will be exposed to the decision-influencing role of accounting by allowing them to discuss the behavioural implications of standard costing. 

This is a Sample of ACC210 Accounting for Decision Making and Control. Here, you can get the information about what you will be learning in this course. Different tasks will make your decision-making better. This sample will also be useful for you to understand the writing style of our experts. If you get stuck in any of the assignments in this course, you can simply ask for Assignment help ACC210. Also, make sure that you do not use any of the information mentioned in this Sample ACC210 Accounting for decision making and control.

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Assignment Task 1: 

The primary difference between full costing (also known as absorption costing) and variable costing lies in their approach to addressing fixed manufacturing overhead costs.

Under full costing, product cost comprises all manufacturing costs, direct materials, direct labour, variable overheads, and fixed manufacturing overheads. These expenses are held in stock until the products are sold, so that it is possible to defer part of the overhead to the future. This method is in line with external reporting standards, e.g. GAAP and IFRS.

In comparison to this, variable costing incorporates only the variable manufacturing costs (direct materials, direct labour and variable overhead) in product costs. Fixed manufacturing overhead is considered a period expense and is expensed to the income statement in full during the period. This is an internal decision-making approach as it can more clearly demonstrate the relationship between profits and volume of sales.

Consequently, under full costing, production is greater than sales, and net income is greater since part of the fixed overhead would be carried in inventory at the end as opposed to being expensed. On the other hand, when the sales surpass the production, the earnings of less than full cost accounting are lower since the earlier onset of overhead charges is discharged out of inventory.

To conclude, full costing offers a more comprehensive picture of the cost of production and is suited to external reporting, whereas variable costing offers a clearer picture of how costs behave and is more appropriate in the internal management decision-making.

Assignment Task 2:

Cost-Volume-Profit (CVP) analysis is one of the tools that can assist managers to know the impacts of changes in costs, volume of sales and prices on profit of a company. CVP divides a particular cost into a fixed and variable part, making it possible to see that a certain number of units must be sold by a business to pay all the fixed and variable costs (break-even) and to achieve particular profit goals.

Managers use CVP analysis to:

• Find the break-even point: Find out how many units need to be sold to achieve a profit.
• Establish the amount to be collected: Evaluate the impact of variation in price, cost structure or mix of products on the overall profitability.
• Guide pricing, product and resource decisions: Model various scenarios, including variation in selling prices or switching production methods, so as to predict their effect on profit.

Assignment Task 3:    

Relevant costing and incremental analysis are important instruments that are applied in making efficient short-term business decisions, like whether to accept a special order, discontinue a product, make or buy a component or otherwise. These approaches concentrate on costs and revenues that will be altered as a direct outcome of the choice.

Future costs that vary across alternative options are referred to as relevant costs. They are avoidable costs, incremental costs and opportunity costs, whereas sunk costs or fixed costs that do not change are excluded. Incremental analysis checks up the extra expenses and advantages of alternative options in order to find out the most lucrative alternative.

To illustrate, when a company gets a special production order, it should only look at variable material cost, labour cost, and overhead cost that are directly related to the production order that is received. It does not matter what the fixed overhead will be, but that will be incurred with or without the decision. In the same case in a make or buy decision, the management ought to compare the incremental manufacturing cost with the purchase cost, and it ought to incorporate opportunity costs, i.e. lost capacity when manufacturing other profitable products.

Managers can concentrate on the relevant and incremental information only, and this will not distract them with references to sunk or historical costs, which results in the better use of the resources and increases short-term profitability.

Assignment Task 4:

The budgeting process receives inputs of various cost estimation techniques, which predict costs inaccurately and the availability of data.

• Bottom-up estimating calculates costs based on task-level estimates that are summed up to obtain totals, and is highly accurate and appropriate for well-scoped projects.
• Top-down estimating starts by using a general budget and assigns it to the parts, and is applicable in early phases of budgeting and less detailed cases.
• Parametric estimating involves the use of historical data and cost drivers (such as cost per square foot) to generate estimates that involve measurable parameters and are effective in repetitive projects.
• Similar estimating makes use of costs associated with similar past projects, along with expert judgment, in cases where scarce project information is available.

Three-point estimating considers the uncertainty by taking the best estimates of costs, which are the optimistic and the pessimistic and the most likely estimates to enhance reliability.

These techniques can assist planners to create realistic budgets in terms of project size, complexity and risk and aid in better financial control and decision making when executing the project.

To conclude, project characteristics and the accessibility of data will determine the correct choice of estimation technique and will help the budgeting products to comply effectively with the planning and control goals of the management.

Assignment Task 5:

Standard costs are founded on past information, market and operational potentials, and they are used as the benchmarks to measure real performance. Actual costs during production are compared with these standards, and the variances are analysed in order to find out the causes behind the variances, like inefficiencies or price variations. This system makes accounting easy since it does not require real costs but standard costs in the recording of inventories and cost of goods sold, and therefore, makes it easy to manage the costs.

Why is it used:

• To make better estimates of future costs to make budgeting and pricing decisions.
• To promptly determine the variances that are to be managed by the managers, nurturing cost control and operational efficiency.
• To support performance measurement of the departments, processes, or products.
• To use inventory as an asset against the difficult-to-determine actual costs.
• To put it short, standard costing assists managers to control costs, fixed competitive prices and make sound operational decisions to ensure the organisation is cost-effective and profitable.

Assignment Task 6:

Sales variances are used to compare the actual sales and the expected sales (budgeted or standard). They are normally categorised as:

• Sales price variance: variance because the price per unit varies.
•  Sales volume variance: variance caused by the actual number of units sold not being the same as the budget.

Direct cost variances are used to examine variations in costs of materials, labour and overhead used in production. They break down further into:

• Price (or rate) variance: the price paid is not equal to the normal price.
• Usage (or efficiency) variance: the quantity used is not the same as the standard quantity that was supposed to be used to create actual output.
• To illustrate, where there is an increase in direct material costs than anticipated, then it may be attributed to paying a premium or utilising more material than anticipated.

Managerial Actions:

• Research Undesirable Variations: Here, you need to find out the underlying causes, for example, waste, supplier price 
• Research undesirable variances: Find out their underlying causes, e.g., supplier price fluctuations, waste, inefficiencies or problems with the sales strategy.
• Modify operations: streamline operations to minimise waste, re-train/re-educate labour to achieve efficiency, renegotiate material prices or alter pricing/sales policy.
• Establish performance standards: Control measures and use patterns of variances to enhance forecasting accuracy.
• Liaise with departments in charge: Liaise with purchasing, production, and sales departments on corrective strategies.

When the variances are studied systematically, the managers will be able to act in advance to prevent cost overruns or shortfalls in sales, thus enhancing profitability.

Assignment Task 7:

The indirect costs may be termed as overheads, which are divided into variable overheads (supplies, indirect materials) and fixed overheads (rent, depreciation, salaries of supervisors, etc.).

In order to determine the performance, managers compute indirect cost variances by contrasting the actual overheads incurred with standard (budgeted) overheads that are used in production.

Key Variance Components:

1.  Variable manufacturing overhead variances:
Spending (or price) variance = (Actual hours x Standard rate)-(Actual hours x Actual rate): indicates whether or not the cost per overhead hour was above or below the expected cost per overhead hour.
Efficiency variance = (Standard rate) (Standard hours allowed -Actual hours): determines whether overhead was utilised efficiently to the level of activity.

2.  Variable manufacturing overhead variances:

Budget variance = Actual fixed overhead-Budgeted fixed overhead: the difference between what was actually expended and what was planned to be expended.

Volume variance = Budgeted fixed overhead- Applied fixed overhead (using standard hours of actual output): reveals whether more or less production was done than was planned.

3. Interpretation:

Favourable variance indicates that the actual costs were lower than the budgeted values or that overhead was utilised better.
An unfavourable variance- this is an indicator of either excess spending or inefficiency.

4.  Managerial use:

Determine reasons behind variances (machine breakdowns, increasing downtime or changes in the price of supplies).
Take corrective measures, i.e., renegotiating with suppliers, improving the efficiency of processes, or switching the production schedule.

To conclude, the indirect cost variances can assist in the management effectiveness of overheads to ensure that the production costs are within the budget, and to help in better decision-making.

Assignment Task 8:

The application of standard costing may have the following effects on managerial behaviour:

• Focus on Efficiency and Cost Control: Managers become cost-sensitive because the standard costs have a clear performance yardstick. They aim to achieve or surpass these targets to prevent negative variances and have good cost management.
• Motivation by Clear Targets: A clear set of goals can be used to motivate managers and employees, as the goals are attainable. A performance-driven culture can be achieved or exceeded to get rewards and recognition.
• Possible Goal Congruence: Managers are more likely to engage in the goal-setting process, which will make their own goals more congruent with the organisation's goals; they will be more likely to work towards the overall success of the organisation.
• According to the research, a high probability of Risk of Unrealistic Targets: Too high or unrealistic standards can lead to demotivation among managers, frustration, negative morale, and even resistance to changes. It may also result in gaming of the system, such as system manipulation or postponement of needed spending to achieve targeting.
• Favouring Variance Analysis and Accountability: Standard costing encourages frequent variance inquiries, holds managers responsible for deviation and takes corrective measures to enhance better performance in future.
• Inhibiting Innovation: A rigid focus on meeting set standards can stifle innovativeness and flexibility, as managers concentrate on maintaining standards rather than experimenting with new ways of doing things, which involve uncertainty.
• Collaboration Requirement: A successful application of standard costing involves multiple departments, and to do so, cross-functional cooperation should be realised to define and preserve the significant standards.

To conclude, although standard costing leads to control, motivation and accountability, it needs a proper design and management to prevent adverse effects on morale and innovation. The soft, participative normative setting can align the behaviour of managers and organisational objectives.

Assignment Task 9:

To help in the formulation of sound capital budgeting decisions, different performance measures which are expected to occur are calculated to determine the potential investments. The following are the important measures that are usually employed:

• Net Present Value (NPV): Net Present Value can be understood by its name; it will provide you with the present value of both types of cash flow (incoming and outgoing) expected by taking into consideration a discount rate (generally the cost of capital). If there is a Positive NPV, that means the project will be adding more value to the cost, which will be acceptable. 
• Internal Rate of Return (IRR): IRR is responsible for providing the interest rate where NPV of all cash flows will be nil. It is the anticipated level of returns. It is better to have projects that have an IRR that is higher than the required rate of return. 
• Payback Period: The duration within which the project can break even in terms of the initial investment through cash inflows. Investors will prefer a shorter payback period because the liquidity is fast and the risk is also limited.
• Discounted Payback Period: Like the payback period, except that a time value of money is taken into consideration by discounting future cash inflows, giving it a longer period than the non-discounted version.
• Profitability Index (PI): PI is basically the quotient of the discounted future cash inflows of the initial investments. When PI is more than 1, it is an indication of a variable project and aids in ranking projects in case of limited capital. 
• Mod. Internal Rate of Return (MIRR): When MIRR takes into consideration the cost of investment and the inflows of cash that get reinvested at the cost of capital of the firm, then MIRR forms a realistic measure of profitability as compared to IRR.

These performance measures are used together to help managers pick the optimal projects that can bring about the maximum value and one that conforms to corporate objectives, balancing profitability, timing, and risk aspects.

Assignment Task 10:

Under the uncertainty condition, when making short-term allocation and capital budgeting decisions, managers examine different scenarios to gain a clearer insight into possible results and risks. Conventional approaches such as net present value (NPV) and internal rate of return (IRR) assume certainty of cash flows, which are not always certain in reality, so more advanced methods are required.
Key approaches include:

• Sensitivity Analysis: Assesses the effect on outcomes of one variable (e.g., sales price, cost) on a project. This determines the key aspects of profitability, which assist the managers in anticipating potential negative changes.
• Scenario Analysis: Takes into consideration more than one combination of changes that occur over variables to determine the result in the worst case, best case, and the most likely case. This gives a variety of possible financial implications and supports contingency planning.
• Monte Carlo Simulation: It applies random sampling to at least thousands of potential outcomes of projects where inputs significantly differ and probabilities of success and loss. This is a holistic risk profile that helps to make more informed decisions.
• Decision Tree Analysis: Diagrams Probabilities of sequential decision-making and uncertain events, expected values of alternatives. It aids in evaluating such options as delaying, expanding, or abandoning projects in phases, gaining management freedom when facing uncertainty.
• Risk-Adjusted Discount Rates: Modifies discount rates on riskier projects to accommodate the returns they require to balance the risk and profitability of the assessment.

The utilisation of these approaches allows managers to make capital budget decisions and short-term allocation decisions that clearly take into account risk and uncertainty to enhance flexibility, risk management and resource utilisation.

Assignment Task 11:

In order to collaborate in a team, it is imperative to acquire the key knowledge and interpersonal skills. The summary, relying on the main sources, is as follows:

Essential Knowledge Skills

• Communication: Clarity and conciseness in the expression of thoughts have been identified to prevent misunderstanding and encourage teamwork (observed in).
• Conflict Resolution: Solving conflicts amicably helps to keep the team in harmony.
• Problem-solving: Rational thinking to seek solutions helps in supporting team objectives.
• Time Management: It is important to make time management about priorities to ensure that progress is efficient.

Interpersonal Skills

• Active Listening: Active listening and empathy help to establish trust and respect.
• Respect and Trust: Giving appreciation to the input of others and establishing trust with others creates a favourable atmosphere.
• Accountability and Responsibility: It encourages the responsibility of duties and obligations.
• Flexibility and Adaptability: Open to new roles and feedback makes the team more resilient.

More Effectiveness Skills

• Teamwork: When working together and drawing on various strengths, one will result in innovation.
• Empathy and Emotional Intelligence: The ability to use and comprehend emotions affects team cohesion.
• Open-mindedness: The creativity is driven by the readiness to listen to other points of view.

Why it matters:

Being knowledgeable in technical skills and with good interpersonal skills, the team members can easily communicate effectively, solve conflicts effectively and work as a team towards a common goal, which eventually will result in increased productivity and team satisfaction.

Assignment Task 12:

It is essential to demonstrate the skills of written and oral communication in order to interact with colleagues and work in a team.

Written Communication Proficiency

• Clarity and Concise: Be direct and clear in the message so that it can be well received without jargon and fanciful explanations. This is useful in the minimisation of misunderstandings in emails, reports and documentation.
• Intentional Formatting: It is better to organise the content systematically by using clear headings, bullet points, and summaries to make it easy to read and follow. A personal tone and style on the audience make an impression.
• Correct Spelling, Grammar and Punctuation: Existence of the correct spelling, grammar and punctuation is professional and credible.
• Professional Format: It is also done by applying the right formats and templates in business documents to deliver the messages formally and effectively.

Verbal Communication Proficiency

• Intelligible Articulation: Good articulation should be spoken at the right pace and volume so that the audience can easily follow.
• Active Listening: Giving complete attention to what the other people are saying, paraphrasing and giving sensible feedback will facilitate rapport and understanding each other.
• Non-Verbal Cues: Your expressions, positive body language, maintaining proper eye contact, soft and calm control on your tone, play an important role in delivering the message as well as making an emotional connection. 
• Flexibility: Language and style should change according to the audience or the situation, and this will enhance communication efficiency.
• Confidence and Professionalism: Be confident but not arrogant in any verbal communication, presentation, or negotiation, which increases credibility.

By integrating these verbal and written methods, professionals can make their messages more effective, clear, and implementable, which in turn fosters stronger relationships and better business outcomes.

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