Maa262 Demand Response In Electrical Answers

• Internal Code :
• Subject Code : MAA262
• University : Deakin University
• Subject Name : Accounting and Finance

Table of Contents

Case Study: White Bolder Investments (WBI)

Question 1.

Question 2.

Question 3.

Question 4.

Question 5.

Question 6.

Reference.

The Case of WBI (White Bolder Investments)

The case states that White Bolder Investments (WBI) is a large investment advisory service in Sydney and I am working as an intern for WBI.The two regular customers of WBI for advisory services include Jumbo Bank (JB) and OmbrelloniFelici (OF).

Management Accounting - Question 1

In this case, it has been stated that one of my LinkedIn contact (possibly unknown) is presenting himself as an entrepreneur and is offeringmeto become a partner in his new business venture where he is going to manufacture trendy business shirts. Against the consideration of the partnership offer and a guaranteed commission, he wants me to share the contact list of the WBI employees and customers with him.

The ethical standard of “Confidentiality”, as provided by the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice, is going to be jeopardized if I accept the offer of partnership and commission with the unknown person because as per IMA, the ethical standard of confidentiality determines the following guidelines:-

1. The professional is required to keep all the information in his/ her possession confidential
2. Any requirement of disclosure should be made legally and after proper authorization.
3. It is required to inform all the related parties about the suitableuse of confidential information
4. It is required to ensure compliance by continuous monitoring
5. The professionals must refrain themselves to get involved in any use of confidential information that is going to be used for illegal or unethical advantage.

That means if I accept the offer of business than I am going to jeopardize the confidentiality ethic because I will share the personal details of my fellow employees and the clients of the company for my personal benefit. Also, since the person is unknown (possibly), hence he might use these details for illegal purposes. This will breach the relation of honesty, faith and trust with all the related parties including employees, customers and also WBI (the employer).

However, I can share the personal details of these parties after taking consent from every individual. In this case, mere disclosure that the personal information (like name, phone numbers, etc.) is being shared with a third party will not be sufficient, but as already stated it will be required to take proper consensus of each and every party before making any further step.Also, the parties should be acknowledged about how this information is going to be utilized and it will be required to continuously monitor the compliance measures. If all this requirements are fulfilled then the business offer could be accepted without jeopardizing any ethical standard.

Management Accounting - Question 2

WBI is fixing the charge per hour of service for a business advisor:

1. Calculation of the price per hour that WBI should charge on the basis of cost-plus approach considering a markup of 35%.
2. Statement to calculate the total cost per hour:-

2. Calculation of price per hour:-

Formula:

Price = Cost * (1 + Markup Percentage)

• 48 * (1 + 35%)
• 48 * (1.035)
• 25

Therefore price per hour that WBI should charge on the basis of cost-plus approach considering a markup of 35% is $ 65.25

1. Calculation of the price per hour based on demand levels, considering WBI can meet any demand level and same fixed costs for all the preceding demand levels

1. Benefit of the cost-plus approach and one benefit of the demand levels approach

1. Benefit of the demand levels approach: Demand-based pricing is a pricing method that considers variations in demand in the market and makes price adjustments accordingly. This method can vary based on several factors, including a company's business goals, its place in its market, consumer preferences, and the quality of its product.
2. Benefit of the cost-plus approach: The price can be justified using the cost-plus approach. This pricing strategy makes it easy to make communication with the consumers that why changes in priceshave been made. That means if WBI needs to increase the selling price of its service for a business advisor due to rising variable costs, then such increment can be justified.

• WBI board should choose the cost-plus approach for long-term planning of the business advisory service because if any time the company is required to make changes especially any increase in the selling price of its service for a business advisor, then the management can justify such increment to its customers.

Management Accounting - Question 3

Jumbo Bank (JB) specializes in savings for corporate customers and retail customers and advisory for loans. As any other bank, JB also follows KYC (Know Your Customer) procedures for its corporate customers and retail customers, which includes:-

1. Customer Identification Program (CIP),
2. Customer Due Diligence (CDD),

• Ongoing Monitoring.

JB currently uses the following cost-allocation rate per procedure, based on the following cost drivers used as the allocation base for the previous year:

Costs of procedures per type of customer are as follows:-

The breakdown of applications (potential customers) and ongoing customers from the previous year is as follows:-

1. Calculation of the cost rate per unit of the cost driver for each KYC procedure for retail customers and corporate customers is as follows:-

1. The managers responsible for corporate customers and retail customers are concerned that there is a product-cost crosssubsidization and thus there department is being charged with higher cost as compared to the other. From the above analysis of the cost rate per unit of the cost driver for each KYC procedure for both retail customers and corporate customers, it has been found that cost related to all the KYC procedures for retail customers is very much low than the corporate customers.

There is no doubt that the retail customer department is spending higher amounts periodically but it is also evident that the retail customers are very large in numbers as compared to corporate customers. This results in lower cost rate per unit for all KYC procedures.

So as per the calculations made there are evidences of product-cost cross-subsidization between retail customers and corporate customers. The argument of Kim Schifino can be considered to be perfectly valid (based on the above discussion) that the corporate customers are the one pushing the cost-allocation rate higher, because, when compared to the retail customers, they are few in numbers.

Management Accounting - Question 4

Given

Therefore, the budgeted labor hours and manufacturing over heads are as follows:-

1. Calculation of variances for the given month for the variable manufacturing overheadas follows

1. the static-budget variance: variance is given by the following formula:

• Variance = (Budgeted – Actual) variable manufacturing overhead
• 10000 – 12000
• -2000

Therefore, it represents an unfavorable static budget variance of $ 2000

1. the flexible-budget variance

And the actual variable manufacturing overhead = 12000

Therefore, it represents an unfavorable flexible budget variance of $ 2500

• the sales-volume variance

Therefore, it represents a favorable sales volume budget variance of $ 2500

1. the efficiency variances: variance is given by the following formula:

• (Actual hrs – budgeted hrs) * Budgeted rate
• (490 – 500) * 20
• - 200

Therefore, it represents an unfavorable efficiency budget variance of $ 200

1. Therefore, the management at OF is not correct regarding having a good budgeting process due to often having a favorable static-budget variance and a consistently favorable efficiency variance.

Management Accounting - Question 5

Given

Therefore, total production cost is given by multiplying the required machine hrsfor both batches with the total machine hrs:

Solution

Management Accounting - Question 6

1. The company collected information on a variety of performance measures of the organization and various frequencies throughout the year. The various information collected are:-
2. Financial performance metrics: on a quarterly basis, included various profitability measures
3. Customers data: included:
   1. customers volume: on a quarterly basis
   2. Telephone surveys: on half yearly basis by third party. It measures the likelihood of shopping at store-24 as compared with competitors.
   3. Comments cards: regular basis.
4. Employee skills: store level operating standards that measured managers and crew skills through bi-annual evaluations

Business process: evaluation of store locations on the basis of competitor’s stores, population density, median household income, etc. within a half mile radius

1. A balanced approach of providing appraisal to employee’s performance can be resulted in an effective way of determining anoverall look at the work performance of the employee. It has been observed that the performance of employees is based on various standards and elements like their behaviors, processes or actions and just by measuring actions or behaviors in isolation, the employee performance plans cannot be implemented accurately.

Reference for Management Accounting

Amaral, J.V. and Guerreiro, R., 2019. Factors explaining a cost-based pricing essence. Journal of Business & Industrial Marketing.

Chiu, C.H., Choi, T.M., Dai, X., Shen, B. and Zheng, J.H., 2018. Optimal advertising budget allocation in luxury fashion markets with social influences: a mean‐variance analysis. Production and Operations Management, 27(8), pp.1611-1629.

Faria, P. and Vale, Z., 2011. Demand response in electrical energy supply: An optimal real time pricing approach. Energy, 36(8), pp.5374-5384.

Guerreiro, R. and Amaral, J.V., 2018. Cost-based price and value-based price: are they conflicting approaches?. Journal of Business & Industrial Marketing.

IMA.2020. IMA Statement of Ethical Professional Practice. https://www.imanet.org/insights-and-trends/business-leadership-and-ethics/ima-statement-of-ethical-professional-practice?ssopc=1

Kes, Z. and Kuźmiński, Ł., 2019. Application of extreme value analysis in the assessment of budget variance risk. Econometrics, 23(2), pp.80-98.

Nørreklit, H., Kure, N. and Trenca, M., 2018. Balanced Scorecard. The International Encyclopedia of Strategic Communication, pp.1-6.

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