solution

Explain to the General Manager what transfer pricing is and what are two methods that can be used to set the price between divisions?

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Using the random number functionin excel simulate the arrival of 25 customers

 

SKU: solviv1

Rationale:

You have finally completed your accounting degree and secured a job with a catering business called Boutique Catering and have been asked to report to management on the issues identified in the questions below
.
This business has experienced significant growth over a short period of time and desperately requires someone to help manage the rapid growth of the business. Boutique Catering’s core business is providing meals for 3 conference rooms which are owned by the company. The business operates from Tuesday to Friday. The general manager who is also the owner wants you to review the business with ‘fresh eyes’ to see where it can improve and also seek some guidance about business opportunities that might be available
As such you are required to complete all parts of the questions showing all workings and providing a clear explanation of the process and output. Where appropriate use a well constructed spreadsheet, compatible with Excel, to answer the questions. The spreadsheet must be submitted with your written report. Your spreadsheet will have a separate worksheet for each question. For each question there will be a data entry section followed by a model or results section. Where appropriate, formula should be utilised.
Your response is to be in a report format and it is compulsory for you to lodge both the report (word file) and your calculations (spreadsheet excel compatible).

Question 1

 In order to assist the manager you are compiling a resource which will define the various management accounting terms used in the process of strategic analysis. Provide an explanation of the following terms, with examples
specifically relating to Boutique Catering, to include in a resource file which incorporates a reason why each concept is relevant or not relevant to decision-making:
  • Satisficing model
  • Simulation
  • Opportunity Cost
  • Sunk cost
  • Break-even point

 

Question 2

It’s your second day with Boutique Catering and the general manager has received a report summarising client complaints which she would like you to investigate.
There is a consistent theme of clients being unhappy with the service time when receiving their meals. The general manager would like you to establish if additional staff should be employed to improve the service time. Meals are
served in a general area and often the clients will stand around talking before placing an order. The following pattern records customer arrivals and the time it takes for the clients to receive their meals
Time between arrivals (minutes) Frequency
1 0.08
2 0.25
3 0.20
4 0.12
5 0.35

 

a)Using the random number functionin excel simulate the arrival of 25 customers

b)Calculate the total simulated hours, total waiting time for the customer service team member, and the total wait time for the customer?

c)Do you think that enough simulations have been completed to report an outcome to the general manager, explain your answer?

 

Question 3

On the third day in your role as accountant the general manager has asked you to review the results of 2012 and 2013 to try and determine if there is a relationship between the number of meals prepared per month and the administration costs which she believes to be too high. Data regarding the number of conferences per month, number of meals prepared for that month and the administration costs for the months of 2012 and 2013 are as follows:

Required:

a)Draw a scatter diagram of Boutique Catering’s Number of meals prepared and administrative costs for the year.

 

b)The relevant range has been identified as between 200 and 800 meals prepared. Mark the range on the scatter graph. Do you think this is an appropriate range? Why?

 

c)The high-low method in another way of estimating the cost behaviour of Boutique Catering. Using administration costs and number of meals prepared within the relevant range create an equation to express the results

 

d)A third method that can help understand the cost behaviour relationship is by using regression analysis. Construct an excel spreadsheet and use regression analysis to estimate the;
a.Number of meals and administration cost. What is the administration costs’ equation when 600 meals are prepared?
b.Number of meals, administration costs and number of conferences. What is the administration cost when 600 meals are prepared?

 

e)From the methods used which method would you feel most confident to report the findings to the General Manager? In your answer make particular reference to the advantages and disadvantages of each method and in addition discuss the cost-benefit of each method

 

Question 4

The forecast for the financial year 2013/2014 shows there will be a significant increase in the number of conferences that Boutique Catering will need to prepare meals for. The general manager is concerned that she will need to double the staff numbers to allow for such an increase. She has mentioned that because of the learning curve phenomenon it will be too difficult to accurately budget for the expected increase
Required:

 

a)Explain to the General Manager what the learning curve is? In your explanation make reference to the two variant methods. Include in your response the conditions under which a learning curve could be used to assist in forecasting for future operations.

Question 5

Boutique Catering is considering expanding the business structure by preparing frozen meals that will be home-

delivered. The meals will then only require to be heated up by the customer. As a point of difference the meals will be cooked according to the CSIRO total wellbeing recipe book. The meals Boutique Catering will offer are ‘everyday’,
‘vegetarian’ and ‘speciality’meals (for people who have allergies). To prepare and cook the meals Boutique Catering is looking at purchasing Frozen Delights which already has the capital equipment to prepare the three types of meals. Frozen Delights provides supermarkets with frozen meals and has spare capacity to supply Boutique Catering with the frozen meals as well as maintain its current customer base. In the table below is an estimation of the cost and
hours required to prepare, cook and freeze the meals and hours available to supply Boutique Catering with the meals.

 

Cost per mea Preparation (hours) Cooking (hours) Freezing (hours)
HOURSREQUIRED
Everyday meals $8.00 4 8 3
Vegetarian meals $9.00 10 3 2
Speciality meals $12.00 8 8 2
HOURS AVALIABLE 800 1200 1000

 

Required

a)Using solver derive the optimal solutions for how many meals should be prepared to maximise profit.
b)State the optimum meal mix and the resulting profit
c)Explain to the General Manager what transfer pricing is and what are two methods that can be used to set the price between divisions?

 

Question 6

The decision making process is a series of steps or stages that we work through to make a choice from an array of alternatives. Making decisions is an important role that management accountants need to undertake in their position. Explain the utility curve with reference to the three perceptions of risk. Which of these best describes your attitude toward risk? In your role as a management accountant explain how your choice may affect your decision-
making process and behaviour.

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