| ACC203: Managerial Accounting |
Question 1
The Business Times reported on 26 January 2021 that “Sheng Siong staff [are] to get up to 16 months’ bonus after strong earnings amid COVID-19 pandemic”. This was to recognize that the company had “performed extremely well as compared to previous years in 2020, on the back of elevated demand for its offerings due to the COVID-19 pandemic”.
Many analysts attributed the sterling results to the company’s following actions:
- Adoption of cost leadership strategy through aggressive cost control.
- And focusing on appropriate product offerings of value for money shelf-stable groceries strongly demanded by customers.
- The timely embrace of e-commerce (online grocery)
As the nation slowly returns to normalcy, analysts believe that the customers’ expectations in grocery shopping will be forever changed. To continue to do well, supermarket chains like Sheng Siong should be asking the following questions:
- What channels should they be focusing on? Do they need to invest more into e-commerce? Or look for partnerships with major consumer good suppliers?
- Should they continue to offer products that sell well during the pandemic or do they diversify their products range?
- Should they be investing more in revamping stores to cater to curb-side deliveries or should they be directing investments to open new compact stores?
- Should they make further investments to improve the current payment system to ensure safety and security for consumers?
Required:
- Define management accounting.Based on the report above,explain how management accounting has helped Sheng Siong achieve success.
- Describe the major management accounting processes and techniques that can be used for companies in the supermarket industry.
- Explain the ways inwhich the information of the key processes of management accounting can help companies like Sheng Siong meet the challenges expected in the post-pandemic super market industry.
- If Sheng Siongis to continue its pursuit of cost leadership strategy, describe the types of management accounting information that might assist the management.
Question 2
On 11 December after the close of business, a devastating fire at Biopharm Pte Ltd destroyed the firm’s work in process and finished goods inventories. The following information is available:
| $ | |
| Sales revenue, 1 January to 11 December | 1,980,000 |
| Purchases, 1 January to 11 December | 300,000 |
| Income before taxes, 1 January to 11 December | 408,000 |
| Direct labor cost, 1 January to 11 December | 720,000 |
| Cost of goods available for sale, 1 January to 11 December | 1,650,000 |
| Raw material inventory, 1 January | 60,000 |
| Work in process inventory, 1 January | 126,000 |
| Finished goods inventory, 1 January | 222,000 |
| Gross profit margin | 30% |
The firm’s accountant determines that the cost of direct materials used normally averages 25% of prime costs. In addition, manufacturing overhead is 50% of the firm’s total manufacturing costs.
Required:
Biopharm Pte Ltd is in the process of negotiating a settlement with its insurance company. Compute and determine an estimate of the cost of work in process and finished goods inventories that were destroyed by the fire. Show all workings.
