Assignment Paper

v:* {behavior:url(#default#VML);}
o:* {behavior:url(#default#VML);}
w:* {behavior:url(#default#VML);}
.shape {behavior:url(#default#VML);}

Normal
0
false

false
false
false

EN-GB
X-NONE
X-NONE

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-parent:””;
mso-padding-alt:0cm 5.4pt 0cm 5.4pt;
mso-para-margin-top:0cm;
mso-para-margin-right:0cm;
mso-para-margin-bottom:8.0pt;
mso-para-margin-left:0cm;
line-height:107%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,sans-serif;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:”Times New Roman”;
mso-bidi-theme-font:minor-bidi;
mso-ansi-language:EN-GB;
mso-fareast-language:EN-GB;}
table.TableGrid
{mso-style-name:TableGrid;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-unhide:no;
mso-style-parent:””;
mso-padding-alt:0cm 0cm 0cm 0cm;
mso-para-margin:0cm;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,sans-serif;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:”Times New Roman”;
mso-bidi-theme-font:minor-bidi;
mso-ansi-language:EN-GB;
mso-fareast-language:EN-GB;}

 

 

Assessment Information

This assignment is an individual assignment designed to assess the following learning outcomes:

2.  Apply numeracy skills and qualitative judgment to aid financial decision making.

3.  Understand apply and evaluate management accounting concepts and techniques in decision making.

Coursework Assignment 

You have just started a new job as Managing Director of Newtron Technologies Ltd a UKbased company whose principal activity is the manufacture and distribution of computer components.

After discussions with colleagues at a business conference, you have concluded that the strategic planning and annual budgeting process needs to be reformed. You are particularly interested in the concept of “Beyond Budgeting” that was one of the themes of the conference.

You have therefore carried out some background research into “Beyond Budgeting” and have obtained the following documents (available on the module Moodle page).

Document 1 – A journal article on the Beyond Budgeting (Sandalgaard, N. and Bukh, P.N.

(2014) ‘Beyond Budgeting and change: a case study.’ Journal of Accounting & Organizational

Change 10, (3) 409-423)

Document 2    Income statements

The following income statements relate to Newtron Technologies Ltd.

    Year-ended    31/12/2017 31/12/2016 31/12/2015 31/12/2014 31/12/2013 31/12/2011 31/12/2010

 

£000

£000

£000

£000

£000

£000

£000

Turnover 

31,671

43,416

48,509

52,377

42,753

20,097

14,810

Cost of Sales 

(22,603)

(31,603)

(36,239)

(40,272)

(31,076)

(15,292)

(11,636)

Gross Profit 

9,068

11,813

12,270

12,105

11,677

4,805

3,174

Administration Expenses 

(12,675)

(11,102)

(12,482)

(16,980)

(23,876)

(5,433)

(3,951)

Operating Profit 

(3,607)

711

(212)

(4,875)

(12,199)

(628)

(777)

Other Income &

Interest 

2

194

(152)

(1,123)

10,432

(63)

(47)

Profit (Loss) before Tax 

(3,605)

905

(364)

(5,998)

(1,767)

(691)

(824)

Taxation 

810

(82)

0

(569)

386

214

267

Profit (Loss) after

(2,795)

823

(364)

(6,567)

(1,381)

(477)

(557)

Tax 

The last seven years have been very difficult for the company, and it has survived through the support of its parent company and its bank. However, the company now intends to engage in a number of income generating, cost-saving and efficiency measures in order to improve its financial performance.

 

 

 

 

 

 

 

 

 

 

Document 3New production equipment

Newtron Technologies Ltd are considering automating their production process for the TX9 computer procesor. At present this is requires a significant input of manual labour.

Due to the automation, the requirement for production labour will be significantly reduced. 

The current typical annual volume of output and sales is about 160,000 units.

Information relevant to this decision is given in the following table:

 

Current production system

Automated production system

Sales price (per component)

£42.00

£42.00

Direct materials cost (per component)

£23.00

£23.00

Direct labour cost (per component) 

£12.00

£5.00

Fixed manufacturing overheads 

£800,000

£1,400,000

Fixed administrative overheads 

£80,000

£60,000

Fixed selling and distribution overheads 

£60,000

£60,000

Break-even point (components)

 134,286 

 108,572 

Margin of safety at budgeted profit level

Unit sales required to achieve budgeted profit

35%

25%

of £500,000 (components)

 205,715 

 144,286 

 

 

 

 

 

 

 

 

 

 

Document 4    Cash budget

Newtron Technologies Ltd’s Finance Department has prepared the following cash budget and budgeted income statement together with some balances extracted from the budgeted statement of financial position for the final 6 months of 2018.

The Chairman of the Board has expressed surprise and dismay that the cash balance is expected to deteriorate by nearly £2,000,000 over a period when the total loss is expected to be less than £1,500,000.

Cash budget 

July

August

September      October

November

December

 

£

£

         £                     £

£

£

Opening balance 

(250,000)

(487,937)

(895,422) (1,344,350)

(1,823,601)

(2,104,989)

RECEIPTS: 

 

 

             

 

 

Cash sales 

623,700

643,191

        662,229          706,038

732,262

609,608

1,995,000

 

1,896,300

2,618,700

 

2,539,491

Credit sales                                                               1,981,809      2,067,771      2,233,962     2,347,738

Total receipts                                                           2,644,038      2,773,809      2,966,224     2,957,346

PAYMENTS: 

 

 

 

 

 

 

Cash purchases 

(586,818)

(629,604)

(684,468)

(726,206)

(698,490)

(664,333)

Credit purchases 

(579,495)

(563,806)

(580,708)

(605,511)

(615,599)

(566,798)

Operating expenses

(144,800)

(154,936)

(165,782)

(177,386)

(189,803)

(203,089)

Fixed overheads 

(155,800)

(155,800)

(155,800)

(155,800)

(155,800)

(155,800)

Production labour 

(789,544)

(824,645)

(869,479)

(932,324)

(912,413)

(809,967)

Administration labour 

(600,180)

(618,185)

(636,731)

(655,833)

(675,508)

(695,773)

 SHAPE  * MERGEFORMAT

Total payments: 

(2,856,637) (2,946,976)

(3,092,967) (3,253,060)

(3,247,612)

(3,095,760)

Net cash flow 

(237,937)

(407,485)

     (448,928)        (479,251)

(281,388)

(138,414)

Balance c/f 

 

Budgeted income

(487,937)

(895,422)

(1,344,350) (1,823,601)

(2,104,989)

(2,243,402)

statement 

July

August

September      October

November

December

 

£

£

         £                     £

£

£

Sales 

2,520,000

2,625,000

    2,730,000       2,940,000

3,080,000

2,590,000

(1,836,000)

 

(1,912,500)

 

(1,989,000)

(2,142,000)

 

(2,244,000)

 

(1,887,000)

684,000

 

712,500

 

741,000

798,000

 

836,000

 

703,000

Cost of sales   

Gross profit   

  

 

 

 

 

 

 

Operating expenses

(154,936)

(165,782)

(177,386)

(189,803)

(203,089)

(217,306)

Fixed overheads 

(156,645)

(156,645)

(156,645)

(156,645)

(156,645)

(156,645)

(655,833)

 

(675,508)

 

(695,773)

(1,002,281)

 

(1,035,242)

 

(1,069,724)

Administration costs (600,180)        (618,185)       (636,731) 

Total expenses          (911,761)     (940,612)       (970,762) 

Operating

             

 

 

 

 

 

profit/(loss) 

(227,761)

(228,112)

(229,762)

(204,281)

(199,242)

(366,724)

 

             

Extract from budgeted statement of financial position at period ends

 

Accounts receivable at

July

August     September October

November December

the period end (£)  Accounts payable at

1,896,300

1,981,809 2,067,771 2,233,962

2,347,738 1,980,392

the period end (£) 

563,806

580,708          605,511       615,599

      566,798       515,484

RM closing stock (£) 

349,237

405,047          477,755       514,307

      502,217       548,080

FG closing stock (£) 

462,825

529,472          627,220       722,797

      668,587       725,507

The following information is relevant to the figures above:

1.     Credit customers are allowed one month’s credit on sales;

2.     Credit suppliers allow one month credit on raw materials purchases;

3.     Production labour costs are included in cost of sales in the budgeted income statement.

 

 

Document 5    Full (absorption) costing

Newtron Technologies Ltd’s product costing team have provided you with the following information on the current method used to charge overhead costs to products. The table shows each overhead cost and the apportioned and reapportioned costs by cost centre together with the apportionment bases used.

Department

Computer Processors

Graphics

Processing Units

Memory Cards

Maintenance

Admin-

Total istration

 

Direct costs

 

 

 

 

 

 

 

 

Direct materials (£)

 

3,405,000

2,951,000

2,644,000

              

 

   9,000,000

 

Direct labour (£)

 

2,066,000

1,902,000

2,032,000

 

 

 

 

  6,000,000

 

Overheads

 

 

 

 

 

 

 

 

 

Indirect labour (£)

 

 

 

 

 

 

 

900,000

 

Rent (£)

Machine insurance

 

 

 

 

 

 

 

2,380,000

 

(£)

 

 

 

 

 

 

 

20,000

 

Heating (£)

 

 

 

 

 

 

 

50,000

 

Machine power (£) Machine

 

 

 

 

 

 

 

900,000

 

depreciation (£) Value of machines

 

 

 

 

 

 

 

720,000

 

(£)

 

832,000

725,000

713,000

1,330,000

 

3,600,000

 

Floor area (m2)

 

11,000

10,000

9,000

8,000

7,000

45,000

 

Machine hours

 

449,000

385,000

329,000

637,000

1,800,000

 

Direct labour hours

 

130,000

110,000

104,000

344,000

 

Employees

 

72

61

58

68

49

308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department

Computer Processors

Graphics

Processing Units

Memory Cards

Maintenance

Administration             Total

 

 

£

£

£

£

      £                  £

 

Direct materials (£)

3,405,000

2,951,000

2,644,000

              

   9,000,000

 

Direct labour (£)

2,066,000

1,902,000

2,032,000

 

 

 

  6,000,000

 

Direct costs

5,471,000

4,853,000

4,676,000

0

0

15,000,00 0

 

Overheads

Indirect         labour

 

 

 

 

 

 

 

(direct labour)

309,900

285,300

304,800

900,000

 

Rent (floor area) Machine insurance

581,778

528,889

476,000

423,111

370,222

2,380,000

 

(machine value)

Heating (floor

4,622

4,028

3,961

7,389

20,000

 

area)

Machine power

12,222

11,111

10,000

8,889

7,778

50,000

 

(machine hours) Machine depreciation

224,500

192,500

164,500

318,500

900,000

 

(machine value)

Total apportioned

166,400

145,000

142,600

266,000

720,000

 

overhead costs Re-apportion maintenance

1,299,422

1,166,828

1,101,861

1,023,889

378,000

4,970,000

 

(machine hours)

Re-apportion

395,293

338,949

289,647

(1,023,889)

 

administration

(employees) Total reapportioned

142,492

120,723

114,785

 

 

 

 

 

  (378,000)

 

overhead costs Total reapportioned

1,837,208

1,626,499

1,506,293

                 0                 0

4,970,000

 

overhead costs

1,837,208

1,626,499

1,506,293

             

 

 

Direct labour hours Overhead absorption rate per direct labour

130,000

110,000

104,000

             

 

 

hour (£)

14.13

14.79

14.48

             

 

               

The Graphics Processing Unit cost centre has been making significant losses in recent times and the Board of Directors have held discussions about whether this product line is still viable or should be shut down. The manager of the Graphics Processing Unit cost centre has complained that a significant portion of the cost centre’s costs are apportioned and reapportioned overheads. The manager has noted that the cost centre is charged a higher amount per direct labour hour (£14.79) for overheads than the other cost centres (£14.13 and £14.48). She has complained that she has no control over these costs and has queried the basis upon which the charges are made.

Document 6     Capital investment appraisal

The Maintenance department is considering investing in a new piece of problem diagnostic equipment that will help them identify problems with production equipment more quickly, reduce equipment down times and wasted material and components in the factory.

There are two options for the new piece of equipment: the Oracle and the Clairvoyant.

The following information about the cash flows, profits and capital investment appraisal measures has been provided to you. The company’s cost of capital is currently 6%.

Oracle                                                                   Cash flow      6%       Present           Depreciation (£)        Factors           value (£)         (£)

Cumulative

        Year                                                                                                     Profit (£)     cash flow

(£)

0                           (1,500,000)          1.0000             (1,500,000)                             (1,500,000)

1                           480,000    0.9434             452,832           (264,000)        216,000           (1,020,000)

2                           420,000    0.8900             373,800           (264,000)        156,000           (600,000)

3                           375,000    0.8396             314,850           (264,000)        111,000           (225,000)

4                           315,000    0.7921             249,512           (264,000)        51,000             90,000

5                           270,000    0.7473             201,771           (264,000)        6,000   360,000

          5*                  180,000     0.7473              134,514                                                      540,000

                                                  NPV =              227,279                               540,000                        

                                                                       

Payback period   3 years 9 months                                                                           

Accounting rate of return    12.86%                       

 Internal rate of return          11.31%              

 

 

 

 

 

 

 

 

 

 

                                                                         

Clairvoyant                                                              Cash flow      6%       Present           Depreciation (£)        Factors           value (£)         (£)

Cumulative

        Year                                                                                                     Profit (£)     cash flow

(£)

0                           (2,000,000)          1.0000             (2,000,000)                             (2,000,000)

1                           370,000    0.9434             349,058           (350,800)        19,200             (1,630,000)

2                           431,000    0.8900             383,590           (350,800)        80,200             (1,199,000)

3                           513,000    0.8396             430,715           (350,800)        162,200           (686,000)

4                           575,000    0.7921             455,458           (350,800)        224,200           (111,000)

5                           657,000    0.7473             490,976           (350,800)        306,200           546,000

          5*                  246,000     0.7473              183,836                                                      792,000

                                                  NPV =              293,632                               792,000                        

                                                                         

Payback period   4 years 3 months                                                                           

Accounting rate of return   14.11%                                                                          

Internal rate of return   10.29%                             

 *The second cash flow in year 5 for each option represents the sales proceeds on the disposal of the equipment at the end of its life (residual value).

The Clairvoyant will not be fully effective until other modifications and improvements have been made to production equipment over the next few years, whereas the Oracle will be fully effective almost immediately.

Only one of the two pieces of equipment can used on the company’s production equipment as they are incompatible and essentially perform the same functions.

 


Assignment requirements

You are required to write a report for the Board of Directors of Newtron Technologies Ltd (italicized words in brackets indicate the approximate word count for each section).

The report should cover the following key areas:

1.       An executive summary outlining the key challenges that the company is facing and the main outcomes from the analysis work you have under taken so far (250-300 words).

2.       A discussion of why Newtron Technologies Ltd might want to implement “Beyond

Budgeting” and why the company may not want or be able to fully adopt “Beyond Budgeting”. (Document 1) (225-275 words).

3.       A discussion of the break-even analysis of the proposed automation of the TX9 production process (Document 3) with particular emphasis on the following areas :

a.     An explanation of the probable reasons for the changes in the different costs relating to production of the TX9 component in the table above (90-110 words).

b.     A review of  the risk and return offered by the two manufacturing options with reference to the concept of operating gearing and a recommendation on which option Newtron Technologies Ltd should choose (210-240 words).

4.       A discussion of the reasons for the significant deterioration of the cash balance in the cash budget above (Document 4), given the much smaller total loss recorded in the budgeted income statement. (325-375 words).

5.       A discussion of the basis and reasons for charging overheads to individual production cost centres (Document 5) with particular emphasis on the following areas:

a.     Using the figures in the tables above, explain the basis of the overhead charges to the Graphics Processing Unit cost centre.  (275-325 words);

b.     Using the figures in the table above to illustrate your points, critically discuss the process of absorption costing.  (180-210 words).

6.       A critical appraisal of the results of the capital investment appraisal of the Oracle and Clairvoyant (Document 6) with particular emphasis on the following areas:

a.     A discussion of the reasons for the apparent conflicts between the investment advice provided by each method (375-425 words);

b.     A discussion of the risk and return presented by each option and a recommendation as to which option should be chosen (170-200 words).

 

GUIDELINES TO THIS ASSIGNMENT

 

Criteria for Assessment

 

This assignment will summatively assess learning outcome 3.

2.    Apply numeracy skills and qualitative judgment to aid financial decision making.

3.    Understand apply and evaluate management accounting concepts and techniques in decision making. 

Assessment Criteria  

Marks will be awarded according to the following criteria:

5%

An executive summary outlining the key challenges that the company is facing and the main outcomes from the analysis work you have undertaken so far.

20%

A discussion of potential for the introduction of the “Beyond Budgeting” philosophy.

20%

A discussion of the break-even analysis of the proposed new production equipment for the TX9 computer processor.

20%

A discussion of the reasons for the significant deterioration of the cash balance in the cash budget.

15%

A discussion of the basis and reasons for charging overheads to individual production cost centres.

15%

A critical appraisal of the results of the capital investment appraisal of the Oracle and Clairvoyant.

5%

Referencing, spelling and language used.

Word Count

The word count is between 2,000 and 2,250 (see guidance above on word count for each section). There will be a penalty of a deduction of 10% of the mark (after internal moderation) for work exceeding the word limit by 10% or more. The word limit includes quotations, but excludes the reference list.

How to submit your assessment

The assessment must be submitted by 16.00:00 on 02/07/18. No paper copies are required.

You can access the submission link through the module web.

       Your coursework will be given a zero mark if you do not submit a copy through Turnitin.

Please take care to ensure that you have fully submitted your work. 

       All work submitted after the submission deadline without a valid and approved reason (see below) will be given a mark of zero. 

       The University wants you to do your best. However, we know that sometimes events happen which mean that you can’t submit your coursework by the deadline – these events should be beyond your control.  If this happens, you can apply for an extension to your deadline for up to two weeks, or if you need longer, you can apply for a deferral, which takes you to the next assessment period (for example, to the resit period following the main Assessment Boards). You must apply before the deadline. You will find information about the process and what is or is not considered to be an event beyond your control at https://share.coventry.ac.uk/students/Registry/Pages/DeferralsandExtension.aspx

       Students MUST keep a copy and/or an electronic file of their assignment.

       Checks will be made on your work using anti-plagiarism software and approved plagiarism checking websites.

Plagiarism

As part of your study you will be involved in carrying out research and using this when writing up your coursework. It is important that you correctly acknowledge someone else’s writing, thoughts or ideas and that you do not attempt to pass this off as your own work.  Doing so is known as plagiarism.  It is not acceptable to copy from another source without acknowledging that it is someone else’s writing or thinking. This includes using paraphrasing as well as direct quotations. You are expected to correctly cite and reference the works of others. The Centre for Academic Writing provides documents to help you get this right. If you are unsure, please visit www.coventry.ac.uk/caw.  You can also check your understanding of academic conduct by completing the Good Academic Practice quiz available on Moodle.

Moodle includes a plagiarism detection system and assessors are experienced enough to recognise plagiarism when it occurs. Copying another student’s work, using previous work of your own or copying large sections from a book or the internet are examples of plagiarism and carry serious consequences. Please familiarise yourself with the CU Harvard Reference Style (on Moodle) and use it correctly to avoid a case of plagiarism or cheating being brought. 

Again, if you are unsure, please contact the Centre for Academic Writing, your Academic Personal Tutor or a member of the course team.

Return of Marked Work

You can expect to have marked work returned to you within 10 working days. If for any reason, there is a delay you will be kept informed. Marks and feedback will be provided online. Marks will have been internally moderated only and will therefore be provisional; your mark will be formally agreed later in the year once the external examiner has completed his/her review. 


Detailed Assessment Criteria

5%

An executive summary outlining the key challenges that the company is facing and the main outcomes from the analysis work you have undertaken so far.

Effectively summarises all the other five elements of the assignment.

4-5%

Effectively summarises 3-4 of the other five elements of the assignment or partially summarises all the other five elements of the assignment.  

2-3%

Effectively summarises 1-2 of the other five elements of the assignment or partially summarises 2-4 of the other five elements of the assignment.

1%

20%

A discussion of the potential for the introduction of the “Beyond Budgeting” philosophy.

Effectively covers both of the elements of the task with good reference to the article provided plus at least one more article and the module textbook.

14-20%

Effectively covers 1 of the elements of the task or partially covers both of the elements of the task with adequate reference to the article provided and the module textbook.

8-13%

Partially covers one of the elements of the task with some reference to the article provided and the module textbook.

1-7%

20%

A discussion of the break-even analysis of the proposed new production equipment for the TX9 computer processor.

Effectively covers all 3 of the elements of the task with good reference to the module textbook.

14-20%

Effectively covers 2 of the elements of the task or partially covers all 3 of the elements of the task with adequate reference to the module textbook.

8-13%

Effectively covers 1of the elements of the task or partially covers 2 of the elements of the task with some reference to the module textbook.

1-7%

20%

A discussion of the reasons for the significant deterioration of the cash balance in the cash budget.

Effectively covers the task with good reference to working capital management and the module textbook.

14-20%

Partially covers the task with adequate reference to working capital management and the module textbook.

8-13%

Partially covers the task with little reference to working capital management and the module textbook.

1-7%

             

Assignment Brief Template

Page 13 of 14

15%

A discussion of the basis and reasons for charging overheads to individual production cost centres.

Effectively covers both of the elements of the task with good discussion of cost allocation, apportionment, reapportionment and absorption and good reference to the module textbook.

11-15%

Effectively covers one of the elements of the task or partially covers both of the elements of the task with adequate discussion of cost allocation, apportionment, reapportionment and absorption and adequate reference to the module textbook.

6-10%

Partially covers one of the elements of the task with some discussion of cost allocation, apportionment, reapportionment and absorption and some reference to the module textbook.

1-5%

15%

A critical appraisal of the results of the capital investment appraisal of the Oracle and Clairvoyant.

Effectively covers both of the elements of the task with good reference to the module textbook.

11-15%

Effectively covers one of the elements of the task or partially covers both of the elements of the task with adequate reference to the module textbook.

6-10%

Partially covers one of the elements of the task with some reference to the module textbook.

1-5%

5%

Referencing, spelling and language used.

Referencing is Harvard compliant. Spelling accurate. Language is appropriate and persuasive.

4-5%

Two out of the three requirements above are achieved.

2-3%

One out of the three requirements above are achieved.

1%