Objective: The objective of this individual coursework assessment is to apply the concepts and techniques of management accounting to real-world industry scenarios. This assessment aims to enhance your critical thinking, analytical skills, and ability to make informed managerial decisions based on financial data.

Instructions: You are required to analyze the industry cases provided from a management accounting perspective. Your analysis should be well-structured, supported by relevant data, and demonstrate your understanding of the course concepts. Your submission should be in the form of a written report.

Case: Imagine you are a management accountant at a retail company that sells electronic gadgets. The company is considering introducing a new line of smartphones in the market.

Section  1  (20  Marks):  You  are  tasked with  analyzing the  costs  associated with manufacturing  and distributing these smartphones and providing recommendations on the pricing strategy. Your analysis should include:

1.     Identification  and  classification   of  different  types  of  costs   (fixed,  variable,   etc.)  involved  in manufacturing and distributing the smartphones.

2.     Calculation of the breakeven point in units and dollars, considering the projected selling price and cost structure.

3.     Discussion of the potential impact of different pricing strategies (cost-plus, value-based, competition- based) on the company's profitability and market positioning.

4.     Analysis of the sensitivity of the breakeven point and profitability to changes in key assumptions, such as variable costs or selling price.

Section 2 (25 Marks): Now please complete the following budget of your company for this coming year.

1.     the sales budget

2.     the production budget

3.     the direct materials purchases budget

4.     the direct labor budget

However, after two years, the company is facing challenges in meeting its budgeted targets and wants to evaluate the performance of its various departments. Your analysis should include:

5.     Discussion of how the use of flexible budgets can provide a more accurate assessment of performance in a dynamic business environment.

6.     Examination of the role of cost variances (e.g., materials, labor, overhead) in evaluating departmental performance.

Section 3 (15 Marks): The company’s standard cost card for direct labor and variable manufacturing overhead follows:

Actual results were as follows:

•    The number of units sold and produced was 10,000 units.

•    The direct labor cost was $12,000 for 960 hours ($12.50 per hour).

•    The variable overhead cost was $4,992 for 960 hours ($5.20 per hour).

Calculate the following variances and label them as favorable (F) or unfavorable (U):

1.   Direct labor rate variance.

2.   Direct labor spending variance.

3.   Variable overhead rate variance.

4.   Variable overhead efficiency variance.

5.   Briefly explain the relationship between direct labor efficiency variance and variable overhead efficiency variance.

Section 4 (20 Marks): The manager is considering a new project that would require an initial investment  of $1,197,810. The cost of capital or the required rate of return of this company is 10 percent. This project will generate an annual cash inflow of $300,000 in the following five years.

1.     Calculate the net present value (NPV) of this project. Indicate whether or not this project is acceptable.

2.     Calculate the internal rate of return (IRR) of this project.  Indicate whether or not this project is acceptable.

3.     Briefly explain what the time value of money means.