London School of Business & Finance (LSBF)

Module

Performance Measurements and Control

Assignment Title Assignment Type Word Limit Weighting 50% Student Cohort Issue Date Submission Date Feedback Date Issued by (Assessor) Internal Verifier Plagiarism

Individual Assignment
2,000 (+/- 10%)

Online 13th May 24th June TBC Peter Wheale When submitting work for assessment, students should be aware of the LSBF guidance and regulations in concerning plagiarism. All submissions should be your own, original work. You must submit an electronic copy of your work. Your submission will be electronically checked.

Harvard Referencing

The Harvard Referencing System must be used. The Wikipedia website must not be referenced in your work. Your assignment should demonstrate the following qualities: 1. Answering the central focus of the assignment requirements. 2. A critical appreciation of relevant literature and its use to support your arguments, substantiate performance measurements and other aspects of the assignment. 3. Taking ownership of the content, being prepared to debate and argue a personal position, providing evidence evaluative skills. A submission made up of extracts from published sources which is descriptive or simply just theoretical regurgitation is not acceptable. Your submission must have interpretation and consideration of the challenges and issues of taking theory into practice. 4. Ability to analyse relevant theoretical concepts in a critical manner, evaluation of material. 5. Logical flow of ideas and treatment; imaginative approaches; appropriate selection of real world factors related to the company of your choice. 6. Evidence of additional personal research, and the ability to analyse material from a variety of appropriate relevant perspectives. 7. Presentation, structure, appropriateness of methodology, section headings/subheadings, tidiness. 8. Marks will be awarded for proper referencing and originality of work. Also note that plagiarism is a serious offence and your submission will be electronically checked.

Learning Outcomes

Background
Suppose you have been appointed as a financial manager to a company which makes two types of washing machines which are retailed throughout the UK. The two models, Delux and Standard, are produced at the factory. The company has traditionally used direct labour hours as the basis for allocating overhead costs to products to calculate a full-cost per unit. The Finance Director of the company is considering replacing this traditional approach to overhead allocation and adopting instead an activity-based costing system (ABC). The Finance Director has asked you to report back to him on how an activity based costing system (ABC) could be applied to overhead allocation instead of the traditional approach. Overheads have not been broken down into selling, administrative and general overheads. The following cost data for the year are available on the two models of washing machine: Table 1: Data used for the traditional costing approach Delux Annual production volume (units) Selling price per unit Direct labour and material cost per unit Annual direct labour hours Total annual overhead is 2,480,000 Table 2: Data for an Activity Based Costing System Activity Budgeted Cost Engineering and Maintenance 155,000 Machine setup costs 350,000 Machine related set up 1,800,000 Packaging and Shipping 175,000 Total overhead 2,480,000 8,000 350.00 170.00 20,000

Standard 24,000 140.00 60.00 60,000

Cost Driver Engineering hours Number of setups Number of machine hours Number of shipments

Table 3: Cost driver-volumes based on estimates for the year. Cost driver Engineering hours Number of Setups Machine hours Number of shipments Required: (a) Present calculations of the unit cost and the unit profit or loss for each of the two models, Delux and Standard, based on the data available for the traditional costing system. (15 marks) (b) Show calculations of the unit costs for the Delux and Standard product models based on the data available for the activity based costing system (ABC). (25 marks) Delux 6,000 300 80,000 7 000 Standard 8,000 50 80,000 9,000 Annual total 14,000 350 160,000 16,000

(c) With reference to the above data, discuss the most significant differences between the
traditional approach and activity based costing (ABC) system and some of the difficulties in implementing it that may be encountered. Assume that you are presenting your answer to a group of staff who have little experience of ABC. (20 marks)

(d) The company is considering organizing the production of the Delux and Standard washing machines into autonomous divisions with separate managers who would report back to higher management. Discuss the advantages and disadvantages of decentralisation. (20 marks) (e) Assuming the company did decide to decentralize and are considering introducing a balanced scorecard approach to divisional-manager performance assessment. Discuss what you consider to the merits of this approach to performance measurement. (20 marks)
Total marks 100

GUIDANCE ON THE ASSESSMENT

Where plagiarism is suspected the normal rules and procedures of the LSBF will be applied. Your answer should not exceed the limit of 2,000 words (+/- 10%) excluding appendices and references. It should be formatted on A4 paper and include a cover page and a table of contents. Use 12pt font size Times New Roman, with 2.5cm margins all around and double-spacing. References, table of contents, and tables/figures/graphs may be single-spaced with a font size 10. Ensure you provide a Contents page and an Executive Summary to your report. In your Appendices present abstracts of key or critical secondary data your have collected (do not present whole copies of articles or reports you have cited). Use the Harvard-style of referencing in your report. All materials must be properly referenced. Length required is advised above and longer work will not be penalised. However, it should be noted that a concise and professional style which is well focused and clear in the points being made will gain credit. Originality, quality of argument and good structure are required.

Your assignment should demonstrate the following qualities: 1. Answering the central focus of the assignment requirements. 2. A critical appreciation of relevant literature and its use to support your arguments, substantiate performance measurements and other aspects of the assignment. 3. Taking ownership of the content, being prepared to debate and argue a personal position, providing evidence evaluative skills. A submission made up of extracts from published sources which is descriptive or simply just theoretical regurgitation is not acceptable. Your submission must have interpretation and consideration of the challenges and issues of taking theory into practice. 4. Ability to analyse relevant theoretical concepts in a critical manner, evaluation of material. 5. Logical flow of ideas and treatment; imaginative approaches; appropriate selection of real world factors related to the company of your choice. 6. Evidence of additional personal research, and the ability to analyse material from a variety of appropriate relevant perspectives. 7. Presentation, structure, headings/subheadings, tidiness. appropriateness of methodology, section

8. Marks will be awarded for proper referencing and originality of work. Also note that plagiarism is a serious offence and your submission will be electronically checked.