3104AFE STATEGIC MANAGEMENT ACCOUNTING

INDIVIDUAL ASSIGNMENT

Assessment weight: 10%

Due date and time: 12th OCTOBER 2015, before 8:00 am

1. SUBMISSION
All submissions should be made on line which is a requirement
under University Policy. No hard copies will be accepted. The
submission point can be found in the Assignment folder under
the Assessment option of the course web site at Learning @
Griffith.
Your submission should be in a Microsoft Word format
file.
You must attach a standard cover sheet to your assignment. A
copy of a standard coversheet is given in the Assignment
folder under the Assessment option of the course web site at
Learning @ Griffith.
2. NOTE
To be fair by all the students in this course:
1. No extensions will be granted (refer the course
profile).
2. Convenors/ tutors will not give any individual
feedback/help/clarification on the work prior to submission. Any
information relating to the Assignment will be posted on the
web or announced in the lectures so that everybody gets the
same information.

3. ASSIGNMENT
This assignment is marked out of 100. It has a 10% weight on
your final assessment.
Last month you took over the position of Management Accountant at Boron Brothers Pty Ltd
which makes toys for children at its factory located in Logan. The documents relating to the
next year budget show the following information in relation to three toys that Boron Brothers
Pty Ltd plans to make and sell next year.
TEDDYS
SCOOBYS BUNNYS
Direct materials per unit
Direct Labour per unit

$15.00

$18.00

$15.00

$20.00

Variable O/H per unitoverhead

$11.80

$14.95

$24.85

Fixed O/H per unit

$5

$7.50

$9.75

Fixed Marketing Costs per unit

$1.50

$2.00

$2.75

Head Office allocated costs per unit

Selling Price per unit
$40

$3.00
$57

$3.50
$78

$3.75

Machine Hrs per unit

Demand

0.4hrs
0.7hrs
0.9hrs
12,000 units 12,000 units 6,000 units

The total machine hours available in the next year are limited to 12,000 hours due to major
maintenance work that needs to be carried out every 5 years on some machines. The
production manager has indicated that it is not possible to meet the total demand for the three
toys due to this reduction in the available machine hours. The managing director has asked
you to decide on the product mix for the next year to maximise the profits from the available
machine hours.
Required;
A. Out of the information in the budget documents given above, state which information is
NOT relevant to deciding the product mix to maximise the contribution to company
profits (15 marks).
The Variable O/H per unit is not relevant to deciding the product mix to maximise the
profits from the available machine hours.

B. Using the relevant information given above, calculate the optimum product mix that would
maximise the contribution to company profits (50 marks). Estimate the contribution to
profits that would result under the product mix that you calculated (15 marks).
40-(12+9+5+1.5+3) = $9.5
57-(15+15+7.5+2+3,5) = $14
78-(18+20+9.75+2.75+3.75) =$23.75
X+Y+Z=12,000hrs
TP =9.5X+14Y+23.75Z
If the Total Profits is the maximised, the product with highest profit per unit-BUNNYS
should be fully produced as demanding.
12000*0.9= 10800hrs
And then the product with second highest profit per unit SCOOBYS should be produced
within the hours left
12000-10800 = 1200hrs
That means Boron Brothers Pty Ltd will not make TEDDY next year, if they want to
maximise the profits.
The maximised profits will be
12000*23.75 = $285000
1200/0.7 *14 $24000
TP=285000+24000= $309000
C. The company is not in a position to make any capital expenditure during next year to
increase the machine capacity. Write a report to the Managing Director (not exceeding half
a page) suggesting alternative strategies that can be used to meet the demand which is not
met under the product mix you recommended. Your report should also indicate briefly the
risks associated with the strategies that you are suggesting (20marks).
If the recommend strategy had been adopted to maximise the profits,
the demand of product would not be met.
The alternative strategy I make will be producing 12000 units TEDDYS,
about 10000 units SCOOBYS and 200 units BUNNYS.
Though the recommended strategy can maximise the profits, it cannot
met the producing plan. Because the total demands of this three toys
are double of the limited working hours in the next year,
12000*0.4+12000*0.7+12000*0.9=24000hrs>12000hrs;
And per unit profit of BUNNYS is the highest, the more units of BUNNYS,
the higher profits are. But that is at the cost of producing only all
BUNNYS and little SCOOBYS, which is harmful to the companys plan
and reputation.
The alternative strategy balances the product demanding and profits
maximum. The profits are neither the highest nor the lowest. And all
three toys are made. The numbers of SCOOBYS and BUNNYS are
adjustable according to the markets.
However, one of the risks of the alternative strategy is that, the
producing plan may make the company deficits.