TACC607 Managerial Accounting

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Page 1 of 4Australian National Institute of Management and CommerceMaster of Professional AccountingTACC607 Managerial AccountingTerm 2, 2021(2 August 2021 – 15 October 2021)Lecturer: Dr. Gerry LIGroup Assignment(Due on 8 October 2021 by 11:59 pm)Read carefully the following Case information before planning to write the ReportEagles International Group has its head office in Sydney and operates throughout Australia, NewZealand and parts of Asia. There are three main business divisions:• Brewing division – operates major breweries in the states of New South Wales, Queenslandand Western Australia. This is the oldest division.• Newspaper division – owns leading tabloid newspapers in several cities in Australia.• Cable television division – operates cable television services in Asia and Australia. This is ahigh-risk, growing market.Each division is headed by a managing director, who has been given a high level of decisionmaking authority. Each managing director effectively runs his or her division as a stand-alonebusiness within the general policy guidelines provided by the board of directors in the head office.Each managing director agrees to achieve a series of targets: return on investment (ROI), marketshare and sales growth. These targets are developed each year as part of the annual budget-settingprocess. Intense lobbying takes place between each managing director and the board of directorsto determine the most suitable targets.Each managing director receives an annual cash bonus based on achieving the target divisionalROI. The company defines ROI as operating profit, before interest and taxes, divided by divisionalassets (measured at original cost less accumulated depreciation). Senior managers are each eligiblefor a cash bonus of $60 000 if they reach their divisional ROI target. If performance is abovetarget, share options are awarded at the rate of 10 000 shares for every additional point over target.Thus, if the ROI target is 13 per cent and the division achieves 15 per cent, the manager would bePage 2 of 4awarded 20 000 share options. These options are at the prevailing market price on the last day ofthe financial year, and must be taken up within two years of the award. During the past year, themarket price of the company’s shares increased from $4 to $6. If the ROI target is not reached,there are no bonuses or share options, and the managing director has to provide convincing reasonsfor the poor performance. As a consequence of the performance measurement and reward system,the managing directors are highly motivated to achieve, and exceed, their ROI targets.Ms. Rebecca Fowler has just been appointed as the new management accountant in the head office,charged with redesigning the performance measurement system. As her first task, she has obtainedthe financial data for the last year and the latest forecast for the current year, for each division, inthousands of dollars, as follows:Mr. David Smith, the managing director of the brewing division, is concerned that his marketshare, and hence his ROI, is likely to suffer next year, as his main competitor has recentlypurchased new brewing technology. While his own brewing equipment is only 10 years old, it isunable to produce the new varieties of beer that customers are demanding, and maintenance andoperating costs are increasing.Mr. Smith is considering a proposal to invest $10 million in new equipment. This will probablyincrease next year’s operating profit for his division by $1 million. He has analysed the future cashflows of this proposal, and the new acquisition will easily satisfy the minimum required rate ofreturn of 10 per cent for all new investments that is set for the whole group. Without thisacquisition. Smith expects his divisional ROI to drop to 14 per cent next year.Page 3 of 4Assignment Tasks and Report RequirementsPart I1. Calculate the ROI for each division for last year and the current year, as well as the twocomponents of ROI: profit margin and return on assets. Use a table format as follows:
Last year
Current year
Brewing division
Newspaper division
Cable TV division
2. Discuss and comment on the relative performance of the three divisions.Part II1. Calculate the bonus that each managing director would earn in the two years. Use the sametable format as in Part I.2. Explain why David Smith is reluctant to invest in the new brewing equipment. Providecalculations to support your answer.Part IIIRebecca Fowler is considering expanding the divisional targets to include a range of non-financialmeasures. She is keen to develop a balanced scorecard (BSC) for each division. Select ONE ofthe three business divisions:1. Formulate two strategic objectives for each of the four perspectives: financial, customer,internal business process, and learning and growth.2. Suggest one lag and one lead indicator for each of the strategic objectives in all the fourperspectives.3. Construct a strategy map to demonstrate the relationships between strategic objectives foreach perspective.Note: please combine your answers of (1) and (2) above into one table as follows:
Perspectives
Strategic objectives
Lag indicators
Lead indicators
Financial
1.
2.
Customer
1.
2.
Internal business process
1.
2.
Learning and growth
1.
2.
Page 4 of 4Format and Submission of the Group Assignment Report1. Each group should consist of 3 to 4 members.2. The assignment report format, contents and structure should be decided by your group, but itmust include the three major parts listed on the previous page. The report should be presented ina professional and quality manner.3. Apart from the calculations and discussions required in the assignment tasks, the report mustalso discuss the relevant qualitative issues of financial and non-financial performancemeasurements, reward systems, and the balanced scorecard implementations in organisations.4. Relevant headings/sub-headings/sections in the report should be designed appropriately to coverthe relevant issues in the Case. Credit will be given for identification and organisation of therelevant issues discussed in the report.5. The entire report should contain a cover page, a table of contents, an introduction, the main reportbody, a conclusion, and the references.6. The number of references should be between 5 and 10 (maximum one page) for any materials(academic, business, professional) referenced and cited to support your arguments / concepts /examples addressed in the report. 10% of the assessment is allocated to proper research effortson relevant topics.7. The cover page of the report must follow the format provided by IMC, and each member of thegroup must submit the Peer and Self-Assessment of Teamwork on individual basis.8. The report is to be submitted (by one member in your group) to the submission box on Moodlethrough Turnitin checking for plagiarism on or before 8 October 2021 by 11:59 pm.9. Report body length: 1,800-2,000 words (excluding the calculations) containing proper pagenumbers with the following settings:• Font style/size: Times New Roman “12”• Line spacing: 1.5 lines (except tables with numbers using single line spacing)• Margins: Top (2.5 cm), Bottom (1.5 cm), Left (2.5 cm), Right (2.0 cm)• Paper size: A4

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