Cost Analysis Report Discussion

Submission Requirements:

Your submission has two parts. Both parts must be submitted to Blackboard by the due date and time for a complete submission of this assessment item. Refer to the instructions on Blackboard under Assessment Item 2 regarding uploading of files.

The following files must be uploaded into Blackboard:

1.Excel file containing the completed Schedules 1 and 2 contained in the workbook provided.

2. Management Report to the General Manager to be completed in the proforma word document provided.

Make sure you check your files once uploaded to ensure they are readable. No marks will be given for submissions where the file is an incorrect version, corrupt or unreadable.

This unit uses the Turnitin software to detect plagiarism. Turnitin compares submissions to other submissions, both current and past, and online sources such as textbooks, scholarly articles, websites, and blogs.

Note: When submitting the excel document, the SafeAssign may say that the excel file is not supported. This is okay, you should not convert the excel file into a pdf or any other format

 Roberta Rawlings

Roberta Rawlings is the Kitchen supervisor at Green Day Shelters in Wollongong, Southern NSW. Roberta has acted in this role for five years and is very proud of the service Green Day provides, and the positive difference her kitchen has made to so many lives.On Friday, Roberta switched on her computer to find an email marked *Urgent – Response required* from the new General Manager. She read the email carefully:“As you know, I have recently implemented a new system of responsibility accounting. As part of these changes, you will now receive quarterly reports comparing the costs of operating your department with budgeted costs. The report will highlight any differences – these are called variances. Responsibility accounting means you are accountable for keeping the costs in your division within the budget, and responsible for explaining any variances. Your first such report is attached and indicates that your costs are significantly above budget for the quarter. The report shows that you need to pay particular attention to the cost of raw ingredients and kitchen labour. Please send me a report by the end of the week detailing why your costs are so out of control and your plan for making the needed reductions. I will be sending this report to the Board, and I can tell you now that they will not be pleased with the increase in costs over the last quarter.”Roberta opened the attached cost analysis report. “How could this be?” she thought to herself. Roberta had worked so hard over the last quarter. A prolonged cold streak had seen the temperature plunge well below average for this time of year and this had caused an increase in the demand for hot meals. Roberta didn’t have a background in accounting, but she felt the findings of the report did not represent a true picture of her kitchen operations for the quarter. Roberta had always been conscious of keeping her costs low. To meet the increased demand for meals outside the scheduled kitchen hours, Roberta had approved overtime for her most efficient staff. But to offset this increase, Roberta had negotiated lower prices from her main suppliers. Roberta had expected to be praised for these efforts, but instead she was being admonished.

Background;

Founded in 1978, Green Day Shelters is a not-for-profit organisation that provides free hot meals and short-term accommodation to those in need across NSW. Their mission is to provide a friendly face and a helping hand to those who have stumbled along their life journey. Green Day has grown significantly over the last decade, and now operates seven shelters. Each location has two operational supervisors, one for the accommodation, and one for the kitchen. The kitchen serves meals between the hours of 12pm and 2pm, and 5pm to 7pm every day, but Roberta often stays open longer to make sure no one misses out on a meal. While on average the kitchen serves 200 meals a day, demand is much higher in the winter months when temperatures are low, and many come in to make use of the free warm showers. Over the last two years, the shelter has seen a steady increase in demand for both meals and accommodation due to the pandemic which has led seen an increase in unemployment and homelessness across the region. Green Day receives income from government grants and fundraising; although, the pandemic has reduced the organisation’s ability to raise funds. This has put additional pressure on Green Day’s bottom line and ability to continue operating at a surplus.

Recent Changes;

Earlier this year the Board of Green Day hired a new General Manager to improve its business activities. Dean Marsh, a business school graduate with experience in marketing and sales was appointed to the role. The Board was very excited about the ideas Dean shared in his interview about how to reduce costs. One of Dean’s first initiatives had been to introduce what he called ‘responsibility accounting’ along with a new budgeting system and quarterly cost analysis reports. The Board were looking forward to reviewing these reports and were expecting to see reductions in the organisation’s costs.

The Budget

The budget for the current financial year had been developed by Dean soon after he arrived. Dean built the budget himself using the prior three years’ actual costs to base his estimates. His analysis showed that costs had been increasing year on year, with more rapid increases over the last two years. To reduce costs Dean decided to set this year’s budget at last year’s costs less 3%. He knew these targets would be hard to achieve but thought that this would encourage staff to find innovative ways to make their operations more efficient. For the kitchen, Dean measured activity based on the number of meals served per day and set the budget using the average number of meals served over the last three years. Quarterly budgets were computed by dividing the annual budget by four.

Your Role

Roberta is an old family friend and knows that you are studying Management Accounting at QUT this semester. She has asked for your help in explaining the budget and cost analysis report and preparing a report to the General Manager.During a detailed phone conversation with Roberta, you gather the following information about the Kitchen’s costs and activities over the last quarter:Kitchen labour, raw ingredients and kitchen supplies are 100% variable based on the number of meals served. Water and electricity are 40% fixed and 60% variable. All other costs are fixed.During the quarter Roberta replaced some small equipment that had been affected by water damage in last year’s flooding. Although Roberta had advised management about the timing of these purchases and provided the relevant quotes, only a quarter of the total cost had been included in her budget for this quarter.Allocated administrative costs relate to head office and are allocated evenly across each location and each service.The budgeted rate per hour for kitchen labour was $10 and the kitchen staff were expected to produce 20 meals per hour. The added demand for meals outside of the kitchens usual hours led to overtime increasing the average cost per hour to $10.50 over a total of 1,036 hours.Raw ingredients were budgeted at $6/kilogram; however, after negotiations with her main suppliers, Roberta was able to reduce the average cost per kilogram to $5.75. Roberta ran a very tight kitchen, each kilogram of raw ingredients was expected to produce 15 meals, and there was no change to this over the quarter.

Your Tasks

Prepare the following to assist Roberta:

1. Using the proforma set out in Schedule 1 in the excel workbook provided, create a revised cost analysis report that takes account of the following:

a.Flex the budget for the actual level of activity, and

b. Eliminate any costs for which Roberta is not responsible For each variance include the amount and direction (U or F).

    Using Schedule 2 of the excel workbook provided, complete the table of Variance Analysis for the quarter. For each variance include the amount and direction (U or F).You must show your workings.

3. Prepare a report to the General Manager that includes the following:

 a.Discussion on the Cost Analysis Report

i. Explain and justify all adjustments you made to the original cost analysis report in Schedule 1.

ii.Evaluate the Kitchen’s performance for the quarter. Refer to the revised cost analysis report and variance analysis report you completed in Schedules 1 and 2.

iii.Support your discussion with one to two graphs that highlights the key variances for the quarter and based on your calculations in Schedule 1.

 b.Budget Improvements

i.Outline TWO weaknesses in the current budgeting process. For each weakness explain the behavioural implications and provide a recommendation that would improve the budgeting process going forward.

Refer to the attached CRA report for a breakdown of marks

NOTES FOR THIS ASSESSMENT:

Errors and omissions

If you believe there is an error in the assignment, or that an essential instruction has been omitted, please contact the Unit Coordinator.

 Format and presentation of assignmentAll students are required to follow the standardised format for their assignment. You must address items and follow the setting out as described. The assignment must be completed using the provided Schedules in Excel and Proforma in Word (see Blackboard) and comply with all instructions on all assignment documents provided.Marks are given for presentation in both the excel workbook and management report.

Excel workbook presentationYou are eligible for up to three marks for your workings in Excel. The following will be considered to obtain these two marks:

· Your Excel workbook should be completely dynamic. Formulas will need to refer to other cells in the worksheet that either contain the original values from the worksheets or formulas and calculations from a previous step. This means, every time the values in the worksheet are changed, the results are updated automatically. Cells should not contain hard coded values, rather all values should be obtained using an Excel formula.

· Numbers in the excel spreadsheets should be presented in a consistent, professional manneri.e. avoid decimal when reporting dollar’s, and use commas for numbers in the thousands (ie1,000,000).

·Workings must be shown where instructedThere is plenty of help online regarding the use of Excel formulas and graphs. QUT gives free access to learning videos via LinkedIn Learning - QUT Digital Workplace 

Management Report

Marks are awarded for the presentation and communication in your management report. Some tips to help you maximize these marks are provided bel

1. Do not provide generic reasons from the textbook or lecture. You should link or base your judgement and reasoning on the information provided, your calculations and your knowledge of management accounting concepts and processes.

2.The report should be communicated in a professional manner with no spelling mistakes or grammatical errors.

3The report should include a brief introduction and conclusion and include headings and paragraphs where appropriate.

 4.Graphs should be presented and formatted in a professional manner (see further notes for graphs below).

5.Figures in the management report should be presented in a consistent manner.

6. Your student name and number should be included in the footer of the report.

Graphs

Notes for preparing graphs:

· Label graph axis and include titles for graphs.

· You may need to create separate tables in the excel workbook to organise the data required for each graph, remember to link to each source cell.

·         Graphs should be relevant to your analysis and assist in further demonstrating your evaluation. They should be presented and formatted in a professional manner.

General comments

Make sure that you:

· Answer the question asked, and only the question asked

·Be concise

·Do not go over the word limit: 1,000 words for Management Report (+/- 10% is okay)

·Make sure you check your file once uploaded (i.e. that it is readable)

· No marks will be given for submissions where a file is an incorrect version, corrupt or unreadable

This unit uses the Turnitin software to detect plagiarism. Turnitin compares submissions to other submissions, both current and past, and sources that are available online such as textbooks, scholarly

articles, websites and blogs. This is relevant for the Management Report only. SafeAssign is not supported for excel.

CRITERION REFERENCE ASSESSMENT SHEET