Management Accountancy Case Study

Financial Analysis of Corporate Travel Packages

1.It is imperative that the management accounting system needs to be organised so that the organisational needs can be catered to.  Thus, it must be derived from the strategy of organisation while taking into account a host of internal and external contingent factors related to business environment and structure of organisation (Drury, 2016). My skills related to information systems, design of accounting systems along with strategic planning would be helpful in this regards

The information required for management accounting system operation will be derived based on the current accounting system based on transaction. I can provide advice in relation to the data types that are of use in costing of various services. Besides, a host of information like department budgets, operational performance measures may be provided by management accounting system. In the process of new systems design, there needs to be involvement of hospital managers with consultants so that there is smooth transition from the existing system to new system. Further, on a continuous basis, the participation and supervision of the management account staff would be considered vital (Heisinger, 2014).

• Owing to exposure to a host of businesses, the hospital and the managers would require access to host of information on a weekly or monthly basis. Relevant examples are indicated below.
• Intensive Care – Patient treated count, occupancy rate of bed, patients who could not be accommodated owing to unavailability of beds, rate of billing, Revenue from Medicare, Revenue from private insurance, Average length of stay, Cost of staff and medical suppliers
• Accident and Emergency – Patient treated count, rate of billing, Consultant Referral Rate, Revenue from Medicare, Revenue from private insurance, Average length of stay, Cost of staff and medical suppliers
• Neurology: Patient treated count, occupancy rate of bed, patients who could not be accommodated, rate of billing, Revenue from Medicare, Revenue from private insurance, Average length of stay, Cost of staff and medical suppliers
• Cardiology: Waiting list patients, Patient treated count, occupancy rate of bed, rate of billing, Revenue from Medicare, Revenue from private insurance, Average length of stay, Cost of staff and medical suppliers
• Radiology- Staff hours, Per doctor referral number, rate of billing, Revenue from Medicare, Revenue from private insurance. Cost of staff and medical suppliers, Revenue gap
• Records of patients, New records count, Patient entries processed count, Costs related to staffing

• The reports based on weekly and monthly performance can be transmitted to the managers electronically which may be accessed by the managers based on their necessity. Additionally, the level of details required and the underlying format preferable by the managers could be built in so as to make the system convenient to use and easy to access the information required without must hassle (Northington, 2015).

2.Part 1

Profit per package along with the profitability determination for each of the given three packages is highlighted below.

Part 2

The most profitable package is Malaysian Orienteering and the second profitable package is Bali Adventure. The above two packages are profitable even after overhead cost is allocated. Further, Thailand Discovery is not a profitable package even before the overhead costs are considered.  

Part 3

The current practice of allocating overheads on the basis of sales revenue is not a appropriate practice as the overheads would be dependent on the packages sold and also the number of people that are availing these packages. This is because there would be difference in the packages prices which may be caused due to differences in costs such as transport or accommodation. Thus, based on sales revenue, overhead allocation might result in under ot over application of overheads to certain packages (Brealey, Myers and Allen, 2014).

Part 4

Since the Thailand Discovery package is unprofitable even before the overheads have been applied, it implies that this package is not able to recoup the direct costs and hence it ought to be discontinued. Further, focus should be on the other two packages which are profitable for the firm and there should be attempt to redesign the Thailand discovery package or introduce a new package which atleast meets the underlying direct costs (Damodaran, 2015).

3.Part 1

Calculation of cost of goods manufactured for the month February

Part 2

Amount of over applied/under applied overhead that would be closed to cost of goods sold on 28 February.

Applied overhead = $30,000 -$32,000 = -$2,000

Hence, the amount is under applied overhead as reflected from negative sign

References

Brealey, R. A., Myers, S. C. and Allen, F. (2014) Principles of corporate finance, 2nd ed. New York: McGraw-Hill Inc.

Damodaran, A. (2015). Applied corporate finance: A user’s manual 3rd ed. New York: Wiley, John & Sons.

Drury, C. (2016) Cost and Management Accounting: An Introduction. 6^th ed. New York: Cengage Learning

Heisinger, K.(2014) Essentials of Managerial Accounting 4^th ed. London: Cengage Learning.

Northington, S. (2015) Finance, 4^th ed. New York: Ferguson