College of Business, Hospitality and Tourism Studies
School of Accounting & Law
Department of Accounting
ACC502 Operations Management Accounting
Semester 2, 2022
Major Group Assignment and Presentation
Instructions
1. There are two parts to this assignment. Both parts are compulsory
2. This is a Major Group Assignment. You can create your group. Please note the maximum
number of students in a group should not exceed four.
3. Write the Name and ID Number of all group members on the cover page of the Major Group
Assignment
4. You are required to submit the soft copy of the Major Group Assignment on or before the 6th
of November 2022.
5. The Major Assignment constitutes 25% of total assessment of this unit
6. The submission will be administered through Turnitin Software; hence plagiarism must not
exceed 20%.
PART A:
MAJOR GROUP ASSIGNMENT
Total Marks – 50
Weighting – 15%
Question 1
The marketing department of BJ Hot Water Ltd has recommended that the company introduce a new
solar hot water system to be called the Sunstruck. To compete effectively with existing models offered
by other companies, the Sunstruck would need to be priced at $1600. The company requires a target
profit margin for all new products of at least 30% of sales. The technology in solar energy is developing
rapidly, and therefore the Sunstruck is expected to be obsolete within 3 years of entering the market.
Initial estimates of the Sunstruck’s cost of manufacture per unit are:
Direct material $500
Direct labor 250
Manufacturing overhead 250
*Manufacturing overhead is applied at 100% of direct labor cost.
The marketing department is keen to introduce the Sunstruck as soon as possible. However, the
Management accountant is concerned about the non-manufacturing costs likely to be associated with
the new product. He asks the departments that are upstream and downstream of manufacturing to
estimate the costs in their departments associated with the development, production and sale of the
Sunstruck. He receives the following information
Estimated costs associated with the proposed Sunstruck (in $’000s)
Department
Year 1
Year 2
Year 3
Year 4
Year 5
Research & Development
3000
Product & process design
6000
1400
Marketing
2000
1600
1000
800
Customer support
500
1600
1500
400
The forecast sales of the Sunstruck are as follows:
Year 2
Year 3
Year 4
10 000units
15 000units
5 000units
Required:
1. Calculate the target cost for the Sunstruck that will meet target selling price of $1600 and the
target profit margin of 30% on sales. Compare this with the estimated manufacturing cost. On
this basis, would you recommend the development and introduction of the Sunstruck model?
(3 marks)
2. Explain how BJ could use life cycle management to reduce the manufacturing cost of the
Sunstruck solar hot water system. Which part of the value chain may warrant additional
expenditure? Explain. (5 marks)
Question 2
LTL Ltd produces two extrusion machines that are very popular with plastics manufacturers: model
ABC and model XYZ. Model ABC has an average selling price of $45 000, and model XYZ sells for
about $40 500.The company is concerned about the differing performance of the two machines in
relation to quality, and has collected the following information:
Model ABC
Model XYZ
No. of machines (units) produced and sold
80
100
Warranty costs:
Average repair cost per unit
$1800
$600
Percentage of units needing repairs
70%
10%
Reliability engineering at $225 per hour
1600 hours
2000 hours
Rework at LTL’s manufacturing plant:
Average rework cost per unit reworked
$2850
$2400
Percentage of units needing rework
35%
25%
Manufacturing inspection at $75 per hour
300 hours
500 hours
Transportation costs to customer sites to fix problems
$44 250
$22 500
Quality training for employess
$52 500
$75 000
Required:
1. Classify the above quality costs as prevention, appraisal, internal failure or external failure
(5 marks)
2. Prepare a cost of quality report in dollars for model ABC, XYZ (10 marks)
3. Comment on the two reports, noting whether the company is investing its quality expenditure
differently for the two machines. (7 marks)
Question 3
Tom Smart recently ran into an old colleague, Jerry, at a cocktail party. They had both worked together
at a major accounting firm until 5 years ago. Tom started telling Jerry about the JIT Inventory
management system that his company was planning to implement:
Tom:It really is a different approach. We hold seminars for our suppliers and we send some of our
purchasing people out to inspect their plants. Most of our suppliers now deliver raw material a
couple of times each day, rather than once a month. And our receiving staff save a lot of time
because there is no inspection. We are also saving money in the administrative area, as we not
raise separate orders or receive separate invoices from suppliers for each delivery. Our
inventories are almost non-existent, so we have no storage costs!
Jerry: But how can your company even think of doing this? We both remember the problems we used
to find on our audits. How are you going to keep effective control over payments to suppliers?
How can your company save money when there are reducing the size of orders and increasing
the number of orders delivered? What about the risk of running down the levels of inventory?
And how will these changes impact on your strategic priority of product quality?
Required:
Respond to each of the criticisms made by Jerry. In your answer, explain the rationale behind
improving supplier relationships and the likely impact of introducing a JIT system on the company’s
strategic priority. (20 marks)
PART B: PRESENTATION Total Marks – 10
Weighting – 10%
INSTRUCTIONS:
1) Students are required to conduct this group presentation in the same group that they had formed
to complete their Group Research Assignment. [Members not to exceed 4].
2) Group members are required to refer back to their Major Group Assignment Question 3 and
prepare a class presentation on the rationale behind improving supplier relationships and
the impact of introducing JIT system
3) Students are to use MS PowerPoint to prepare their presentation slides [not exceeding 12
slides].
4) Marks will be awarded to individual group members based on their presentation skills.
5) A group’s presentation should not exceed 10 minutes or should not be less than 5 minutes.
All presentations will be timed.
6) The date and venue for presentations will be advised by your campus Lecturers in the due
course. However, it is advised to prepare the presentation slides as the group prepares their
Major Group Assignment alongside to avoid delays.
7) All presentations will be assessed by the following criteria:
Assessment Criteria
Mark Allocation
Critical areas addressed in question 3 of Major Group Assignment
5
Within time duration (< or = 10 minutes & >5 minutes)
1
Ability to deliver without reading (maintain eye contact)
1
Group creativity (such as keeping listeners engaged, use of e.g.’s)
1
Teamwork
1
Presentation skills (attire, posture, confidence, audible)
1
Total Marks (Weighting)
10 marks (10%)
8) Consult your Lecturers if the group wishes to clarify any other doubts.
THE END
ALL THE BEST
