Jane, a friend of yours, has informed you that she is planning to set up a coffee shop. You have advised her to be cautious, as the coffee market appears to be very competitive. She agrees, but says that she has a strategy to help ensure that her business does not make a loss. She stated: “I am going to work out the exact full cost of making one cup of each type of coffee and then set my prices to ensure that this cost is fully recovered, along with a profit margin”.
In further discussion with Jane, she provided the following additional information regarding her business plan:
· The business will operate from rented premises, with a fixed rental cost per month, and be responsible for heating and electricity costs.
· A coffee machine and related equipment will be purchased, along with furniture and sufficient coffee cups, saucers, spoons etc.
· Jane will work in the business, but plans to hire additional staff to work on a casual basis during busy periods.
· Suppliers have been identified to supply the business with coffee, milk and other supplies at prevailing market prices.
· Some advertising will be undertaken, in local newspapers and on local radio, at least while the business is getting established.
· A public liability insurance policy will be taken out to cover risks such as accidents involving customers and staff.
1. Discuss the difficulties associated with Jane’s plan to “work out the exact full cost of making one cup of each type of coffee”. (7 marks)
2. Jane intends to set prices “to ensure that ... cost is fully recovered, along with a profit margin”. What type of pricing model is Jane adopting and what difficulties may arise in trying to implement her pricing strategy? (3 marks)
3. In light of your responses to Questions 1 and 2, what practical advice would you give to Jane to help her business be successful? Your answer should be based upon the material covered in BUACC5933 Cost and Management Accounting. (5 marks)
Topic 2: Essay
According to the prescribed textbook, “corporate social responsibility considers a company’s efforts to employ sustainable business practices with regard to its employees and the environment” (p. 21). Using examples to illustrate your discussion, explain how a knowledge of corporate social responsibility is important for today’s management accountants and how it may influence their work.
The assignment is to comply with the University’s General Guide to Writing and Study Skills, General Guide to Referencing, and Assignment Layout and Appearance Guidelines. See comments below regarding word length. Each group is to submit a single copy of their assignment.
6. Assessment criteria
In assessing submitted assignments consideration will be given to:
· Overall neatness, completeness and quality of presentation. Graduate students are expected to achieve a satisfactory standard with respect to this criterion as a matter of course, and for this reason no credit will be granted for achieving it. However, assignments that fail to achieve the minimum standard in connection with this criterion will be penalised. The expected standard concerning this criterion is as specified by the University’s General Guide to Writing and Study Skills, General Guide to Referencing, and Assignment Layout and Appearance Guidelines.
· Timeliness of submission. Graduate students are expected to be able to meet reasonable deadlines for the submission of assessable work as a matter of course. For this reason, no credit will be given for submitting the assignment by the due date. However, assignments that are submitted late will be penalised at the rate of three marks out of 30 per day that the assignment is late.
· Demonstrated application of appropriate cost and management accounting knowledge, skills and values. This criterion pertains to the overall quality of the content of responses to the assignment requirements. Specific factors to be taken into account include: accuracy, comprehensiveness, demonstrated understanding of the topics, and the location and effective use of relevant research materials.
The response to each topic is expected to be between 1,200 to 1,500 words (1,500 words being the maximum length for each topic). These guidelines exclude the cover sheet, list of references and abstract (note: an abstract is required for Topic 2 only). For Topic 1, students should be guided by the mark allocations in determining the length of their responses to each part of the topic.
Students in a group will normally each be awarded the same mark for their assignment. This is based on the expectation that each student in the group will have contributed equally to the preparation of the assignment. Where this expectation has not been satisfied differential marks may be allocated. Selected students may be required to discuss their assignment with the person responsible for marking it. This discussion may be taken into account in marking an assignment where it provides evidence that a student has not made a fair contribution to the preparation of the assignment. This could, for example, be evidenced by a student being unable to explain the meaning of their assignment, being unable to explain how they contributed to the preparation of the assignment, or being unable to explain why certain information has been included