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ACC5213-Management Accounting With A Strategic Perspective

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Question:

Read the  Brausch, JM & Taylor TC 1997 article, and in conjunction with material from module 6 and your own research, answer the following questions. Any material used (apart from module 6 materials) should be fully referenced.
 
a) Define the ‘cost of capacity’. 
 
b) What misled the first mentioned company into investing in a new plant and what were the consequences? 
 
c) What is required for effective management of capacity and why? 
 
d) Define theoretical and practical capacity, as used in calculating volume variances.
 
e) Identify and explain three common flaws in capacity measurements and outline which types of capacity measurement they apply to (possibly more than one).
 
f) Define the term ‘bottleneck’. What solutions for bottlenecks are mentioned in the article that do not require a permanent increase in capacity? Why is a permanent increase costly? How common were bottlenecks in the study? 
 
g) The information below relates to XZY Ltd. Use the information to draw up a Schedule of Contribution Margin nor Realized (similar to that demonstrated in the article, although you may need to adapt the format to suit the information given to you). How should this report be used (and not used) in the business? How many businesses in the study used some measure of unused capacity? 

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