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ACT502 Management Accounting

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This assignment consists of two case study scenarios.

Case Study 1

You have recently taken a 12-month leave of absence from your job in Australia and have accepted an AusAid sponsored position as the financial controller of the African Nasal Hospital (ANH) group.

The ANH group was established in 1965 by Sir John Packard and his wife, Lady Julia Packard, with the purpose of providing aid to people suffering from severe nasal issues. While initially this aid was provided from one location, today there are 20 hospitals throughout Africa.


The Packards started ANH in response to a heartfelt need. While this issue was resolved in America as far back as 1890, today more than 300,000 people in Africa suffer from severe nasal issues due to limited access to medical treatment. Based on available resources, ANH is able to treat approximately 25,000 patients per annum.


As patients receive free treatment at ANH, all funding for the organisation is based on donations received from overseas organisations, as well as through aid programs run by developed nations such as Australia and New Zealand.

Patient treatment

The two main causes of nasal issues are a lack of access to medical treatment, and poor education. Patients suffering from severe nasal issues normally undergo a small surgical procedure (with an 85% success rate), and then spend 14 days as an in-patient at the hospital. Below provides a typical in-patient treatment program.


ANH has recently been approached by a major US-based charity which has proposed to fund ANH $1,125 for each patient treated at Abuja Hospital (one of ANH’s largest hospitals).

Assuming that ANH accepts this proposal, You will need to:

  • Calculate the break-even number of patients for Abuja Hospital, assuming that no other funding will be received.
  • To address the requirement, follow the steps below:
  1. classify costs into variable and fixed
  2. calculate the variable costs per patient,
  1. calculate the contribution per patient
  2. calculate the fixed costs (to the nearest dollar)
  3. calculate the break-even number of patients for Abuja Hospital
  4. calculate the current hospital capacity
  • Comment on the break-even point compared to the hospital’s capacity.

Case Study 2

Jet Santiago is the management accountant for the Pizza Gourmet chain of restaurants.

Pizza Gourmet is a successful pizza business focused on providing authentic, quality

Italian pizza.

It is a popular brand that enjoys a strong reputation for quality food and the restaurants are known for their authentic Italian ambience.

Pizza Gourmet restaurants are popular dining venues and can command a premium price for their pizzas. Service is either dine-in or take-away (pick-up and home delivery).

The following factors are relevant to Pizza Gourmet.

  1. Business model

The original Pizza Gourmet restaurant is still proprietor-owned, plus there are 150 franchise outlets. The business was expanded to include franchisees in July 2000 and further expansion is planned.

  1. Quality control systems

In order to maintain quality and ensure the brand promise is delivered, strong control is maintained over franchisees. Key ingredients are received into a central hub and premixed to the Pizza Gourmet recipe, then transported to restaurants for final processing. An integrated stock control system is used, with all stock levels being centrally monitored and all orders for ingredients originating only from Head Office.

  1. Staff recruitment and training

Staff recruitment and training is controlled from Head Office. Pizza Gourmet manages its staff in line with its slogan, ‘Treat your staff the way you would your best customer’. The business uses an internally developed e-recruiting system to source staff and has achieved significant cost savings this way. A centrally controlled enterprise resource planning (ERP) system is used to administer all financial and operational aspects of the business.

  1. The changing economic situation

Pizza Gourmet’s business is operating well and has consistently earned high returns over the past five years. However, with tight economic conditions many consumers are moving from fine dining to mid-range restaurants, which means that competition in the sector is increasing. Management is assessing options to maintain Pizza Gourmet’s competitive advantage.


Jet has been asked to prepare an analysis using Porter’s value chain to assist management in assessing Pizza Gourmet’s competitive advantage.

Specifically, she has been asked to:

  1. Prepare a value chain analysis for Pizza Gourmet and categorise each activity according to Porter’s value chain. (Classify these per the activity types/value chain element provided)

Use the following Activity types/Value chain element for your analysis: Primary activities:

Inbound logistics Operations Outbound logistics Marketing and sales After-sales services

Support activities: Administrative infrastructure HR management Technology development Procurement

  1. Assess whether each activity provided is a key element of Pizza Gourmet’s competitive advantage. (Assess whether each activity is a key element by indicating “Yes”or “No”
  1. Evaluate which activities Pizza Gourmet could outsource to achieve cost reduction. (Indicate whether each activity could be outsourced by indicating “Yes”or “No”and providing a brief explanation)
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