Increasingly, householders and small businesses are considering renewable power generation systems to decrease their energy costs. The two most popular approaches in Europe are wind and solar energy. While larger businesses typically appraise all investments using a variety of well-defined techniques and criteria, smaller businesses (and households) typically do not have either the knowledge or resources to undertake a full investment appraisal. For solar energy generation, an initial investment outlay is necessary. This may range from a few thousand pounds for a small domestic solar system to about £40,000 for a 25kW system capable of meeting the power requirements of a medium-sized farm or office complex. In terms of measuring whether an investment is viable, the typical evaluation method used is the payback period. Most suppliers of solar panels provide payback calculators on their websites. The Sustainable Energy Authority of Ireland also provides such a tool (see the link below). According to its calculator a domestic solar system costing €5,000 and capable of a peak generating capacity of 5kW will generate estimated annual energy cost savings of just over €400 and will have an estimated payback period of nine years. Questions 1 What might affect the payback calculations on solar energy investments for a business and/or a household? 2 In making a decision, should the business or householder look beyond the payback period?
> Use the data in GPA1 for this exercise (i) Add the variables mothcoll and fathcoll to the equation estimated in (7.6) and report the results in the usual form. What happens to the estimated effect of PC ownership? Is PC still statistically significant? (
> SAP, a global leader in enterprise resource planning (ERP) systems, offers several tools to help businesses find an optimal solution to production scheduling and planning problems. For example, the advanced planner and optimizer (APO) module offers solut
> An article written by Ben Chu published in The Independent newspaper in 2016 demonstrated why the classical economic view of humans as rational decision-makers is often very wide of the mark. When individuals evaluate a financial decision, when a busines
> Just-in-time (JIT) manufacturing and inventory systems have been used by many companies to reduce manufacturing times and reduce waste with the ultimate objective of increasing profitability. The JIT concept is based on close relationships with key suppl
> Chinese computer manufacturer Lenovo had an annual turnover of $45 billion for the year ended 31 March 2016, of which 66 per cent was in the personal computer market. This market includes desktops, tablets and notebooks. A report on the internet in Octob
> Safety or buffer stocks are held for many reasons. For example, road authorities might want to hold sufficient stock of grit salt in case of bad weather, or firms might build stock of key materials if a price rise is impending. In recent times climat
> Modern day aircraft are complex pieces of engineering, increasingly using more technology, composite materials and more efficient engines. Aircraft engines are in particular improving not only in fuel efficiency but also in range, thus contributing to
> South African energy and chemicals company Sasol, like many companies dealing with large scale projects, needs to prepare cost estimates. Sasol specializes in high value liquid fuels, chemicals and low-carbon electricity. In 2014, the company decided
> In the March 2016 edition of CIMA’s Financial Management journal, Lawrie Holmes interviewed Noel Togoe, CIMA’S director of Education. Togoe stated that value measurement has been an area of dramatic change affecting the financial management landscape.
> Big data refers to the huge volume of data that exists within many firms, much of it enabled by recent advances in information technology. According to the website of the software and services firm SAS, the issue for firms nowadays is how best to analyse
> Farrar’s report (2019) identified how the finance function (including management accounting) is evolving and the corresponding implications for finance professionals. An article published on the CIMA website by Ash Noah, the Managing Director of CGMA Lea
> A CBS News report from August 2019 highlights the issue of the increasing cost of water to domestic consumers in the USA. The average consumer bill is $104 per month, and this amount is an increase of 30 per cent on the rate for the previous decade. S
> In recent years, two global companies have had to deal with some quite large costs as a result of quality control failures. First, take the example of Toyota cars in the USA. In late 2009 and early 2010, Toyota recalled several of its US models, the
> Many low-cost carriers such as easyJet and Ryanair regularly offer flights to customers at low prices. They continue to do this even during depressed economic times. Both continue to make good profits with easyJet posting pre-tax profits of £578m (2018 c
> Every time Apple releases a new device it cannot satisfy immediate demand. This is a result of Apple’s precise JIT manufacturing system. Apple does not wish to take the risk of producing more devices than it will sell, so it adjusts manufacturing to ma
> Until very recently, the Boeing 737 jet was the world’s most popular and reliable commercial airliner. However, the grounding in mid-2019 of its latest generation of this plane, the 737Max, after two fatal crashes killed nearly 350 passengers, led to
> Insteel Industries decided to implement ABM at their plant in Andrews, South Carolina. The ABM team analysed operations and identified 12 business processes involving a total of 146 activities. The ABM study revealed that the 20 most expensive activit
> Electric vehicles are a potential part of the solution to reduce our planet’s CO2 emissions and reduce reliance on fossil fuels. They are however more expensive than vehicles using internal combustion engines. For example, in 2019, an electric Nissan
> According to an article in Financial Management, ‘A sustainable supply chain manager needs to understand all issues within a company’s supply and value chain’. Some of these issues are cost related, but some also are driven by non-economic issues. One
> The term ‘big data’ refers to large collections of data that may be analysed to reveal patterns, trends and associations. The term is often associated with social media data, but big data may also refer to large volumes of internally generated data. An a
> Southwest Airlines set ‘operating efficiency’ as its strategic theme. The four perspectives embodied in the balanced scorecard were linked together by a series of relatively simple questions and answers: Financial: Wha
> The Globe and Mail (Canada) quotes an article written by Professor Pietro Micheli in Industry Week in which he listed seven myths about performance management that promote the wrong behaviours. The following is a summary of these myths: Myth 1: Numbers
> Across Europe, just how much – or little – US multinational firms are paying in taxes is coming under intense scrutiny according to an article published in the Washington Post. Most of the investigations revolve around the issue of ‘transfer pricing’, wh
> According to figures released by the UK tax authority (HMRC – HM Revenue & Customs), £1.68 billion was raised from transfer pricing adjustments in the tax year 2017–18, which was slightly higher than the previous year (£1.62 billion) and represents a his
> Although there are various ways to categorize the costs that firms incur, one of the most popular is to do so using fixed and variable costs. Depending on the industry in which a particular firm operates, their cost structure (i.e. combination of fixed a
> Multinational organizations can use international transfer pricing to achieve multiple objectives. By setting a high transfer price in selling/providing a good/service between subsidiaries/divisions located in different countries, they can reduce the pro
> Following the events of September 2001, airport security screening in the USA and globally increased dramatically. As we all know, this led to increasing queues at airports which, while inconvenient, are paramount to ensure the safety and security of
> As a result of the recent financial troubles at Tesco its shares declined to an 11-year low in 2014. Terry Smith, chief executive of investment house Fundsmith, stated in an article published in The Financial Times that investors had long ignored warning
> Each year, Institutional Shareholder Services (ISS) conducts a Global Benchmark Policy Survey as part of an annual development process. Questions in 2019 included a broad range of topics such as board gender diversity, director over-boarding and dire
> From Real World Views 19.1, you know that Siemens operates in many countries and has a diverse product offering. With such complex and broad operations, there are invariably many factors that can affect the performance of a business sector or division. I
> German global company Siemens AG had a turnover of almost €87 billion in its 2019 fiscal year, recording a net profit of €6.31 billion, according to its 2019 Annual Report. The company operates globally and employs 385,000 staff. Siemens is a diverse org
> An article by Thomas Conine on cfo.com provides some useful insights into how to deal with responsibility for variances from plan, especially given increases in the volatility of uncontrollable factors in recent years – oil prices, climate change and
> Recipes are used in the manufacturing processes of many sectors. In the paper industry, a starch recipe consisting of borax, caustic soda, starch (from maize or potatoes) and hot water is used to glue corrugated board (cardboard) together. This proces
> Meditech South Africa (Pty) Ltd provides software solutions to meet the information needs of healthcare organizations in Africa and the Middle East. According to their website, the software can encompass all areas of healthcare from doctors’ offices t
> Setting standards in an organization may be primarily to assist in the calculation of a standard cost for the product or service for management accounting purposes. Standards are also relevant for operational and customer service managers as they may a
> Chartered Institute of Management Accountants (CIMA)/Chartered Global Management Accountants (CGMA) Activities and skills of management accounting Management accounting combines accounting, finance and management with the leading-edge techniques needed t
> Once standard costs have been established and used by a business, they should be updated on a regular basis. Actual costs are frequently used as a basis for any updates. SAP, a leading enterprise resource planning (ERP) system, provides tools and data
> In September 2019, Liverpool City Council in the UK were facing a cash hole of £57 million, which the city’s major, Joe Anderson, titled the ‘worst financial crisis since the Second World War’. He blamed the government’s austerity measures for the dra
> The Crossrail project currently under construction in London, will run from Heathrow Airport to the Canary Wharf financial district, and will be known as the ‘Elizabeth Line’. The new line will stretch for more than 100km and is expected to carry app
> In 2007, crime-fighting targets set by the UK government were criticized by senior and on-the beat police officers as driving them to make ‘ludicrous’ decisions on the prosecution of crimes. For example, such crimes included a ‘man who was cautioned by
> It appears that most firms benefit from having a budget in place, to allow them to use their limited resources in the most optimal manner possible in pursuit of their strategic objectives. However, the merits associated with budgeting are debated. For ex
> Although the apex of ZBB’s popularity in the late 1970s is long past, there has been renewed interest in ZBB in today’s environment of fiscal constraint, says Shayne Kavanagh in an article published in Public Management. He cites a Government Finance O
> Big data is a term that describes the large volume of raw data, both structured and unstructured, that inundates a business on a daily basis. It includes information such as email messages, social media postings, phone calls, purchase transactions, w
> This is a question posed by the Becker’s Hospital Review website. According to an article on the website from October 2019, the budgeting processes in healthcare have lagged other sectors, especially in the use of ‘data-driven forecasting approaches’.
> In 2015/16, sustained high prices for oil and natural gas prompted an increasing interest in drilling in locations that were previously not considered. For example, oil is being extracted from sands in countries such as Canada, where the deposits are
> An article published in The Irish Times by Olive Keogh cites the following comments by Patrick Gibbons, Professor of Strategic Management at the UCD Michael Smurfit Graduate Business School: The one thing we know about most forecasts is that they are
> As one of the pioneers in the low-cost airline industry, easyJet’s business model has some core values: ● Safety – We never compromise on safety. ● Simplicity – We cut out the things that don’t matter to keep us lean and make it easy. ● One team – Togeth
> Writing in The Australian Financial Review Jack Mintz states that for investment decisions, taxes matter, and Australia’s company tax rate (30 per cent) is too high in comparison to other countries, particularly in the increasingly competitive global
> As our planet faces many threats from resource use and climate change, governments, firms and individuals are beginning to change their views and ways of work. One resource the human species needs to survive is water. Despite water being a natural re
> In October 2019, Pure Gold Mining Inc. announced that its Madsen Mine project in Red Lake, Ontario, had identified a new expansive gold deposit. The deposits are in a previously unexplored area and the company reports the gold as being of high quality. P
> All businesses have to continually engage in capital investment to improve and maintain processes, equipment and facilities. Governments also invest in infrastructure projects like roads, rail and utilities provision. Whether a private or public organi
> Each individual’s attitude to risk lies somewhere on a continuum with risk-seeking at one extreme and risk-averse at the other extreme. The same logic generally applies to organizations or even for that matter, national governments or political instit
> Management accountants would typically perform a risk assessment as follows: identify the risks, assess their impact and probability, and develop appropriate risk responses. Although very practical, it is uncertain as to how specific management accoun
> The CGMA website offers management accountants a collection of tools and resources which are useful to identify, assess and respond to (or manage) various types of risk faced by an organization. For example, it identifies the following four categories
> As reflected in RWVs 11.3, costing healthcare is a challenge. While ABC may offer some benefits to healthcare costing, the adoption rates of ABC are not high, and its implementation is often complex. To make matters simpler, time-driven ABC (TDABC) may
> The remuneration system that is applied in healthcare organizations in number of a countries (e.g. Australia, the USA, Switzerland, Spain and Italy) enables ABC profitability analysis to be applied in hospitals. These countries apply the Diagnosis Relate
> Fast fashion refers to clothes that are designed and manufactured quickly and sold to consumers at extremely low prices. New garments arrive in stores weekly, or even more frequently, and cost so little that consumers can fill their wardrobes with new
> Raab, Shoemaker and Mayer (2007) developed a workable ABC model for a restaurant operation in the USA that enabled previously undistributed indirect operating expenses to be traced to individual menu items. Menu prices were previously determined on a
> Until recently, Xu Ji Electric Co Ltd was a typical state-owned Chinese enterprise manufacturing electrical products such as relays. From an accounting point of view, this implied a manual bookkeeping system which was primarily designed to meet external
> From the perspective of a firm selling goods or providing services, not all customers are profitable, as some will cost a lot more to serve than others. Therefore, to be commercially viable, a business must acquire and retain a sufficient number of cust
> Eskom is a South African electricity public utility. In recent years, it has been subjected to some media coverage as the country faces energy infrastructure issues and the company deals with high debt. Eskom has power plants which burn coal. It entered
> Apple Inc. is well known for developing innovative products like the iPhone, iPad and iPod. Such devices are manufactured with complex electronic components and incur substantial design and development costs. The actual cost to manufacture these product
> Cloud computing describes the delivery of information systems without the purchase of physical hardware or even software in some instances. What this means for an average business is that they can purchase processing capability, data storage or content d
> Lidl and Aldi, the German discount supermarkets, have both announced significant expansion plans for the UK. Aldi expects to have 1,000 UK stores by 2022, an increase of over 230 on their current 762 stores; Lidl, which currently has 710 shops in th
> Many firms outsource manufacturing and other activities, but at the same time are increasingly aware that outsourcing may be best suited to non-core activities. Take packaging for example. In the craft brewing sector, a bottling line is a large invest
> As a result of the increasing accessibility of air travel, due to the emergence and popularity of low cost carriers such as Ryanair and easyJet, more people are now flying than ever before. Indeed, the demand for commercial air travel is such that airli
> Most developed economies have well-developed road and highway networks. From time to time new highways are built to relieve congested cities, but by and large most developed countries are not embarking on major road-building projects. Reducing government
> As technology has developed in recent decades, more time has been freed up for management accountants as they have less of the mundane transaction processing work to do. Technology has also enabled even the smallest businesses to take advantage of manage
> A headline in The Guardian of 23 September 2019 asked, ‘Why did Thomas Cook collapse after 178 years in business?’ The Thomas Cook Group collapsed in 2019, having been a leading British tour operator and airline. As reported in The Guardian, the immediat
> According to the International Air and Transport Association (IATA) airlines were expected to make around $6.12 profit from each passenger in 2019, which represents a decline from the 2018 projection of $6.85. Although carriers were expecting combined ne
> The break-even price of crude oil includes production costs, exploring or finding costs, oil well development costs, transportation costs, and selling and general administration expenses. A survey published in 2015 showed some interesting insights into t
> The Airbus A380 was the world’s first double decker aircraft. It can accommodate from 555 to 853 passengers depending on the class configuration. Long haul airlines such as Singapore Airlines were early adopters of the aircraft back in 2007. The 2018 lis
> According to a blog post by VWG Consulting, the key to successful and sustainable cost reduction in a manufacturing environment lies with variable costs. Indeed, in high-margin production firms such as Nike or Apple, as their variable costs may be a mult
> According to a survey undertaken by CIMA, variable (or marginal) costing is used by almost 40 per cent of firms. Management accountants from a wide range of sectors, including manufacturing and service firms, were questioned on how they use traditional t
> Each year, the paper and pulp industry produce millions of tonnes of sludge in the production of paper. This sludge is typically disposed of in landfill sites or incinerated. Both disposal methods are costly and environmentally undesirable. However, some
> South Africa is one of the top gold producers in the world, holding about 6,000 metric tonnes of reserves in mines as of 2019. Most mining operations have waste and by-products, some of which are disposable, reusable or even saleable; others are not. A
> Real World View 5.2 gave some insights in the process of distilling whiskey. Irish and Scotch whiskey producers operate in similar environments and their processes are quite likely to yield the same process losses due to evaporation – which is referred t
> Bushmills Irish Whiskey, a world-renowned brand of Diageo plc, is distilled in County Antrim in Northern Ireland. The Old Bushmills distillery has been in operation since 1608 and currently markets five distinct whiskeys under the Bushmills brand. Whiske
> The Internet of Things (IoT) refers to physical objects which are connected to the internet. This includes household devices and many business and industrial applications. Together with 5G networking technologies, the IoT has given way to a vast array of
> Almost all beer contains four basic ingredients – a grain (typically barley), water, hops and yeast. While the process of brewing can be complex, with potentially some variation in the ingredients used, the basic process generally follows a standard appr
> SAP is one of the global leaders in the provision of enterprise resource planning (ERP) software. While ERP software is complex, it must still incorporate basic transaction capturing modules to allow a business to gather data for more detailed analysis.
> Capturing labour costs accurately includes capturing time worked on customer orders, jobs or projects. In some cases, this is a reasonably easy task, such as in a supervised factory setting. In some cases, capturing hours worked accurately can be more di
> It was decided in the first quarter of fiscal 2016 that Commercial Metals Company Ltd would change the accounting method it used to value its inventories. This change would be for its Americas Mills, Americas Recycling and Americas Fabrication segments.
> Although there has always been a strong demand for tea in Malaysia, very few cafés actually offered bubble tea on their menus. However, in recent times, bubble tea cafés have become increasingly popular across the country, with many new chains being esta
> There are many factors which can influence the costing system choice of a business. In manufacturing, one factor is the nature of the industry itself and one way to classify the type of manufacturing is as an a-type industry (‘a’ representing assembly) o
> Allan Stratton is a cost management consultant with over 35 years of experience who shares the benefit of his experience providing tools and resources via the internet. In one of his articles he debunks three myths on cost allocation. All sorts of busine
> A questionnaire survey based on the responses of 272 practising UK management accountant who were members of the Chartered Institute of Management Accountants (CIMA) revealed that approximately 81 per cent of the respondent firms used absorption costing
> A distinguishing feature of today’s digital technology is that it is characterized by zero (or near zero) marginal costs. Once the investment needed to create a digital good has been incurred, it costs next to nothing to roll out and distribute millions
> The near collapse of the Irish banking sector in 2008, due to insolvency, led the Irish Government at the time to provide a blanket guarantee to cover the liabilities of all the financial institutions involved. This decision was taken in an attempt to ma
> Garrett Automative Ltd (GAL) is a UK subsidiary of a US parent company that manufactures turbochargers for the automative industry. GAL decided to begin its profit improvement programme by examining its factory throughput. Throughput was defined as t
> Decker Company has five products in its inventory. Information about the December 31, 2021, inventory follows. The cost to sell for each product consists of a 15 percent sales commission. Required: 1. Determine the carrying value of inventory at December
> Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company’s records under this system reveal the following inventory layers at the beginning of 2021 (listed in chronological order
> Caterpillar, Inc., is one of the world’s largest manufacturers of construction, mining, and forestry machinery. The following disclosure note is included in the company’s 2017 financial statements: D. Inventories ($ in millions) Inventories are stated at
> Carlson Auto Dealers Inc. sells a handmade automobile as its only product. Each automobile is identical; however, they can be distinguished by their unique ID number. At the beginning of 2021, Carlson had three cars in inventory, as follows: During 2021,
> Topanga Group began operations early in 2021. Inventory purchase information for the quarter ended March 31, 2021, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inv
> Ferris Company began January with 6,000 units of its principal product. The cost of each unit is $8. Merchandise transactions for the month of January are as follows: 8,000 units were on hand at the end of the month. Required: Calculate Januaryâ
> Johnson Corporation began the year with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year: a. Purchased 50,00
> At the beginning of 2021, Quentin and Kopps (Q&K) adopted the dollar-value LIFO (DVL) inventory method. On that date the value of its one inventory pool was $84,000. The company uses an internally generated cost index to convert ending inventory to b
> On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $260,000. An internally generated cost index is used to convert ending inventory to base year. Year-end in
> Kingston Company uses the dollar-value LIFO method of computing inventory. An external price index is used to convert ending inventory to base year. The company began operations on January 1, 2021, with an inventory of $150,000. Year-end inventories at y
