Managerial Accounting

1. Settin” rel=”nofollow”>ing up management control systems and determin” rel=”nofollow”>inin” rel=”nofollow”>ing measurement methods and who should be responsible for particular revenues, costs, and in” rel=”nofollow”>information can be a large task. The structure of the organization plays a part in” rel=”nofollow”>in how well a particular measure is likely to work. Ensurin” rel=”nofollow”>ing that the goals of the organization are in” rel=”nofollow”>in concert with the management control system is also an important factor. It is not possible to evaluate a company’s management control system from an Internet site. What we can do, however, is to use a site as an example and apply some of the concepts of the chapter to measure the tools that would be possibilities for a firm.a. A well-known and well-established company with worldwide acceptance is Procter & Gamble (P&G). Log on to the company’s Web site. Locate the most recent annual report by followin” rel=”nofollow”>ing the lin” rel=”nofollow”>inks under the “Investor/ Shareholder Relations” tab to “Fin” rel=”nofollow”>inancial Reportin” rel=”nofollow”>ing.” Examin” rel=”nofollow”>ine the “Letter to Shareholders” section of the annual report. What does P&G consider to be the most important factors that drive their growth strategy? How does P&G ensure that managers meet the company’s objectives? (6 marks)
b. What would be the two possible fin” rel=”nofollow”>inancial measures and two non-fin” rel=”nofollow”>inancial measures for the performance of P&G? (4 marks)
2. Budgetin” rel=”nofollow”>ing at Intercontin” rel=”nofollow”>inental Intercontin” rel=”nofollow”>inental has several hotels and resorts in” rel=”nofollow”>in the South Pacific. For one of these hotels, management expects occupancy rates to be 95% in” rel=”nofollow”>in December, January and February; 85% in” rel=”nofollow”>in November, March and April; and 70% the rest of the year. This hotel has 300 rooms and the average room rental is $250 per night. Of this, an average 10% is received as a deposit the month before the stay, 60% is received in” rel=”nofollow”>in the month of the stay, and 28% is collected the month after. The remain” rel=”nofollow”>inin” rel=”nofollow”>ing 2% is never collected. Most of the costs of runnin” rel=”nofollow”>ing the hotel are fixed. The variable costs are only $30 per occupied room per night. Fixed salaries (in” rel=”nofollow”>includin” rel=”nofollow”>ing benefits) run $400,000 per month, depreciation is $350,000 a month, other fixed operatin” rel=”nofollow”>ing costs are $120,000 per month, and in” rel=”nofollow”>interest expense is $600,000 per month. Variable costs and salaries are paid in” rel=”nofollow”>in the month they are in” rel=”nofollow”>incurred, depreciation is recorded at the end of each quarter, other fixed operatin” rel=”nofollow”>ing costs are paid as in” rel=”nofollow”>incurred, and in” rel=”nofollow”>interest is paid semiannually each June and December.
Prepare a monthly cash budget for this Intercontin” rel=”nofollow”>inental hotel for the entire year. For simplicity, assume that they are 30 days in” rel=”nofollow”>in each month.

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