CREATE AN ECONOMIC AND MANAGEMENT ACCOUNTING PLAN: Assume that you have just been hired as a...

Question:

CREATE AN ECONOMIC AND MANAGEMENT ACCOUNTING PLAN:

Assume that you have just been hired as a financial consultant to a startup company that plans to introduce a new beverage to the soft drink market. Your company?s product is advertised as a healthier alternative to soda and other artificially flavored drinks. The all-natural sparkling beverage has only 25 calories, 5 grams of sugar, no chemicals or preservatives, and comes in four fruit flavors: orange, pineapple, apple and grape. Two years ago the product was introduced in Florida. A phenomenal growth in sales since its introduction demonstrates that the product and its marketing possess tremendous potential. Accordingly, the company wants to explore possibly expanding sales of the product to the rest of the U.S. market. Although the company has been highly profitable, the management group has little to no financial experience. Most decisions to date have been made on the basis of "does it feel right" as opposed to rigorous, data based financial analysis. The company has no system of financial oversight and the managers of the company have a limited understanding of sound management accounting practices. You have been asked to provide the company with a general analysis of this proposed project. Your specific task is to produce a report discussing the following key aspects of this expansion project:

A microeconomic analysis of the current state of the soft drink market in the U.S. and how any recent developing trends may affect the demand for this product.

A macroeconomic analysis of the state of the U.S. economy and the impact this may have on the demand for this new product.

A list of key management accounting practices that the company must put in place to support their planned expansion. Each item you list must be fully explained to the management group so they understand how and why the practice is necessary to manage the growth that will come with expansion of the product to different states. Be sure to consider the fact that the company will need outside financing and may even consider the possibility of going public in order to sell its stock on an exchange.

Management accounting plan:

Every business needs to have a financial oversight committee that will counter check the transaction activities carried out by an organization. Proper accounting practices ought to be installed to ensure the company is maximizing its profits.

Answer and Explanation:

The economy of the US is mixed; therefore, it operates in a free market. The anticipation of the upsurge of GDP sets the country on a reasonable basis for doing business both locally and globally. Fiscal policies by the federal government to subsidize young business is a massive boost to this soft drink company. Since 2008-2018 there has been a high rise of carbonated drinks which so far are termed to be unhealthy. There is a high demand for health drinks not only in Texas but in the whole country. The introduction of healthy drinks will find a ready market with no competition. In this case, the company will monopolize every corner of the country, giving 100 plus profit returns. Low tax on drinks will be an added advantage to the company since it will increase its production. The significant management accounting practices include;

a) Standard cost; this is a technique that is used to analyze the factors of the business, such as labor and materials. This approach will help the company to minimize loses.

b) Job costing; is a method of assessing the amount of labor required by the company, and it's a tool to calculate the firm's returns.

c) Variance analysis; is a significant practice since it compares the cost of raw materials from different dimensions. It will also evaluate the labor variance on your employees.

d) Risk management; it is crucial to gauge the number of risks involved in every business, especially for a startup company.

e) Resource management; the available resources are supposed to well utilized. This practice ensures expansion is made easy.


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The Role of Cost Accounting in Management

from NYSTCE Business and Marketing (063): Practice and Study Guide

Chapter 14 / Lesson 9
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