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21 – 30 of over 31000Amith Vikram Megaravalli and Gopinath BS
The case presents students with the opportunity to do the following: students can pre-work questions; understand the relevant factors to be considered in the decision to expand;…
Abstract
Learning outcomes
The case presents students with the opportunity to do the following: students can pre-work questions; understand the relevant factors to be considered in the decision to expand; and list out the industry and macro-environment factors affecting the expansion decision. Assignment questions help understand the various measures used to evaluate the financial performance of the company; understand the practical implication of incremental analysis to estimate the profit; assess the operating profit and margin of safety of the restaurant Shri Sagar with and without expansion; and critically evaluate the impact of uncertainty on projected sales using the sensitivity model.
Case overview/synopsis
Shri Sagar (Central Tiffin Room – CTR) was started by Y.V. Subramanyam and his siblings (Y.V. Srikanteshwaran, Y.V. Krishna Iyer and Y.V. Ramachandran) in the 1920s, specialised in Benne (Butter) Masala dosa, Maddur Vada and Mangalore Bajji. In Bengaluru, there are few restaurants, which have the legacy of more than 50 years such as Vidyarthi Bhavan, Mavalli Tiffin Rooms and Shri Sagar (CTR). Shri Sagar has witnessed three different ownership right from 1920 to the present. Ganesh, an MBA graduate, took the active participation in the business from 2018 and found there are potential opportunities to expand the business. Although business was doing well, Ganesh wanted to assess his company’s financial strength before proceeding. He would require a financial forecast that took into account the strength of the competition and the peculiar nature of the restaurant business in Bengaluru. Ganesh wanted to assess the expansion plan; to address the proposed plan, the case had used cost–volume–profit analysis and sensitivity analysis techniques to make the students understand how these techniques can evaluate the alternatives.
Complexity academic level
This case is best used while teaching Managerial Accounting, which is a core course in MBA program with a module on break-even-analysis or it can also be used in an executive education class with a similar purpose. The teaching plan can be used for MBA students and entrepreneurial training programmes, which involve training on important managerial decisions, which includes business expansion, estimating business profits/revenue targets, etc. It assumes some basic knowledge of cost–benefit analysis concepts where participants have already exposed some basic understanding of break-even analysis and what-if analysis.
Supplementary materials
Teaching Notes are available for educators only.
Subject code
CSS 1: Accounting and Finance
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Maliah bt. Sulaiman, Nik Nazli Nik Ahmad and Norhayati Alwi
Traditional management accounting techniques such as standard costing and variance analysis, traditional budgeting and cost volume profit analysis are said to be less useful in…
Abstract
Traditional management accounting techniques such as standard costing and variance analysis, traditional budgeting and cost volume profit analysis are said to be less useful in the present manufacturing environment. To succeed in the present dynamic business environment, tools or strategies such as JIT, ABC, TQM, process re‐engineering, life cycle assessment and target costing would greatly enhance the ability of corporations to meet global competition. Through a literature review, this study examines the extent to which traditional and contemporary management accounting tools are being used in four Asian countries: Singapore, Malaysia, China and India. Overall, the evidence reviewed suggests that the use of contemporary management accounting tools is lacking in the four countries. The use of traditional management accounting techniques remains strong. The paper concludes with various recommendations for future research, the most important of which is the need for future studies to be grounded in theory.
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Reinaldo Guerreiro and Juliana Ventura Amaral
While the gap between economic theory and companies’ practice, regarding to the pricing setting, has been extensively explored and explained, the new gap between the marketing…
Abstract
Purpose
While the gap between economic theory and companies’ practice, regarding to the pricing setting, has been extensively explored and explained, the new gap between the marketing normative view and companies’ practice needs further clarification. In this way, the paper aims to investigate whether marketing researchers’ claim that the use of cost-based price approach prevails over the use of value-based price approach is pertinent.
Design/methodology/approach
The paper is guided by the following research question: “Does price-setting based on cost plus margin go against the value-based price approach?” The answer to this question is grounded in reflections on results of previous research studies and in a case study conducted in an industrial company. Because of the qualitative focus of the present study, hypotheses are not established, but rather the following proposition: certain companies use the mechanics of cost plus margin in the sale price-setting process, but it does not necessarily mean that these companies set prices based on cost.
Findings
The arguments, propositions and the case study findings provide the logical sequence and the support required to conclude that price-setting based on cost plus margin does not always conflict with the value-based price approach. As a result, it may be claimed that the general proposition established is theoretically valid, i.e. using a price formula that contains the elements cost and margin does not necessarily mean that the company sets prices based on cost.
Originality/value
The key contribution of this paper is demonstrating that in certain business environments, such as, B2B, using the price formation mechanics based on cost plus margin is the way found by companies to enable the approach adopted. The approach may be cost-based or value-based price. This is the first study that explicitly reveals how B2B companies may set prices based on value while simultaneously preserving the simplicity of cost plus margin formulas. Researchers have significant misconceptions about these formulas: in previous studies, they classified all price-making companies as those adopting the cost-based price approach simply because they used formulas containing the element cost.
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Majidul Islam and Jeffrey Kantor
The concept of the market economy is gaining ground in China. So also, with the growth of international business partnerships and collaboration with the West, is the significance…
Abstract
Purpose
The concept of the market economy is gaining ground in China. So also, with the growth of international business partnerships and collaboration with the West, is the significance of management accounting. The purpose of this paper is to provide some background for the development of management accounting practices in China.
Design/methodology/approach
As enterprises gain more autonomy, management accounting techniques such as capital budgeting, cost of capital concept, just‐in‐time inventory, inventory model concept, cost‐volume‐profit analysis, total quality management and others will become more important. This paper examines the development of management accounting practices in China from the perspective of transitional economies.
Findings
Evidence suggests that the national culture and values practiced for centuries by Chinese business influence the concerted efforts for information dissemination and developing management accounting practices. Because of the lack of understanding of western management accounting practices, the pace of development of Chinese management accounting practices might be slow for now.
Research limitations/implications
The paper attempts to analyze the development of management accounting practices in Chinese business by looking at the background and contemporary thoughts; however, the value of the paper could be raised if the results were tested empirically, though discussion was aligned to empirics from other research and existing literature.
Practical implications
This paper argues the necessity of recognizing the significance of culture‐based management accounting systems and practices, but also of realizing that, since the Chinese government opened its doors to foreign investment, international standards and practices have a major role to play.
Originality/value
This paper attempts to analyze the challenges that China, a transitional economy, faces and what factors it seriously needs to consider for developing much needed management accounting practices. It also examines the evolution of management accounting systems in China, with their distinctive features, in order to provide a better understanding of their development.
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M. Oberholzer and J.E.E. Ziemerink
Cost behaviour classification and cost behaviour structures of manufacturing companies. The purpose of this paper is to determine the cost structures of companies that formed part…
Abstract
Cost behaviour classification and cost behaviour structures of manufacturing companies. The purpose of this paper is to determine the cost structures of companies that formed part of an empirical investigation. Further aspects were investigated to determine why manufacturing companies classify cost behaviour into fixed and variable components and to determine how these companies classify specific cost items. It was found that there is a significant negative relationship between the fixed cost of a company and its degree of technological development. This means that labour intensive companies have more fixed cost as part of total costs and therefore a higher operating risk than technologically developed companies. It was also found that manufacturing companies classify cost items differently and this study provides some guidelines how to manage cost behaviour.
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Sherman Hayes and Lawrence A. Klein
Should public sector libraries, primarily not‐for‐profit service agencies, use cost accounting? The answer is an emphatic yes. Frequently, non‐librarians with little knowledge of…
Abstract
Should public sector libraries, primarily not‐for‐profit service agencies, use cost accounting? The answer is an emphatic yes. Frequently, non‐librarians with little knowledge of the library world judge our work and make important organizational decisions from an accounting viewpoint.