ACCY7101 Assessment 1

Weighting

25%

Learning outcomes

• Examine the operational and strategic role of management accounting in organisational contexts.
• Analyse strategic cost and profit management across the value chain.

Instructions

Complete and submit your assessment according to the Open Polytechnic’s Assessments webpage. This includes information on academic integrity, formatting, word limits and referencing.

• Include your name, student number and the assessment number.
• Number your pages.
• Use APA referencing.

Submission

• Submit your assessment in one file.
• Submit your work through your iQualify course.
• Emailed assessments will not be accepted.
• You will receive an automated notice advising you of your successful submission.

By submitting your assessment, you confirm that it is your own, original work.

Read the following case study and then complete the tasks that follow.

Part A: Strategy and the strategic environment

Case study: Kiwi Property Group LTD (KPG)

This case study is based on Kiwi Property Group (KPG). You will be required to do a strategic analysis of KPG.

You will find most of the information you need for this case study on the internet. The following are suggested web pages you can visit, but it is crucial that you supplement these with your own internet search.

• On the Kiwi Property website, you will find the bulk of the information you need for this case study, including the following useful information. o Commitment to sustainability in the ‘Sustainability’ section.
  ➢The latest annual report, as well as important announcements in the ‘Investor Centre’ section.
• The Stats NZwebsite provides industry and other statistical information.
• Publications of newsworthy articles on KPG include the following examples.
  ➢The New Zealand Herald’s article Kiwi Property profit drops 77% as write downs hit half–year result, (NZ Herald, 2025).
  ➢RNZ’s article Kiwi Property’s net profit falls 77 percent (RNZ, 2025).
  ➢TipRank’s article Kiwi Property names seasoned finance executive as new CFO, (TipRanks, 2026).

You should search for further information on the internet.

Use the knowledge gained in the course so far, as well as general knowledge, work and life experience, to formulate responses for the required tasks.

Provide responses for the following tasks, demonstrating your understanding of strategy and the strategic environment.

Task 1: Strategy and organisational environment

a. Explain which type of business strategy the organisation adopted based on Porter’s generic strategies.

(Word count guideline: 100 words)
(2 marks)

b. Analyse the organisation’s macroenvironment using PESTEL as a framework. Your answer should only consider social and economic factors.

Hint: Your answer should provide four (4) observations of social factors and ten (10) economic factors, as well as a concluding remark on how your observations in each segment will influence KPG strategy.

(Word count guideline: 650 words)
(9 marks)

c. Discuss how any two of the PESTEL factors spill over from one category to another.

This may include a reference to a factor that you did not analyse in the previous point.

(Word count guideline: 150 words)
(1 mark) 

(Task 1 total: 12 marks)

Task 2: Using Porter’s five forces framework

Conduct a strategic analysis of the organisation’s external environment using Porter’s five forces framework. Provide two responses for each of the five forces. For each force, provide an overall assessment of whether the force is strong/high or weak/low.

(Word count guideline: 550 words)
(15 marks)

Task 3: Managing strategic capability

Use a SWOT analysis to illustrate the extent to which KPG can manage the development of strategic capabilities to maintain its strategic position.

Your SWOT must include four (4) observations relating to KPG in each category and an explanation of each observation showing how it affects KPG’s ability to develop or maintain strategic capabilities.

(Word count guideline: 500–550 words)
(16 marks)

[Part A total: 43 marks]

Part B: The strategic nature of management accounting in the contemporary business environment

Case study: Plastic Moulding Ltd

Plastic Moulding Ltd (PML), based in Hamilton, is a manufacturer of plastic water tanks and troughs. Initially, the company focused on manufacturing water tanks and troughs for agricultural use. PML has gradually added to its product range with a wider range of water and animal feeding troughs.

PML aims to be the cost leader in its markets and aims to set prices 2.5% below competitors’ lowest prices. Current production is all green in colour to minimise the costs of both raw materials and equipment setups (no changes for different colours are needed).

PML is investigating moving into urban water storage tanks. These are tanks that capture and store rainwater. They provide emergency water and can help reduce peak water runoff in extreme weather events. As the tanks are mostly installed above ground, urban customers are concerned about the shape and colour of the tanks. To meet this demand, a range of shapes and styles of tanks will need to be produced in a range of colours.

You have recently been appointed as the senior management accountant at PML. In your first meeting with the CEO, you suggest that you should be included in the strategic leadership team (SLT). The CEO is surprised by this suggestion as the previous management accountant had been happy to submit monthly financial reports to the SLT rather than being a member of the team. He asks you to prepare responses for a list of questions that will assist him in making a case for your inclusion in the SLT.

Required

Prepare responses to the following questions that you have received from the CEO.

Task 1: Contemporary business environment

a. In general, explain the role that management accountants can play in assisting an organisation like PML in dealing with changes in the contemporary business environment.

b. Identify four changes in the contemporary business environment and explain briefly how each one could influence PML.

(Word count guideline: 300–350 words)
(8 marks)

Task 2: Strategy development

Identify the business strategy that PML Ltd is following. Provide a detailed discussion of how you, as a management accountant, can assist the management of PML with this strategy.  

(Word count guideline: 250–300 words)
(9 marks)

Task 3: Behavioural considerations in management accounting

Discuss how management accounting can contribute to effective communication and feedback for all levels of an organisation.

(Word count guideline: 150 –200 words)
(5 marks) 

[Part B total: 22 marks]

Part C: Sustainability

Case study: Sustainable Inks Ltd

Kerry Ford, the CEO of Sustainable Inks Ltd (SIL), has approached you, a management accountant, about concerns for their company. Kerry’s opening comment to you is, ‘We are actively involved in reusing ink cartridges, so we are a sustainable company. I don’t understand how some of our stakeholders can think otherwise. What more can stakeholders expect of us?’

After further conversation, you discover Kerry is the CEO of an ink firm. The firm has three aspects: ink manufacturing for commercial customers, importing ready-to-use ink, and recycling printer ink cartridges by refilling them.

Kerry explains that the company’s AGM held last week attracted some negative comments about the company’s sustainability practices and performance, and drew some accusations of unethical behaviour. Kerry explains the board chair was as confused as they were about how ethics affected the company’s sustainability. The chair’s comment was, ‘We mostly manufacture plant-based inks. How can our sustainability performance be considered poor? Surely, these concerns are just the misguided views of people who don’t understand our business. I resent the claim by some shareholders that we are greenwashing our reports.’

The board of directors is concerned about the negative press and has instructed Kerry to investigate the company’s sustainability practices and present some ideas on how to respond to the concerns. Kerry asks you to prepare notes on the issues so they can begin discussions with the board.

Kerry supplies the following information about Sustainable Inks Ltd.

• The company imports, manufactures, and refills ink cartridges.
• The firm’s manufacturing plant is in Palmerston North
• The manufacturing plant discharges wastewater into the Manawatu River under a 10year-old resource/discharge consent. SIL has not breached its discharge consents. No improvements have been made in discharges in the last 10 years.
• The manufactured ink is mostly made to customers’ individual specifications. Raw materials are purchased from the suppliers offering the lowest price. No other supplier analysis is completed. Some current suppliers have been accused of polluting their local rivers and adversely affecting the quality of local drinking water.
• Approximately 10 customers’ specifications include petrochemical-based solvents. These solvents are volatile and evaporate quickly. The fumes are toxic if inhaled, and repeated exposure can have health impacts. All required health and safety requirements are met. Staff are issued appropriate PPE (personal protective equipment). Given the infrequent use of the solvents, staff do not receive ongoing health screening.
• Imported ink is purchased from sources approved by the major printer manufacturers.
• This ensures the ink sold is compatible with the customers’ printers. Approval of the printer manufacturers is considered by SIL to indicate that the suppliers are sustainable producers. Suppliers are selected solely on price.
• Ink for refilling ink cartridges is manufactured in Palmerston North, as the consistency of the ink must be different to standard ink to help the refilling process. SIL is actively seeking overseas suppliers to lower costs. If all the ink is purchased overseas, 15 staff would no longer be needed.
• Sustainable Inks Limited is an Aotearoa New Zealand company with most shareholders based in Aotearoa New Zealand. The company promotes itself as a green company, making a positive contribution to the sustainable future of Aotearoa New Zealand and the Manawatu where it operates.
• The company’s management team is based in offices in the Viaduct precinct, Auckland.
• The management team have a remuneration package that is weighted on bonuses for meeting financial targets. The bonus scheme provides a 10% bonus on managers’ salaries if targets are met. The financial targets have been met for the last 5 years. The key targets are to meet the required ROI and maintain profit levels.
• SIL reports full environmental information on the ink imports and refilled cartridge divisions. The disclosures focus on the waste reduction created by refilling used cartridges.
• Management excludes manufacturing from the firm’s sustainability reporting as the customer sets the product specification, so SIL does not have full control over the factory performance. Management feels it would be misleading to report this.
• The criticism raised at the AGM included claims that the company does not contribute to the local community and has failed to reduce toxic discharges to air and water.
• Kerry explains that tax is paid on all profits generated in Aotearoa New Zealand.

Task 1: Sustainability issues for Sustainable Ink Ltd

Required

Prepare responses for Kerry and the board, providing the following.

a. An explanation of what is currently considered a sustainability issue or concern, with examples from Sustainable Ink Ltd (ensure you provide four relevant examples).

(Word count guideline: 100–150 words)
(4 marks)

b. An explanation of what is meant by greenwashing and whether Sustainable Ink Ltd is engaging in this practice.

(Word count guideline: 80–100 words)
(2 marks)

c. A brief explanation of how ethical considerations fit into sustainability initiatives, with an example of an ethical issue Sustainable Ink Ltd should be addressing.

(Word count guideline: 100–150 words)
(6 marks)

d. A discussion of how the company’s accounting and management systems may be influencing Sustainable Ink Ltd’s sustainability due to their influence on the behaviour of the company’s managers.

(Word count guideline: 100–150 words)
(3 marks)

 [Part C total: 15 marks]

Part D: Conventional and contemporary cost management 

Task 1: Overhead cost allocation

Design Furniture Ltd produces custom furniture for retailers. The company uses a job-order costing system and applies manufacturing overhead costs to this product based on labour hours. At the start of the current financial reporting period, the following estimates were made.

The economic conditions over the last 18 months were better than the forecast, leading to more production than was planned.

Design Furniture Ltd’s actual production and cost data for the financial reporting were as follows.

Actual labour hours – 120,000 hours

Actual manufacturing overhead cost – $2,650,000

Inventories at the end of the financial reporting period:

Raw materials –  $230,000

Work-in-progress – $480,000

Finished goods inventory – $500,000

Cost of goods sold – $2,400,000

Required

a. Explain the accounting treatment of any under- or over-applied manufacturing overhead for the period, assuming that the total of under- or over-applied manufacturing overhead is closed out to cost of goods sold (COGS). Use calculations to support your answer.

(Word count guideline: 50–60 words)
(3 marks)

b. Explain the accounting treatment of any under- or over-applied manufacturing overhead for the period, assuming that the total of under- or over-applied manufacturing overhead is allocated to work-in-progress inventory, finished goods inventory and COGS based on the balance in each account at the end of the reporting period. Use calculations to support your answer. Round all calculations to two decimal places.

(Word count guideline: 50–60 words)
(2 marks)

c. Assume that managers are paid a bonus as a percentage of net income. In this case, explain which of the two methods of allocating under- or over-applied manufacturing costs the managers would prefer. Show your calculations of the effect on net income between the two allocation methods.

(Word count guideline: 80–100 words)
(2 marks)

(Task 1 total: 7 marks)

Task 2: Activity-based costing

Totara Ltd wants to introduce an activity-based costing system. Traditionally, the company used a costing system where overhead costs were allocated to products using a predetermined overhead rate based on direct labour hours.

The manager of Totara Ltd feels that an activity-based costing system will provide much more relevant product costing information. More detailed information assists in setting the selling price of the product. The per-unit selling price is set at $220 per unit.

Given the costs associated with an activity-based costing system, you have been asked to determine if an activity-based costing system will provide more relevant product costing information. A long-standing customer, Kate Diamond, recently ordered twenty units of Totara Ltd’s product, which shipped as two shipments. You would like to illustrate to the manager of Totara Ltd the difference between the two costing systems using this order as an example. You have gathered the following information to prepare a customer margin report for Kate Diamonds’s order.

Overhead costs

Allocation of overhead costs to activity cost pools

*The activity cost associated with the ‘other’ activity cost pool will not be allocated to products. Cost drivers

Additional information

• The direct material cost per unit is $100 per unit, and the direct labour cost per unit is $30 per direct labour hour.
• Every unit requires 3 hours of direct labour.
• For the purposes of the activity-based calculations, it is estimated that customers will place 500 orders.
• It is estimated that 70,000 units will be produced during the year. Every unit requires 2 automated processes.
• Most orders are shipped as 1 shipment, but 20% are shipped as two shipments, as requested by the customer.
• Selling price is $220.

Required

a. Prepare a customer margin report for each of the two costing systems. Show the per-unit cost/price (where applicable), total cost/income and the net profit margin for Kate Diamond’s order. Show all workings used in preparing each report.

(Calculations only)

(9 marks)

b. Outline the situations in which a conventional costing system could provide accurate allocations of overhead cost.

(Word count guideline: 200–250 words)
(4 marks)

(Task 2 total: 13 marks) 

[Part D total: 20 marks]