AC211 Managerial Accounting

2016-2017

Module 1: Management accounting for decision making

Dr. David Twardowski

‘Sharing our thinking’ – selection of discussion points made by students in class and
collected by class teachers

Class 1 MT: Inglis

 The expected revenues from books sold can be expected to increase in the next years. As
the Committee does not change the expected revenue in their calculations for 2000
books, this might further decrease the total overall costs of the book donations depart-
ment.

 If the cost object were an individual book, one could also classify the salary of the assis-
tant as direct cost in case she spends her time exclusively on tagging the received books
(i.e. like at an assembly line). However, the number of books received would have to in-
crease significantly in the next years.

 The book donations department is asking for additional funding as it assumes the annu-
al capacity to increase up to 1900 books. If 1900 books represents the highest possible
number of books the department can accept (i.e. upper level of the relevant range), 2000
books would (again) make additional funding necessary (i.e. another students assistant).
Although, the Committee’s calculation of $ 37, 800 is still wrong, this would result in an
increase of overall costs.

 Whether or not costs are fixed or variable depends upon what is your cost pool. For ex-
ample, if the graduate assistant’s salary would be charged on an hourly basis to the book
donations department by the library, the head librarian could make use of the additional
capacity just as needed, i.e. if there are weeks where not many donations are expected,
the librarian could just reduce the number of working hours. Thus, from the head librar-
ian’s view, the graduate assistant’s salary would be flexible.

 The increasing enrolment numbers might have a much wider effect for the whole region
as students need apartments which might stimulate real estate business. Also they like
to go to cafes, bars, as well as clubs and may even pay taxes from part-time work. So
there is a wider economic factor associated with increasing number students.

 It is very difficult to quantify the future revenues and costs associated with the book do-
nation department. Especially the potential revenues arising from an increasing number
of students are highly uncertain. This would require much more complex calculations
and thus be quite expensive to do.