Engineering Economics and Finance

48250 – Engineering Economics and Finance
Spring 2020
Assessment Three – Management Accounting Memo (Individual)
Due Date
Friday, 23 October 2020 11:59pm
You are working as a graduate within the engineering department of a manufacturing and consulting focused public listed company. You and your team are working on the post-COVID recovery and how best to allocate capital.
The entire department is going to have a conference call next week and you have been asked to prepare a memo for the team regarding the financial options being considered. As the accounting department will be joining, your memo is to prepare the staff for the call.
The accountants are expected to use terms which may not be fully understood by the greater department. So your memo will be distributed before the call or you may be asked to speak on the call to assist everyone’s understanding. The memo should discuss each of the following:
1. As there is still uncertainty about employees returning to work, the capital may need to be moved from its current interest bearing account elsewhere. Explain the opportunity cost associated with leaving the money in a bank account as opposed to other investment options that may mitigate the opportunity cost.
2. The stock price of your company has suffered due to the economic downturn. A focus at the company may be to encourage both current and prospective shareholders. Explain one way that the company could directly incentivise these investors.
3. Your company has been using traditional costing and is considering moving to Activity Based Costings for a number of product lines. Explain what is meant by Activity Based Costings, how it differs from traditional costing, and how it may be advantageous.
4. A new product line is also being proposed and it is expected that the accountants will discuss this option. Explain the difference between fixed and variable costs and state at least three examples of each that the company may incur.
5. Some employees have raised their concern that the new product line will not be profitable and that it will cost more to produce. Explain the break-even point with particular focus on why a break-even point is not immediate but rather is reached over time.
Respond to the above questions in a memorandum format that would be suitable for distribution. Each answer should be no more than a page, half page for each would be suitable. Maximum of 5 pages in total.
You are to submit one deliverable. A maximum 5 page memorandum.
Optional: As some of you enjoyed the multimedia components of the prior assignment, You may submit up to two questions as verbal/audio or a video media covering the question. The ideal being to imitate your answer on the conference call explaining your answer to the team. As you would answer on the call. Include the links to your media in the memorandum. You have the discretion as to which you answer this way.
Answer guide
Expected length answer to each question is approximately 2-4 Paragraphs, no more than 1 page per answer.
The memorandum should be submitted as a PDF via turnitin. If you decide to use audio or visual for questions please include links to the media in the memorandum.
Marking Allocation
Each question will be worth 5 marks. Marks are given for a clear articulation of the answer and a demonstration of understanding of the concepts discussed.
Presentation of the submitted components will be marked out of 5. Marks are given for a professional format and appropriate use of language and grammar.
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