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1.1 Explain the principles behind lifecycle costing and briefly state why Margrin in particular should consider these life cycle principles. (20 marks)

Module Title: Managing Business Performance

Managing Business Performance Coursework Question 1 (55 marks) Margrin designs, develops and sells PC games. Games have a short lifecycle lasting around 3 years only. Performance of the games is measured by reference to the profits made in each of the expected three years of popularity. Margrin accepts a net profit of 35% of turnover as reasonable. A rate of contribution of 75% is also considered acceptable. Margrin has a large centralised development department which carries out all the design work before it passes the completed games to the sales and distribution department to market and distribute the product. Margrin has developed a brand-new game called GFX and this has the following budgeted performance figures. The selling price of GFX will be a constant £30 per game. Analysis of the costs show that at a volume of 10,000 units a total cost of £130,000 is expected. However, at a volume of 14,000 units a total cost of £150,000 is expected. If volume exceed 15,000 units the fixed costs will increase by 50%. GFX’s budgeted volumes are as follows: Year 1 Year 2 Year 3 Sales volume 8,000 units 16,000 units 4,000 units In addition, marketing costs for GFX will be £60,000 in year one and £40,000 in year two. Design and development costs are all incurred before the game is launched and has cost of £300,000 for GFX. These costs are written off to the income statement as incurred (i.e. before year 1 above).

1.1 Explain the principles behind lifecycle costing and briefly state why Margrin in particular should consider these life cycle principles. (20 marks)

1.2 Produce the budgeted results for GFX and briefly assess the game’s expected performance, taking into account the whole lifecycle of the game. (20 marks)

1.3 Explain why incremental budgeting is a common method of budgeting and outline the main problems with such an approach.

Question 2 (45 marks)

2.1. “Environmental management accounting: Innovation or Managerial Fad”? Discuss the role environmental management accounting can play within an organisation in the modern business environmen

2.2 Explain the concept of Total Quality Management and list its fundamental features. (15 marks)

2.3 Camtasia, a manufacturer of video games, is in the process of developing a new game called ‘The Sims’ and has undertaken market research to find out about customers’ views on the value of the product and also to obtain a comparison with competitor’s products. The results of this research have been used to establish a target selling price of £55 and an estimated life time volume of 200,000 games.

Direct materials 3.21 Direct labour 4.23 Direct machining costs 1.12 Ordering costs 0.23 Quality assurance 4.60 Design 19.80 Marketing costs 8.15 Distribution costs 3.25 Warranty costs 1.30 The target profit margin is 30% of the proposed selling price.

Calculate the target cost of The Sims and discuss the implications of the result.

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