Accounting for Managers Team Assignment

QUESTION 1: Big Business Tobacco (BBT) is a large Australian producer of tobacco products including a market-leader brand of cigarettes. With the continuing development of Asian countries such as China and its move to a market-based economy, the company has made the decision to sell its cigarettes in this large market from the beginning of next month. The cigarettes will be sold in packs of 40.

Mary Bender, marketing manager, is discussing the design of the cigarette packet for the Asian market with Randall Hedges, the company's public relations manager. Having agreed on the basic design of the pack, Hedges raised the issue of whether to include the normal health warning on the pack, which has to be displayed under Australian law. He emphasised recent medical findings which predicted many hundreds of thousands of deaths from cigarette smoking in the next few years, particularly in the developing countries.

Mary Bender was strongly opposed to including a 'health hazard' warning on the packs destined for parts of the Asian market. She explained: 'In this business it is the bottom line (i.e. profits) which matters - we have to think of our shareholders. BBT stands to lose a considerable market share to competitors if it includes such a warning. Besides, it is not a legal requirement in many Asian countries to display a health warning on cigarette packs. If Asian law is subsequently amended, then we will be one of the first to comply. Besides, the managing director supports me on this one.'

Hedges expressed a final opinion: 'The company could be better off in the long term by being seen to be acting with corporate responsibility, and demonstrating some concern for its consumers. Besides, such warnings have not been detrimental to the company's performance in Australia, where health warnings have been common for many years.'

Required:

A. Who are the major stakeholders in the debate on the health warnings on cigarette packs?

B. What are the main ethical issues involved in the debate?

C. If you were Randall Hedges, what would you do?

QUESTION 2: Brian Kelly has spent many years of his life panning for gold, with little success. On several occasions, he has found small traces of gold along the usual river banks that he is licensed to pan.

However, on his last trip to the Ballarat River, almost by accident he managed to find a very promising piece of rock which he placed in his satchel. He took the rock into town to be examined and valued by experts, who assured him that the rock was a valuable gold nugget and that it was worth at least $60,000. Brian was elated and opened a bottle of champagne to celebrate with his friends.

About 2 weeks later, he sold the nugget to a jeweller for $75,000 in cash.

Required: Evaluate and justify whether and when revenue exists and on the appropriate time for this revenue to be recognised in the accounts of Brian Kelly.

QUESTION 3: A. As a new management accountant, reply to this comment by a plant manager: 'No "bean counter" knows enough about my responsibilities to be of any use to me. As I see it, our accountants may be needed to keep records for shareholders and the Australian Tax Office, but I don't want them sticking their noses in my day-to-day operations.'

B. 'Knowledge of technical issues such as computer technology is a necessary but not a sufficient condition to becoming a successful management accountant.' Do you agree? Explain your answer.

Question 4: Required: In relation to the financial statements of Stratum Limited given below answer the following questions -

A. Calculate the changes in the financial statements from 2017 to 2016 in both dollar amounts and percentages.

B. Prepare common size financial statements for 2017 and 2016.

C. Comment on any relationships revealed by the horizontal and vertical analyses using a word limit of 200 words.

The comparative financial statements of Stratum Ltd are shown below and on the next page.