Value Chain Diagram - Package Homes - JM Builders Case Study - Accounting & Finance Assignment Help

Assignment Task

PART A: (Relates to the attached Case Study)
Required:
With reference to the attached Case Study, answer the following questions:
1) Explain what role a value chain can play in a firm such as JM Builders.
2) Present a process-level value chain diagram for JM Builders for building “package homes”.
3) Calculate the target cost for each of the three types of package homes and briefly explain how Justin and Miley can use this information in their “package home” business.
4) a) Present a life-cycle budget for the total anticipated quantity sold of the RATA home packages;
b) Calculate the life-cycle cost per RATA home package;
c) Comment on the results.
5) Miley is concerned that their product costing information may be incorrect due to their costing system possibly being out-of-date, and that it may need to be re-designed. Outline and discuss the factors that both Miley and Justin should be aware of, that may indicate their business’ costing system is obsolete. (Note: Full APA referencing required for the answer to this question.)

PART B:
Required:
Using the articles available on EIT Online, plus the information in the first chapters of your text book, critically evaluate the development of Management Accounting, including the current status and likely future direction. Full APA referencing is required.

Case study
For the past two years, JM Builders Ltd has been struggling, with very few contracts being received to build new houses. The owners of JM Builders (Justin and Miley) feel this is due to the strong competition from the “home package” providers. Justin and Miley decide the only way they can survive is by setting up their own “home package” business. A “home package” is where JM Builders design the home and then build, furnish and landscape it for their customers. After six months of research (costing $48,750 in total) on what customers require in new homes, they have developed three home packages to meet this market demand. These are:

JM Builders wants to make, on average, a profit of 5% of the selling price per built home.

Justin is a draughtsperson, and he has spent several weeks designing these homes at a cost of $57,200.  This cost includes drawing the plans, designing the interior and landscaping options, and determining how much the various components would cost.  All research and development and design costs are to be split across the three home package types based on the floor area. 

An analysis for the building (production) costs for the RATA home indicates that the following per package costs will be incurred:

In the four years that the RATA design is to be in production, Miley estimates they will sell 12 packages in total.  JM Builders plans to spend $30,000 per year marketing their three types of package homes.  The marketing costs are to be split evenly between the three packages.

JM Builders offers a building guarantee.  Based on experience, they expect that customer service claims and repairs will cost them 1% of sales revenue.  Further, they are considering offering a 12-year ‘weather-tight’ guarantee, but do not know whether this will add additional costs to the package price.

At the last meeting of the local Small Business Owners Association, there was a presentation covering value chains, designing to meet customer price and quality expectations, and managing activities and processes to control costs.  Justin and Miley think this might be a way for them to improve their new strategy to build package homes.