QUESTIONS FOR CRITICAL REVIEW OF PUBLISHED PAPERS

Hello guyz,

i would like to share with you these questions which are useful when providing a critical review of a published paper.

when you are doing a critical review of a published paper you should make sure you answer all questions based on the paper you are criticising.

• Why is this article interesting/important?

• Are the outcomes important?

• What has motivated the authors to write this article when the did?

• What is the research problem/question?

• What theory or theoretical framework underpins the research?

• What are the key motivating literatures on which the study depends?

• Which research method has been chosen?

• How has the sample been selected?

• How have questions of validity been addressed?

• How has the data/evidence been analysed?

• Are the conclusions and recommendations consistent with the findings?

Management accounting- Pricing

A pottery has to quote for a special order of clay pipe fittings to be made in its two departments, Blunging and Extruding.  Details are as follows:

                                                                              Blunging                            Extruding

Standard direct wage rate per hour                            £5                                      £3

Standard variable overhead per hour                          £2.50                                 £2

Standard fixed overhead per hour                              £6                                      £4

Direct labour hours per unit for the first

1000 clay fittings                                                        12                                      6

Direct labour hours available per period                     40,000                               30,000

Expected rate of learning curve, applied

per block of 1000 units                                               80%                                   70%

Cost of clays used in Blunging are as follows:

                                                Level of output                         Cost per clay fitting

                                                      (fittings)                                              £

                                                         1000                                              36.00

                                                         2000                                              32.40

                                                         8000                                              27.00

No overtime premium has been included in the calculation of overhead, but overtime is paid at time and a half.

The special order involves special tooling to be used in Extruding at a total cost of £6,000, chargeable to the customer.

In arriving at selling prices, the company adds profit mark-ups of 20%.

If the order is for 2000 clay fittings or fewer, it will need to be done during period 5 which already has a workload of:

Blunging                                          25,600 direct labour hours

Extruding                                         14,000 direct labour hours.

Required:

a)      Recommend the price to be charged for clay fittings made entirely within the company for an order of:

         (i)      1000 clay pipe fittings

         (ii)     2000 clay pipe fittings.                                                       

b)      Assume that an order for 2000 clay pipe fittings has been placed as in a) (ii) above, recommend the lowest price the company could charge for an additional order of 600 clay pipe fittings in the following conditions:

         (i)      The company wished to treat this as an incremental order but did not wish to make a loss on it;

         (ii)     the additional work would be done when there were no capacity constraints for either department; and

         (iii)    the materials suppliers would charge the price at the 8000 level.

                 

Solution

                                                                                    Blunging                      Extruding

Direct labour hours for order of 1,000 units                  12,000                           6,000

Current workload                                                           25,600                         14,000

Total hours with order of 1,000 units                            37,600                         20,000

                                                                                       =====                         =====

Direct labour hours for order of 2,000 units

2,000 x 12 x 0.8                                                          19,200 (2,000 x 6 x 0.7)          8,400

Current workload                                                        25,600                            14,000

Total hours with order of 200 units                            44,800                            22,400

                                                                                    =====                            =====

Overtime hours required                                               4,800

Overtime premium (x £2.50)                                       £12,000

                                                                                    = £6 per unit

a)      Assuming that the order is to be costed as part of the normal business of the company and will therefore be required to absorb the full amount of fixed overhead.

                                                            (i) Order of                              (ii) Order of

                                                                1,000 units                             2,000 units

         Blunging                                    £/unit     £/unit                         £/unit    £/unit

         Direct wages           12 x £5         60.00                     x 0.80      48.00

         Variable overhead 12 x £2.50    30.00                     x 0.80        24.00

         Fixed overhead      12 x £6          72.00                     x 0.80      57.60

         Overtime premium                              0                                       6.00

                                                                            162.00                                    135.60

         Extruding

         Direct wages            6 x £3          18.00                    x 0.70       12.60

         Variable overhead  6 x £2            12.00                    x 0.70         8.40

         Fixed overhead       6 x £4           24.00                    x 0.70       16.80

                                                                             54.00                                      37.80

         Direct materials (clays)                               36.00                                      32.40

         Special tooling £6,000 ÷ 1,000                     6.00     £6,000 ÷ 2,000         3.00

                                                                           258.00                                    208.80

         Profit Margin (20%)

                                                                             51.60                                       41.76

         Recommended price per unit                      309.60                                   250.56

b)      If the company wishes to treat the order as incremental only those costs which are incurred as a direct result of the order would be included in the estimate.  assuming that fixed overheads will not increase, they are excluded from the calculations.

         Since the company wishes to charge the lowest price possible without making a loss, no profit margin will be added.

         A further order of 600 units in addition to an initial order for 200 would bring cumulative volume to 800 units.  this means that the original volume of 200 fittings would be doubled twice.

                                                                        2,000  fittings              8,000 fittings

                                                                        £/unit                           £/unit

                                                                        (from a(ii))

         Direct wages and variable

         overhead

              Blunging                                           72.00     x 0.8 x 0.8     46.08

              Extruding                                          21.00     x 0.7 x 0.7     10.29

         Direct materials                                      32.40                           27.00

                                                                      125.40                           83.37

                                                                      =====                           ====

                                                                                                                  £

         Incremental cost of 8,000 units 8,000 x £83.37                        666,960

         Less incremental cost of 200 units 200 x £125.40                     250,800

         Incremental cost of 6,000 units                                                 416,160

                                                                                                            ======

                                                                                                    =      £69.36 per unit

         The lowest unit price that the company could charge for an additional order of 600 units is £69.36.

BP set to pay first dividend since Gulf oil disaster

 Bob Dudley, BP 's chief executive, is set to announce a resumption of dividend payments on Tuesday as a signal to investors that the UK oil group is recovering after last year's Gulf of Mexico spill .

BP was one of the biggest dividend payers in the UK before the accident, distributing about £7bn to investors in 2009. It suspended the pay -out for the first three-quarters of last year as part of a series of steps to stabilise its financial position in the wake of the mounting costs from the oil spill on April 20 2010 . Any pay -out, however, will be at about half the previous level with analysts expecting the fourth quarter dividend to be 7 cents a share.

The reinstatement will be a key element of Mr Dudley's inaugural presentation to the investment community alongside BP 's full-year results and an update on strategy. The company's profits will have been buoyed by strong oil and natural gas prices, with analysts forecasting clean replacement cost profit, which strips out changes in the value of oil inventories and exceptional charges, of $4.9bn for the fourth quarter, up 11 per cent on the same period in 2009.

Mr Dudley is expected to give an update on the cost of the accident to BP . It has so far made provisions of $39.9bn but still faces a number of claims and potential lawsuits. It has raised about $21bn (£13.2bn) from disposals, close to its $30bn target set after the spill to help pay for claims.

The market will be keen to hear how Mr Dudley sees BP 's future in the US, which before the accident had been its principal strategic focus. Analysts said they did not expect a radical departure from BP 's current strategy but more emphasis on how it will be a smaller, faster-growing company with an increased focus on exploration and production. Jon Rigby, analyst at UBS, said he believed "the core business contains one of the most attractive asset portfolios in the integrated industry".

Investors are also keen to hear more about BP 's alliance with Russian state oil company Rosneft. BP 's billionaire partners in its other Russian venture, TNK- BP , have claimed the UK group has breached the conditions of their shareholder agreement.

One person close to the situation said the partners, represented by AAR, believed BP may have failed to disclose to the Russian government and to Rosneft the terms of its shareholder agreement with AAR for TNK- BP . "There is a question about how forthcoming BP has been with [Igor] Sechin [the Russian deputy prime minister] about their obligations over TNK- BP ," the person said.

Speaking at the World Economic Forum in Davos on Thursday, Mr Sechin, who also chairs Rosneft, said BP had assured Rosneft there were no problems with its contract with AAR.

Additional reporting by Catherine Belton in Moscow

Source: Financial Times(UK)

An Open Letter to the President of the United Republic of Tanzania

Dear your Excellency,

Greetings from the Far East. It is my hope you are doing well.

Of late we have witnessed the political climate in North Africa changing rapidly. This is due to the popular demonstrations and "uprisings" that have toppled governments. First it was Tunisia then followed Egypt and perhaps Libya will be next. I wish to convey to you that the reasons that led to discontent among the populace of these two countries are not markedly different from the situation at home. Before I venture into the reasons I wish to clarify that we are a democracy as such this differentiates Tanzania from Tunisia, Egypt, Libya, Bahrain etc therefore on the face of it we may think we are safe. However, kindly persue the subsequent paragraphs to understand the gravity of the situation.

On a surgical analysis, it is evident that economic conditions are the main causative agents of the protests. This does not mean I am overlooking the political ones however the economic hardships are the main drivers of the "revolutions".

Majority of the protesters were complaining of high food prices, rising fuel costs, massive unemployment, inefficient educational system, corruption, rising income inequality, police brutality and complete lack of accountability by those in power just to name but a few. On looking at these grounds it is clear that the nation (Tanzania) is in the same predicament. The fuel prices are at the roof causing a pinch into every inhabitant's pocket. The domino effect of this is inexplicable on such small space and since you hold economics degree I need not explain the obvious to you.

Further the educational system is in a mess. From primary schools to the university level the government seems to have abdicated its responsibility of providing quality education to the populace. It was easy after liberalization in 1990's to view this as a responsibility of the private sector however we are witnessing the repercussions presently. There is a big shortage of schools plus universities both of which are under-equipped resource-wise. From the lack of teachers to lack of facilities and books the problems are endless.

What is annoying many is the ineptness of the government to deal with the problem surgically. It has to take students to protest for anything meaningful to be done! There seems to be no meaningful government plans of action to alleviate this problem something, which only spells doom for the future.

Rising income inequality is visible from the opulence of the few including the government officials. There is a big gap between incomes in the government servants. The income plus perks of the high-ranking bureaucrats make that of teachers, doctors, lecturers and even the normal civil servant look like loose change. While the government complains of not having money to increase the salaries, we can see new mashangingi being bought, Tea only for the high ranking members in the office continuing to be served. It

makes one wonder, if you do not possess money then how do u service these two of the many unnecessary components.

Not only that, the income inequalities resulting from the business entities or businessmen with close ties to the officials in government also provide fuel for people to hate their government. The media is abuzz with such stories and not all can be discounted with mere deniability or by cooking up a conspiracy story because of the integrity of the journalists who provide them.

At this juncture sir, I think it is pertinent I touch on the subject you may of late hate to hear, corruption and lack of accountability. I have stressed your dislike because some of the allegations have been projected personally to you. Many of the corruption scandals have happened under your nose. The biggest of them all was the Richmond saga. Richmond was the precursor of Dowans. In other words Richmond sold the contract it had with Tanesco to Dowans. The Parliamentary probe committee found that the contract was

awarded under dubious circumstances to an entity that never had any expertise in power generation. Several people were named in the report as the main persons responsible in putting the country at loss. The then prime minister resigned however to the amazement of the nation, no one else was punished. Now we may have to cough billions of shillings in damages for terminating a contract that many feel shouldn’t have been signed at all or was voidable at the option of the government. This has sparked public outrage. What has enraged many of us is the sum proposed to be paid and

which the government was easily willing to release while the culprits who consciously put the country into the quagmire have not been brought to book. It is total lack of accountability that has permeated every corner of the government you run Mr. President. One of the essential questions being asked is where was the government going to get all this money at such a short juncture and if such money is available why is the government complaining of not having money to implement developmental projects.

Politically the recently concluded general elections which returned you to power was full of allegations of rigging and of the state agencies helping your party. This has prompted calls which I believe are justified of rewriting the Constitution so as, among other things, to make some offices like the Chairman of the election commission not a presidential appointee. It is no secret that the Constitution is unsuited to the present political atmosphere.

Even members of your own political party recognize this fact so it makes us wonder why even such a basic element which is inevitable the Government drags its feet to accomplish.

Your Excellency, as I know you are a busy man, I think I should not consume much of your precious time with what has been repeated so many times by Mwananchi and Mwanahalisi. There are still issues to discuss like Police brutality to unarmed lawful protesters in Arusha with no action taken by you to punish those responsible.

Mr. President as I end this letter I wish to remind to you again the purpose of writing. I wanted to show you that the conditions, which prevailed in the North African states that have experienced forceful regime change, precipitate also in our beautiful country. Therefore it is time for the government to tackle these issues before the situation gets out of hand. The masses have shown that no regime is immune from challenge therefore should never get complacent. It is my hope that your wisdom will prevail and ensure the economic as well as political problems are solved in a meaningful way to the satisfaction of everyone.

Your law-abiding citizen,

Ntemi Massanja

Management Accounting- Divisions

 Question

The Benmac Corporation has three operating divisions.  The managers of these divisions are evaluated on their divisional Net Income Before Taxes, a figure which includes an allocation of corporate overhead proportional to the sales of each division.  The operating statement for the first quarter of 1994 appears below:

                                                                                                Division                      

                                                                           A                B                C             Total

Net sales (000)                                                 £2,000        £1,200        £1,600        £4,800

Cost of sales                                                     1,050             540             640          2,230

Division Overhead                                                 250             125             160             535

Division Contribution                                             700             535             800          2,035

Corporate Overhead                                              400             240             320             960

Net Income Before Taxes                                     £300           £295           £480        £1,075

                                                                         ====          ====          ====        =====

The manager of Division A is unhappy that his profitability is about the same as Division B and much less than Division C's, even though his sales are much higher than either of these other two divisions.  The manager knows that he is carrying one line of products with very low profitability.  He was going to replace this line of business as soon as more profitable product opportunities became available, but has retained it until now since the line was still marginally profitable and used facilities that would otherwise be idle.  The manager now realises, however, that the sales from this product line are attracting a fair amount of corporate overhead because of the allocation procedure and maybe the line is already unprofitable for him.

This low margin line of products had the following characteristics for the quarter:

                        Net Sales (000)                                              £800

                        Cost of Sales                                                 600

                        Allocated Divisional Overhead                         100

                        Contribution                                                  £100

                                                                                           ====

Thus the product line accounted for 40 percent of divisional sales but less than 15 percent of divisional profit.

Required:

1.      Prepare the operating statement for the Benmac Corporation for the second quarter of 1994 assuming that sales and operating results are identical to the first quarter except that the manager of Division A drops the low margin product line entirely from his product group.  Is the Division A manager better off from this action?  Is the Benmac Corporation better off from this action?                                                                     

2.      Suggest improvements to the Benmac Corporation's divisional reporting and evaluation system that will improve local incentives for decision-making that is in the best interests of the firm.

                                                                                                                   

 Answer

1.      Without the £800,000 in sales from the low margin product line in Division A, the second quarter operating statements will be:

                                                                                                Division                      

                                                                           A                B                C             Total

         Net sales (000)                                        £1,200        £1,200        £1,600        £4,000

         Cost of sales                                               450             540             640          1,630

         Division Overhead                                        150             125             160             435

         Division Contribution                                    600             535             688          1,935

         Corporate Overhead                                     288             288             384             960

         Net Income Before Taxes                            £312           £247           £416           £975

                                                                         ====          ====          ====          ====

         The Division A manager is able to show a £12,000 higher profit because the £100,000 in lost contribution margin from the dropped product line is more than offset by the £112,000 reduction in corporate overhead.  Divisional sales are now only 30 percent of corporate sales rather than the previous 41.7 percent of sales.  The Benmac Corporation is worse off because it has lost the £100,000 contribution margin from the dropped product line with no reduction in corporate overhead.

2.         The easiest solution is to not allocate fixed corporate overhead to divisions.  Then, the problem of dysfunctional behaviour will not arise.  But central management may want the division managers to "see" the cost of corporate operations so that they will understand that the corporation as a whole is not profitable unless the combined divisions' contribution margins exceed corporate overhead.  In this case, an allocation basis should be chosen that is not manipulatable or under the control of division managers, and has the property that the actions of one division do not affect the allocations to other divisions (as occurred in the second quarter for the Benmac Corporation).  In general, a lump sum allocation based on, say, budgeted net income, or budgeted assets, rather than an allocation that varies proportionately with an actual measure of activity (such as sales or actual net income) will minimise dysfunctional behaviour.  The allocation should be such that managers treat it as a fixed, unavoidable charge, rather than a charge that will vary with decisions they take