Case Study 1 Arrow Pty Ltd (30 Marks)
Arrow Pty Ltd is preparing to design and implement sustainability systems and processes. Energy is a key resource for business operations; first for heating water and second for operational and security lighting. Management of these key resources for business operations can save the company money. Therefore the first step is to measure the water flow at the premises and the second step is to calculate the cost of heating water for 250 days each year. The second key resource for business operations is energy for operational and security lighting for 365 days each year.
The daily rinsing process for fruit and vegetables requires the tap to run for 45 minutes per day and use 12 litres of water flow per minute. The water is heated to 70oC.
The table below provides the number of kWh required to heat one kilolitre of water to various temperatures
Hot Water Temperature Number of kWh required make one kilolitre of hot water
50oC 46 kWh
60oC 62 kWh
70oC 78 kWh
80oC 93 kWh
Arrow electricity usage for lighting for operational and security purposes is set out below.
Number of lights: 15 lights
Light Wattage per light: (halogen light) 70 watts or 0.070 kWh Light Wattage:
Electricity cost per kW Light Wattage: $0.135 /kWh:
Hours of lighting use per day: 18 hours
Days of lighting use per year: 365 days
Required:
a) If the business uses water heated to 70oC, assuming the electricity cost per kilolitre is $0.135 per kWh, calculate the annual electricity cost to the business
associated with the heating of water used to 70o (5 marks)
b) If the business uses water heated to 60oC (assuming the electricity cost per kilolitre is $0.135 per kWh), calculate the dollar saving if this lower temperature is used. (5 marks)
c) You are considering fitting the tap with a flow restrictor that will reduce water flow to 6 litres of water flow per minute. You expect run the tap still for 45 minutes per day. Calculate the cost if the reduced water flow was heated to (i) 70 degrees
and (ii) to 60 degrees. (6 marks)
d) Compare to your answers for (a), (b), and (c) to calculate the energy cost saving resulting from (i) reducing the water flow and (ii) reducing the temperature
(4 marks)
e) Calculate the annual lighting cost for the Arrow Pty Ltd using the following formula
__ lights x ____ kW x _____ $/kWh x ____ hrs x _____ days = $______/yr
(3 marks)
f) How much can a business save in electricity costs by using energy-efficient lights if the business replaces the 70 watt halogen bulbs with 20 watt LED bulbs that
could be inserted into the existing light fitting (4 marks)
g) Provide, in an internal email, your recommendation, what to implement [use your answers in a) to f) to support your recommendation] (3 marks) Case Study 2 Zephyr Farming Pty Ltd (30 marks)
Zephyr Farming Pty Ltd is considering the purchase of a wind turbine generator in order to generate electricity and to reduce the electricity costs for their offices. Currently the business uses 60,000 kilowatt hours (kWh) per quarter (3 months) at an average cost of $0.30 per kwh, supplied by the local coal fired power station. The current required rate of return used to evaluate projects is 6%, with a required payback period of 3 years.
Project details:
Cost of wind turbine generator $6,000
Cost to install turbine and generator $450
Expected cash incentive back from government to offset cost of the panels 5% of total costs
Turbine expected (on average) generated kilowatt 300 hours per month
Generator’s expected life (in years) 15 years
Requirements
1. Calculate the total initial investment and the net annual savings from installing the wind generator. (8 marks)
2. Calculate the payback period of the wind generator. (4 marks)
3. Comment on whether this project meets the company’s Payback Period requirements and whether you should base your decision only in the payback period calculation. (1 mark)
4. Calculate the net present value (NPV) of the project with a required rate of return at 6%. As the savings are the same each year, use the present value table on the next
page for an ordinary annuity. (9 marks)
5. Comment on whether Zephyr should proceed with this project using the Net Present Value method and whether you should base your decision only in this quantitative
calculation. (1 mark)
6. Comments on two limitations you believe exist with the payback period method after considering your answers to 2 and 4 above (2 marks)
7. What qualitative factors (not included in the quantitative analysis) would influence your opinion on whether the investment in the wind generator should proceed.
(2 marks)
8. Provide, in an internal email, your recommendation about what to implement [use your answers in 1 to 7 to support your recommendation] (3 marks) Present Value of an Ordinary Annuity of $1
n 1% 2% 3% 4% 5% 6% 8% 10% 12%
1 0.990 0.980 0.971 0.966 0.952 0.943 0.926 0.909 0.893
2 1.970 1.942 1.913 1.887 1.859 1.834 1.783 1.736 1.690
3 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402
4 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037
5 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605
6 5.795 5.601 5.417 5.242 5.076 4.917 4.623 4.355 4.111
7 6.728 06.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564
8 7.651 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968
9 8.566 8.162 7.786 7.435 7.108 6.802 6.247 5.759 5.328
10 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.650
11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938
12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194
13 12.134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424
14 13.003 12.106 11.296 10.563 9.898 9.295 8.244 7.367 6.628
15 13.865 12.849 11.938 11.118 10.380 9.712 8.559 7.606 6.811
16 14.718 13.578 12.561 11.652 10.838 10.056 8.851 7.824 6.974
17 15.562 14.292 13.166 12.166 11.274 10.477 9.122 8.022 7.120
18 16.398 14.992 13.754 12.660 11.690 10.828 9.372 8.201 7.250
19 17.226 15.678 14.324 13.114 12.085 11.158 9.604 8.365 7.366
20 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.469
21 18.857 17.011 15.415 14.029 12.821 11.764 10.017 8.649 7.562
22 19.660 17.658 15.937 14.451 13.163 12.042 10.201 8.772 7.645
23 20.456 18.292 16.444 14.857 13.489 12.303 10.371 8.883 7.718
24 21.243 18.914 16.936 15.247 13.799 12.550 10.529 8.985 7.784
25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843
n 1% 2% 3% 4% 5% 6% 8% 10% 12%
Case study 3 - Packing and Labelling (PAL) Pty Ltd (40marks)
Packing and Labelling Pty Ltd (PAL) designs, manufactures, prints and distributes labels and packaging for consumer goods, promotional, pharmaceutical, chemical and industrial markets across Australia and South East Asia from its factories in Australia, Taiwan, and Vietnam. State-of-the-art technology and production methods (as shown in the photo below) have positioned PAL at the leading edge of the label printing industry and PAL’s self-adhesive, in-mould labels, lids and cartons are found on some of the world’s biggest brands.
With a small grant from the State government in 2015, PAL undertook a resource assessment. The decision to adopt an efficiency sustainability strategy resulted in a decision to upgrade process and equipment for an investment of just $3,500. The result of this investment, and strategy implemented action, is a reduction in materials used, improved quality, and significant cost savings, which is an annual savings of nearly $70,000 for its 1 July 2015- 30 June 2016 operating year. PAL has adopted an environmental management accounting (EMA) system to enable it to identify the drivers and costs associated with its impact on the environment by its internal sustainable production. However, this efficiency sustainability strategy has not allowed PAL to identify the impact on the environment of its value chain stakeholders’ upstream or downstream production, human resource or marketing activities.
Now the efficiency sustainability strategy has been fully implemented, PAL’s objective for the 1 July 2016 – 30 July 2017 year is to be the first business in the label industry to gain ISO14001 environmental accreditation. This new 2016-2017 year objective means PAL must progress to the next sustainability strategy phase by designing and implementing a “visionary (Strategic Proactive) strategy”.
PAL will need to undergo further organisational change to develop and embed a sustainability business culture within PAL’s employees (internal stakeholders) and PAL’s value chain (external) stakeholders to achieve this sustainable business objective. Where ever possible, PAL purchases materials (and other necessary input components) from local suppliers or providers and employs local staff in the countries where its factories are located.
Requirements
Develop a business case for sustainability for the board of directors who are not accountants that incorporates the following in your plan [separate your plan into four sections with an appropriate name (e.g., Communication the heading for “a”)]:
a. What PAL must change, and why, and then how to communicate the drivers and benefits of environmental sustainability** (14 marks)
b. How PAL should develop a sustainability culture for employees and value chain stakeholders within PAL Australia operations. ** (13 marks)
c. How (i.e., what actions) should PAL take to overcome any customers’ possible growing concerns about sustainability marketing issues of PAL ** (3 marks)
d. What specific societal values (using the information in Societal Values Section and literature discussed during the semester) for Taiwan and Vietnam will impact upon your business case (in b above). How (i.e., what changes) do you suggest in the development of a sustainability culture for employees and value chain stakeholders in Taiwan and Vietnam compared to Australia to overcome these differences. **
(10 marks)
**students may wish to consider the relevance of components in the list of components in Appendix A – please note, students may find that not all components in Appendix A are be relevant for PAL business
Learning/Assessment Task 2: Information about this Individual Assignment
Description: Your answers to the requirements for the three (3) case studies will form the basis of this individual assessment task. The purpose for this assessment is to assess students overall understanding the course content. The case study answers will relate to material covered for modules 1, 2, 3, 4, and 5 of the course as well as assess learning outcomes 1, 2, 3, and 4 listed below.
Submission Details:
? Electronic submission via link provided on the study desk.
? To receive marks for this assignment YOU MUST include your name and student number in your assignment file
Due Date: 5pm Monday 24October 2016 (see study desk and course specification)
Word Length: Maximum Total of 4,500 words (including calculations) but the length of the answers will vary among case studies and be driven by each case study’s requirements
Weighting: 60 %
Learning Outcomes Assessment Criteria listed below will be incorporated within the marks shown next to each question, Maximum
Mark
1. demonstrate a theoretical knowledge of the role of strategic management accounting in supporting strategy development and the
day-to-day operations of a sustainable organisation 30
2. apply strategic management accounting tools and techniques to improve the contribution and sustainability of value-creating activities 20
3. utilise strategic management accounting tools and techniques skills to ensure the role of performance measurement and control systems in value creation is achieved, strategies are implemented and performance monitored and adjusted to improve the success of the strategies 20
4. apply and integrate strategic management accounting tools and techniques in the planning, monitoring and implementing of strategies. 20
Presentation i.e., grammar, spelling, sentence structure, and logical discussion used to provide answers 10
Overall Assessment 100
APPENDIX A for Case study 3: Please note that you may need to consider the following in your developed business case for sustainability. You need to provide some evidence (or supporting discussion) for any point listed below that you believe to be relevant to the specifics of PAL’s case study
Economic drivers and benefits provide a strong basis for the business case for sustainability. (Chapter 12)
Environmental sustainability that you believe to be relevant for PAL and can provide opportunities for organisations (Chapter 12, Chapter 13, and Chapter 5)
? Some drivers of environmental sustainability that you may be believe to be relevant for PAL:
– financial drivers, the benefits of marketing a ‘green’ company image, the desire to make a difference/do the right thing, new business opportunities, support from the government, the desire to do things better, the desire to minimise environmental and social impact;
? Some benefits of environmental sustainability that you may be believe to be relevant for PAL:
– cost savings, increased competitive advantage, the creation of business opportunities, improved marketing and branding, learning opportunities, enhanced ‘green consciousness’ of staff, enhanced organisational pride, opportunities for staff to engage and have fun;
Human resource and sustainability (i.e., its involvement in the foundation, organisational change, and the internal dimensions of sustainable business) that you believe to be relevant for PAL (Chapter 12);
Marketing and sustainability issues that you believe to be relevant for PAL (Chapter 10); Culture and sustainability process that you believe to be relevant for PAL (Chapter 14).
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Societal Values Section Table 1 provides indices for six (6) societal values and attitudes for each of the three countries where PAL operated. The literature provides information about how these values and attitudes influence what information should be provided and the actions that should taken by PAL for it to develop a shares vision and the embedding of that environmental culture in the different countries where PAL operates (chapter 14). (Please also refer to the literature discussed during the semester) Table 1 - A three-country comparison of Societal Values