Management Accounting Tangram Dairies Ltd

Question: Discuss about theManagement Accountingfor Tangram Dairies Ltd. Answer: Tangram dairies Ltd. produced wide range of milk products in the Kiewa Valley of North east Visctoria. The experts from the Sino production, the parent company of Tangram dairies Ltd. suggested that their production lined are required to be altered to align with the modern systems and are expecting to achieve the production capability to be tripled if they work on the manufacturing facilities. The project will cost $ 4 million and the benefits are expected to have a useful life of 15 years. the required amount that is, $ 4 million is to be financed by Sino production at a reduced interest rate of 4% per annum for the up gradation of the subsidiary Tangram dairies (Sino Manufacturing Solutions, 2017). It can be identified from the budgeted sales and profit forecast for the next 5 years before and after the up-gradation that if the company does not opt for the up-gradation, then it will earn a profit of 15%, 20%, 22%, 25% and 27% respectively over the years from 2017 to 2021 on its sales. However, if the company goes for up-gradation then for initial two years it will earn a profit of 10% and 18% respectively, which is lower than the profit that will be achieved if the company does not go for up-gradation. However, from 3rd year, that is from 2019 to 2021, it will earn higher profit as compared to the non-up gradation and moreover, the rate of profit will also be much higher, for instance, 24%, 30% and 34% respectively over the years from 2019 to 2021. Therefore, if the company can ignore the short-term benefits and can think for long-term benefits then they must opt for up-gradation of the product line to overcome the production constraint (Irish Dairy board, 2017). Reference: Archive - Irish Dairy board. (2017). TANGRAM. Retrieved 24 April 2017, from https://aidan-corish.squarespace.com/archive-irish-dairy-board/ Sino Manufacturing Solutions. (2017). Sino-manufacturing.com. Retrieved 24 April 2017, from https://www.sino-manufacturing.com/