management accounting
I need only introduction and Literature review total of 800 words.
*introduction (500word )
*literature review (300 word )
*5-10 references
Zubair Technologies Co (ZTC) produces and sells Gadgets for children. The company’s main customers are Super stores like Lulu and Carrefour that sell a Gadget, which can survive rough handling by children. The Gadgets are individually specified by Stores for each order and pricing has been on a product cost plus basis with a mark-up of 35%. The company uses an absorption costing system based on labour hours in order to calculate the production cost per unit.
The main control system used within the company is the annual budget. It is set before the start of the financial year and variances are monitored and acted upon by line managers.
Further financial information is provided in the below table:
|
Volume (units) |
12,300 |
|
|
Total OMR‘000 |
||
|
Direct variable costs Material |
21,200 |
|
|
Labour |
1,890 |
|
|
Packaging and transport |
1,200 |
|
|
Subtotal |
|
24,290 |
|
Overhead costs |
||
|
Customer service |
3,650 |
|
|
Purchasing and receiving |
1,250 |
|
|
Inventory management |
1,060 |
|
|
Administration of production |
1,350 |
|
|
Subtotal |
|
7,310 |
|
Total |
31,600 |
|
Labour time per unit |
2 hours |
|
Data collected for the year |
|
|
No of minutes on call to customer |
420,600 |
|
No of purchase orders raised |
11,200 |
|
No of components used in production |
310,800 |
|
Order # 5656 |
||
|
Units ordered |
40 |
|
|
Direct costs for this order: |
OMR |
|
|
Material |
70,328 |
|
|
Labour |
6,600 |
|
|
Packaging and transport |
3,400 |
Their activities relating to this order:
No of minutes on call to customer2,604
No of purchase orders raised160
No of components used in production 1,250
Administration of production (absorbed as general overhead)2 Labour hours per unit
The board papers contain a high-level summary of financial information, comparing performance against budget for revenue, costs and profit. The CEO is concerned about the performance information, which is provided in the monthly board papers.
ZTC Key Performance Indicators are profit, profit margin, free cash flow and return on capital employed. Although the CEO acknowledges that the fall in profitability is a concern for ZTC he believes that the company’s performance measurement systems should not focus solely on financial information, but also non-financial information such as quality, or flexibility in meeting customer specifications etc.
Required
You being the Management consultant of Zubair Technologies Co (ZTC) have been asked by the management to write a detailed report on evaluation of traditional absorption costing system against Activity Based Costing.
Your report should include the following points with supporting calculations and working notes:
- An Ideal Introduction to the report which should include relevant literature review
INSTRUCTIONS
- Use of the relevant academic literature to support ideas and issues discussed.The range of academic sources such as texts and journals to support your arguments and comments.
- Any reference to authors and other writers shall be quoted with due acknowledgement in your assignment report using the Harvard Referencing System. For details of Harvard referencing style refer the student’s hand book page 46-47 section7.2..
