Interrelating Material Flow Cost Accounting -Myassignmenthelp.Com

Question: Discuss About The Interrelating Material Flow Cost Accounting? Answer: Introducation Considering the Jan Rossi proposal the companys accountant expected that the selling price requires being $140 per unit for attaining high profit level. Moreover, the companys uncertainty level might be enhanced in case the promotion campaign is not capable to gather attention of fellow consumers (Otley and Emmanuel 2013). Because of this reason, there might be a drastic drop in Bonza Handtools Limiteds profit margin with high promotion and advertising expenses. Bonza Handtools Limiteds production manager Tom Tune, revealed that certain boost in variable cost can decrease per unit contribution margin. Moreover, the promotional strategy expense is low in accordance to the first proposal that can result in high profit of $75,000. This is due to the fact that consumer satisfaction might enhance with product quality (Schmidt, Gtze and Sygulla 2015). The companys sales manager Mary Watson stated that per unit selling price is to be decreased by $10 for initial three months of the financial year. Conversely such initiative could not offer positive results for Bonza Handtools Limited in the upcoming years (Kokubu 2013). This is due to the fact that consumer can perceive there has been decrease in product price as the organization did not maintain quality of its products. Recommendations: From above analysis the directors of Bonza Handtools Limited are convinced to accept the companys production managers proposal. Regardless of identical level of profit as the accountant proposal there is increased risk factor within the proposal as further focus is on advertising and promotional strategies. The third proposal might result in a high profit in comparison to second alternative in which consumers turnover can enhance drastically. The table under is prepared based on the recent plan along with two manufacturing capabilities of the company relied on the offered information: The factorys manufacturing year at 200,000 units each year: From necessary information, it is revealed that the Tassie Company can produce 200,000 units each year. Moreover, the sales volume might be boosted through using overall ability. This leads to highly improved profit margin and this organization can be capable to sell goods at $10.8 per unit that is attained through adding fixed cost, variable cost long with 20% mark-up for the cost price (Klychova et al. 2015). The factorys manufacturing ability at 180,000 units each year: Considering the condition of the Tassie Company it can manufacture more than 180,000 units each year. Therefore, in the initial 30,000 units, the average price might be $10.80 along with additional units and the amount might be around $13.30for every unit. In addition, overall average price of 40,000 units is gathered as $11.43 (Seuring and Goldbach 2013). Activity-based costing importance and fractioned overhead cost pools for pricing Activity-based costing along with segmented overhead cost pools facilitate in allocating amount incurred on a particular conduct focused on the head of the department. In addition, through employing the activity based costing along with segmented overhead cost pools, the companys manager might take superior decisions related with the cost structure in order to increase the profit (Pettersson and Segerstedt 2013). A suitable position might come into existence for the production manager of the firm while consumer negotiation takes place. For the activity based costing a specific departments actual cost is recognized and as per the same certain anticipated hours for the department is computed. Once the above steps are completed, the real direct cost must be divided by the anticipated hours in order to compute each unit rate. The cost pool indicates all the direct costs and the anticipated hours can be recognized as a cost driver. That might result in cost deduction, enabling competitive pricing strategy long with boosting the business profit (Rieckhof, Bergmann and Guenther 2015). For instance, certain charges of supervision might be related considering the total employees present in a department. The above mentioned steps are conducted and the division of real direct cost is conducted by the estimated hours. This might make sure of arriving at a per unit rate. In addition, after anticipation of the unit cost all the cost activities might be apportioned with activity based costing distribute to all products. For this reason, it might also be employed to make sure of attaining increased sales and profit margin (Rieckhof, Bergmann and Guenther 2015). A favorable situation might take place in front of the production manager of the company at the time when consumer negations are conducted. The actual direct cost is association with a particular department is recognized along with relied on certain detection, the estimated departmental hours that is calculated in consideration to activity based costing. Overhead segmentation function in overhead costs allocation within individual jobs Separation of overhead expenses might be advantageous in cost ascertainment that is not explained within the normal business while anticipating overhead expenses in case they are associated with the same. The expenses and income can be related with all manufacturing departments that might facilitate in realising business segments that is increasingly beneficial (Seuring and Goldbach 2013). On the other hand, in case an organization has increased focus on a single item, overhead costs might be efficient that can facilitate managers in anticipating product line profitability. In addition, the accountant of the company might recognise overheads, that can ultimately lead to negative or positive product profit changes. Overhead costs might be separated in different expenditure heading that can facilitate cost determination for specific jobs and services. Some examples of it are mentioned in the table. Variable overhead Indirect overhead Administrative overhead Manufacturing overhead handling of materials salaries supplies and equipment utilities Production salaries research and development Legal fees Accounting and auditing fees Commission or wages selling utilities administration lease Factory utilities Property taxes janitorial employee wages All the overhead expenses can be elaborated with illustrations (Rieckhof, Bergmann and Guenther 2015). For instance, within Melbourne Private Hospital, the computer system is used in order to deal with treatment timing and the physicians employ the same at the station of nurses. Moreover, materials and order treatment are requisite along with that charges and cost are systematically requisite in consideration to patient stay within the hospital. Costs are related to patients beds, meals and x-ray reports. Due to this costs are explained in a better manner within subsidiary ledger including the patients episode and medical number. Another example can be considered of a manufacturing company in Australia that is Adelaide Brighton Cement, which can be considered as a company that allocates the labour hours for assigning suitable costs to employees for generating expenses that the organization might have to experience (Seuring and Goldbach 2013). In addition, the labour hours along with direct costs related with the employees are maintained on the behalf of the lawyers along with accountants. While allocating costs it is necessary to carry out different jobs and services and it is easier to track the adequate amount of cost that can be spent. For this reason, it supports in developing a policy associated with pricing as well as taking major suitable decisions. While the overhead costs is aligned with distinct jobs and services the overall cost of each department is identified along with advantages gathered from every department. For this reason, it can be simple for the managers in anticipating the profit margin associated with the product line. In addition to same, the recognition of overhead might be simpler for the accountant of the organization that can lead to variations in product. These differences can lead to either negative or positive results (Rieckhof, Bergmann and Guenther 2015). For this reason, certain heads of expenses might be employed for separation of the overhead expenses. Therefore, the expenses might be determined in association with certain services or jobs. References: Kokubu, K., 2013. Material Flow Cost Accounting: Significance and Practical Approach. InHandbook of sustainable engineering(pp. 351-369). Springer Netherlands. Otley, D. and Emmanuel, K.M.C., 2013.Readings in accounting for management control. Springer. Pettersson, A.I. and Segerstedt, A., 2013. Measuring supply chain cost.International Journal of Production Economics,143(2), pp.357-363. Rieckhof, R., Bergmann, A. and Guenther, E., 2015. Interrelating material flow cost accounting with management control systems to introduce resource efficiency into strategy.Journal of Cleaner Production,108, pp.1262-1278. Schmidt, A., Gtze, U. and Sygulla, R., 2015. Extending the scope of Material Flow Cost Accountingmethodical refinements and use case.Journal of Cleaner Production,108, pp.1320-1332. Seuring, S. and Goldbach, M. eds., 2013.Cost management in supply chains. Springer Science Business Media.