Essay: Workplace Considerations For Business Members.

Manufacturing Cost Flows

Discuss about the Workplace Considerations for Members in Business.

Cost of goods manufactured schedule

Cost of goods sold schedule

Demands for globally traded dairy products are now dominated by China and Australia is benefitted from this. The free trade deal with the country slashed tariff on the dairy exports can lead Australia to become the land of milk and Australia is set up for taking advantages from the addiction of china on western powdered milk. Infant formula is the preferred foods in china for the infants (Fuller & Beghin, 2015). However, as the mainlanders from Chinese mainlanders were busy in holidaying in the western countries and were taking home the milk powder for family and friends. Chinese tariffs on the Australian dairy products will be cut over the period of 4-11 years and 15% tariff for infant formula milk will be eliminated in 4 years. On the other hand, it will further increase the competitiveness of China, their ability to get healthy, safe, reliable sources for quality protein and the dairy products. 

Reduction in tariff will reduce the export cost of the company, which in turn will reduce the overall manufacturing cost of the product. Therefore, the company can manufacture more products for the purpose of exports. On the other hand, reduction of tariff will increase the competition in export. Therefore, the company may have to improve the quality of the goods to face the competition (Douphrate et al., 2013).

The accounting profession for China is headed by Law of People’s Republic of China on the Certified Public Accounts. China does not follow the international accounting guidelines and policies. However, they are moving to the direction with the accession to World Trade Organization that will be fully complied within few years. As the Chinese government implemented the reform and opened up various policies during 1978, various western concepts of management accounting and techniques are introduced in China.  The main issues with implementation of the western methods are not the political sensitivity issues, but the issues are technical constraints. While essential data for MIS is developed in Chinese companies for usage of the western techniques like Activity Based costing, it is not possible to collect the data easily under the present situation (Hu, Chand & Evans, 2013). Moreover, the changes in the management accounting can be experienced in few areas like promotion of the products, profitability and usage of responsibility accounting as major criteria for choosing investment projects. Further, the Chinese are generally comfortable with grey areas and not with the black and white areas of the business. Learning these navigations requires patients and observance. Taking time for understanding Chinese way is rewarding in professional as well as personal ways (Hilton & Platt, 2013).

Income Statement for Snoozy Trading Co Ltd

Guanxi is based on the concepts of loyalty, reciprocity, trust and dedication that helps in developing the non-familial and interpersonal relations and mirroring concepts of filial piety that is used for ground level familial relations. Eventually the relationships established by guanxi are not transferrable and personal (Kaynak, Wong & Leung, 2013).

On the other hand, power distance is the way in which the power is unequally allocated. In simple words, people from some cultures accept the higher degree of the power that is unequally distributed as compared to the people from other cultures (Sriramesh, 2013).

It is observed that the Chinese people have comparatively high power distance whereas the Australian people have low index value for power distance. Therefore, the management practices in China states that the Chinese superiors will expect to lead, take decisions paternalistically and autocratically (Luo, 2013). On the other hand, the subordinates are unwilling and afraid to disagree with the decisions of superiors. Therefore, Deirdre shall keep in mind these facts while interacting with the managers of China South Dairy Company.

• Sales, production and purchase budget

Sales budget

• Budgeted cost of goods manufactured schedule

• Budgeted cost of goods sold schedule

Computation of NPV

Generally, the project is accepted if the net present value of the project taking into consideration the discounting factor of cost is positive. It has been found from the calculation that the net present value of the project is $ 20,354,314.16. Therefore, as the NPV of the project is positive, the project is acceptable (Žižlavský, 2014). However, before accepting the project various other factors like risks and opportunities must be taken into consideration. Various risks that may b effaced are that though the production capacity of the plant is increased, the workers may not be willing to work for more productions. If new employees are engaged they may charge higher wages that may eat up the additional profit. Further, there may be financial obstacles for investing in the new project. On the other hand, the opportunity that may be achieved by the company is competitive advantages over the competitors, capturing the market segments which in turn will increase the profitability (Leyman & Vanhoucke, 2016). Therefore, after taking into consideration the risk and opportunities the project may be accepted if the net present value of the project is positive.

Variable cost and fixed cost –

Fixed cost is the cost that remains same irrespective of production volume whereas the variable costs change when there is a change in the output. Fixed cost includes building, machinery and rent. On the other hand, variable cost includes wages, utilities, material cost for production (Drury, 2013). The main differences among 2 types of costs are as follows –

International Issues in Management Accounting

Product cost is attributable to product that is the traceable cost to the product and forms the part of the inventory values. On the other hand, period cost is opposite of product cost as it is not associated with the production and cannot be allocated to the product and charged under the period to which they relate (Mishan, 2015). The main differences among 2 types of costs are as follows –

Relevant range is the specific level of activity and is bounded by maximum and minimum amount. Within designated boundaries, specific cost or revenue levels are expected to occur. Outside of the relevant range the expenses and revenues are expected to differ from expected amount. Identification of the relevant range is crucial as knowing production level at which the costs will be changed is crucial for budgeting, financial planning and accounting (Seuring & Goldbach, 2013).

The concept of relevant range does not only apply to the fixed costs. Relevant ranges are also available for selling prices and variable costs. Volume lower or higher than relevant ranges states different selling prices and variable costs per unit (Christ & Burritt, 2013).

Change in sales volume –

The main objective of the report is to analyse the impact of changes in the sales volume on the profitability of Star Wars and its competitor Death Star Manufacturing with respect to sales of electronic toothbrush.  From the above calculation it is observed that –

• The sales volume of Star wars has been changed on account of increasing the advertising cost through rebates to the retailers. However, due to this the cost of the company went up to $ 51,957,000 from the initial amount of $ 38,100,000. Profit went down to $ 65,43,000 from $ 69,00,000 and the ROTA of the company went down to 16.36% from 17.25% (Fullerton, Kennedy & Widener, 2013).
• Due to reduction in sales volume of Death Star the cost of the company went down to $ 22,427,250 from the initial amount of $ 30,480,000. Moreover, profit went down to $ 20,611,500 from $ 29,400,000.
• It can been observed that the required ROTA of the company is 20%. However, if the company accepts the project, its ROTA will reduce from current 17.25% to 16.36% which is far below as compared to required rate. Therefore, it is not recommended to accept the project.

APES GN 40 deals on the matters related to ethical conflicts in the workplace, professional obligations and various ethical requirements to comply with the fundamental principles of the business that includes professional competence, professional behaviour, due care, confidentiality, integrity and objectivity (APES GN 40 Ethical Conflicts in the Workplace - Considerations for Members in Business, 2018).. Here, in the given case to enhance the profit Deltrey, the finance director of Who publishing approached the supplier for production material that 50% of the production material shall be invoiced as plant and equipment so that they can be recorded under fixed asset instead of profit and loss statement which in turn will reduce the expenses and will record higher amount of profit as compared to actual profit. However, when the matter was noticed by the management account Eric Burdon he was advised not to get involved in the matter. Therefore, Burdon in the given situation may be suggested to discuss the matter with higher level of management or the CEO or the shareholders. He may further expose the matter to the internal auditor of the company.  

Burdon must be aware of the relevant facts and its consequences and accordingly collect various documents required for further action. As the major people those will be impacted in the given cases are the users of financial statements like creditors, stakeholders, auditors and investors the matter may be discussed with them (Tucker & Lowe, 2014). However, before any further discussion, Burdon must evaluate the company practices, policies, guidelines, laws and regulations regarding treating the production material in the financial statement. Burdon may also raise the mater in the general meeting of the board.

Reference

APES GN 40 Ethical Conflicts in the Workplace - Considerations for Members in Business. (2018). Retrieved from https://www.apesb.org.au/uploads/standards/guidance_notes/40c1.pdf

Christ, K. L., & Burritt, R. L. (2013). Environmental management accounting: the significance of contingent variables for adoption. Journal of Cleaner Production, 41, 163-173.

Douphrate, D. I., Hagevoort, G. R., Nonnenmann, M. W., Lunner Kolstrup, C., Reynolds, S. J., Jakob, M., & Kinsel, M. (2013). The dairy industry: a brief description of production practices, trends, and farm characteristics around the world. Journal of agromedicine, 18(3), 187-197.

DRURY, C. M. (2013). Management and cost accounting. Springer.

Fuller, F. H., & Beghin, J. C. (2015). China’s growing market for dairy products. Iowa Ag Review, 10(3), 5.

Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2013). Management accounting and control practices in a lean manufacturing environment. Accounting, Organizations and Society, 38(1), 50-71.

Hilton, R. W., & Platt, D. E. (2013). Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.

Hu, C., Chand, P., & Evans, E. (2013). The effect of national culture, acculturation, and education on accounting judgments: A comparative study of Australian and Chinese culture. Journal of International Accounting Research, 12(2), 51-77.

Kaynak, E., Wong, Y. H., & Leung, T. (2013). Guanxi: Relationship marketing in a Chinese context. Routledge.

Leyman, P., & Vanhoucke, M. (2016). Payment models and net present value optimization for resource-constrained project scheduling. Computers & Industrial Engineering, 91, 139-153.

Luo, X. (2013). Guanxi competence as intercultural competence in business contexts: a Chinese perspective. interculture journal: Online-Zeitschrift für interkulturelle Studien, 12(20), 69-89.

Mishan, E. J. (2015). Elements of Cost-Benefit Analysis (Routledge Revivals). Routledge.

425. Tucker, B., & D. Lowe, A. (2014). Practitioners are from Mars; academics are from Venus? An investigation of the research-practice gap in management accounting. Accounting, Auditing & Accountability Journal, 27(3), 394-425.

Seuring, S., & Goldbach, M. (Eds.). (2013). Cost management in supply chains. Springer Science & Business Media.

Sriramesh, K. (2013). Power distance and public relations: An ethnographic study of Southern Indian organizations. In International Public Relations (pp. 181-200). Routledge.

Žižlavský, O. (2014). Net present value approach: method for economic assessment of innovation projects. Procedia-Social and Behavioral Sciences, 156, 506-512.