Joy will state the recommendation briefly and give an industry analysis. Meme will discuss the strategic management accounting technique used and Carnelian will provide an analysis of our results. Courtney will offer an extended recommendation with supporting numerical evidence. Finally, Amanda will discuss the alternatives, before concluding the presentation with a summary of key point s. JENNY – Problem – 1. Min The problem facing Creole’s printing division is the inadequate costing system m which is currently in place.
Cheerio has been described as a reliable and stable partner by supplying high quality printed matter at competitive prices and With the shortest possible turnaround times. Furthermore, it has recently invested in a new 48 page press, resulting in absentia increases in capacity and a larger number of resolutions on the printing presses. However, the potential of Creole’s printing operations cannot be reached with an poor cost inning system. Although it is accurate in dealing with direct costs, the current costing system is highly ineffective and inaccurate when it comes to allocating overhead costs.
This is for a number of reasons; for example, capacity problems cannot be identified, the cost Of unplanned stoppages is unknown and machine hours as a cost pool is inaccurate. For a printing business, understanding and being aware of unused capacity is critical. It may be the cornerstone to achieving a more favorable competitive advantage. Such problems can be addressed and solved by implementing an improved costing system. The controller, Lucerne, is keen to implement timeserver activity based costing to better allocate costs to production.
This would ensure Creole’s differentiated competitive advantage is maintained through reduced costs, improved customer service and increased profitability. JOY – Recommendation + Industry – 3 miss We recommend that your business implements ADAPT in all 3 of it’s printing units which are Heat set Works, Cold set Works and Sheeted ringing. This is because, for Heat set works, it shows unused capacity compared to the old costing system, which didn’t. We believe if we also applied ADAPT to cold set and sheeted, it would have the same effect of showing the unused capacity.
Using ADAPT, will benefit your company, because by knowing the unused capacity, you can either try to reduce this waste or see this as an opportunity to increase strategy. There are also many threats to this industry. One threat to the industry, is the ability to read newspapers and print online, this means that the demand for printing papers has decreased. In our analysis, we are focusing on Creole’s printing unit. Therefore, while lo king at the printing industry, we would say that the graphical market is saturated which means there is declining margins and over capacity.
This means that we need to have a competitive advantage to not only maintain but increase our competitive advantage in the industry. Our strategy is based on differentiation as we like to provide high customer service and quality. This gives us our competitive advantage, and needs to be considered throughout all stages of this process. This means that our cost management was crucial, so that we can remain competitive and profitable. Emmett -SAM Technique – 1 min will begin by discussing the strategic management accounting technique of it me driven BBC.
This sis technique under the SAM framework, which is management accounting but with taking into account the strategy of differentiation so that we can survive and be profitable in the long term. ADAPT directly estimates the resource demands imposed by each quire and copy. It is similar to BBC, however it is based on the time that each activity takes, rather than a resource driver. The tatty of T DAB is its ability to distinguish between used and unused capacity. This is extremely relevant to Cheerio due to its relatively continuous service and therefore it’s unavailability in encountering unused capacity.
Cheerio can then look at this unused capacity, and determine if it is waste and then reengineering i?s value chain to prevent the majority of unused capacity occurring, or to view this unused capacity as an o opportunity. Overall, We have applied this technique as it has been useful in helping us better allocate costs to production at Corbel o Printing. CARLINE – Analysis – 4 min Applying T DAB works well and we have conducted our analysis on why it is a great method. However we have also stood back and thought about the job costing, as in the actual costing pools Cheerio is using the reasons for their past decisions and .
Firstly I will talk about Creole’s job costing: For a customer, what they get charged for the adoption of the machine, depends on what the precious customers order was. This is very strange because what a customer gets charged, should not be at all related or dependent on what another customers order is. For exam peel it costs more for a customer to have a ‘larger adaptation’, meaning hat if the previous order was completely different, like a different paper and fold outline, they get charged more due to the large adoption needed.
This is not up to the customer and it is unfair as it means they are paying more because their order is different to the previous one under ADAPT. One customers cost should not depend on costs outside of their control, such as previous unrelated customer order. A customers order should depend on the individual difficulty and needs of the customer’s quire. For example, a customers quire being full color vs., black and white and different paper weights, sizes and folds.