Accounting for Managers Globalization and Economy

Question: Describe about the Accounting for Managers for Globalization and Economy. Answer: Problem 1 Faster processes and reduced process times to help companies to be more competitive Globalization in the economy requires the formulation of new technologies for production process of the companies with respect to the faster and accurate production of goods and services. With the continuous increase in the market competition, it is essential for the companies to improve the process time in the areas of engineering and administration. Business Process re- engineering is a procedures adopted by many organizations in the recent times to improve the business activities (Polyvyanyy, Smirnov and Weske 2015). It involves the structural change in the areas of technology and manufacturing areas considering the locations and products of the companies. Business Process re- engineering is a process in which fundamental rethinking and radical redesign of business process is conducted to improve the speed of the production of goods by maintaining the quality. The process requires the preparation of structures as per the measured set of activities in the areas of engineering, admi nistration and information technology by adopting the updates techniques (Koetter and Kochanowski 2015). The process timing in the concerned areas can be reduced by incorporating the updated production techniques in the engineering areas. However, in the administration area the process timing can be reduced by incorporating skilled and experienced personnel to operate the business activities. In order to be more competitive, the companies may incorporate online activities that provide faster and accurate results in the business activities (Mijumbi et al. 2015). Importance of improved quality In order to maintain the competitiveness it is essential to produce the work faster by reducing the process time but at the same time quality of the process should be improved. In the present era, consumers are more concerned about the quality of the products rather than any other factors therefore, the companies are required to maintain and improve the quality in the production process (Weber, Olaru and Marin 2016). For instance, Woolworths Limited, one of the largest companies in Australia is known for best quality products as well as improved organizational structure in terms of supermarket chain. High quality products as well as processes are essential in different areas of the business organizations for production process and administration department. Many companies are working to follow the concept of six- sigma in producing the products that involves the production of products with 99.99% perfection. The improved quality in the production process of the company is essential t o create the trust, reliability, marketability and competitiveness that help in maximization of profits and wealth of the company and its stakeholders (Hambrick, Humphrey and Gupta 2015). iii. Potential problems may arise from the increased speed of processes Increased speed of processes in the business organization influence several factors with respect to the production, management and distribution that may form potential problems. One of the major problems that may arise is maintenance and improvement of quality in the production processes and products. Increase in the speed of the processes may affect the quality of the products while designing, development or manufacturing the products and services. Another potential problem that may arise is maintenance of quantity in case the production process is conducted in batch system (Leung, Parker and Courtis 2015). In case the process speed is increased, it is likely to affect the quantity that is established to be produced under the normal standard set by the management. Further, the increased speed of processes impacts the communication between the executive employees and subordinates that affect the flow of relevant information required for business decisions. Further, the increase in sp eed of process may create the potential problem with respect to finding the root cause in difference of improved production process, administration process and distribution process. Increase in the speed of the processes creates faster production and business activities but at the same time, it creates several problems within the business process that may affect the organizational competitiveness (Georgieva 2015). Problem 2 In the present situation, operations of XYZ Ltd having two branches in Brisbane and Adelaide represented changes in the financial statements. The operational result in the Brisbane branch reflected increase in net profit as well as the balance of finished goods inventory. On the contrary, Adelaide branch reflected no net profit but the balance of finished goods inventory disclosed reduction. It can be analyzed that the reduction in the balance of inventory results in reduction in cost of goods sold whereas the increase in inventory results in lowering the net income before tax (Cheng, Harford and Zhang 2015). However, in case of income of Brisbane factory, net profit reflected increased balance even though the finished goods inventory increased. It can be said that the business operations of Brisbane factory was more efficient than the operations in Adelaide factory since it did not reflect any net profit even the inventory showed a reduced balance. Considering the financial result and efficiency of business operation, the managerial bonus was offered to the manager of Brisbane factory and not to the manager of Adelaide factory. Though the offer of managerial bonus was justified, it creates conflicts if it is provided only on the basis of the net profit generated by the company. One of the major conflicts that may arise is long- term risks if the bonus is offered only on the generation of net income since generation of net profit depends on several factors. Additionally, conflicts on the motivation of manager will be affected since the reduction in the finished goods inventory affects reduction in cost of goods sold whereas increase in inventory results in increase of cost of sales. Another conflict that arises on managerial bonus based on the net profit affects the harmonization of diverse interest for the performance of business activities (Lin and Wu 2015). Problem 3 Material variances in a manufacturing company indicate the effectiveness and efficiency of production cost and units. It is measured by using the actual cost and units employed by the company in comparison with the standard set by the management. Favorable material variances indicate the efficient use of raw materials and cost in the process of production of goods and services (Capolei et al. 2015). On the other hand, unfavorable material variance indicates the actual use of units and cost more than the standard units and costs. Similarly, Labor variances indicate the efficiency of labor hours or man- power in production of goods and services by comparing the actual data and standard data. Favorable labor variance indicates that the laborers are efficient in producing the products in less than the standard time set by the company (Taylor 2016). Analysis of production costs and variances for a particular period provides essential information to the management for producing goods and services. It indicates the overall changes in the level of market price, information on the use of quality of the products as per the standard data procured by the management. Production costs and variances provide better negotiation in price to procure the employees or workers for manufacturing process along with the implementation of purchase discounts. It also provides the information on the bargaining power of suppliers, procurement of skilled and unskilled workers at minimum wage rate. Variances and production costs also provides information on the potential profit that the company expects to earn in the given period (Wang and Chan 2015). Problem 4 Variable cost per unit Variable cost per unit is determined by considering the total variable expense in the production process divided by the total units produced or sold. Accordingly, computation of variable cost per unit for the budget A and budget B in the books of Always Right, manufacturing company: Particulars Budget A Budget A Sales Units 20,000.00 30,000.00 Variable Expenses $: Direct materials 260,000.00 360,000.00 Direct Labor 40,000.00 60,000.00 Variable Overhead 60,000.00 75,000.00 Variable selling and administrative expense 60,000.00 60,000.00 Total variable expenses 420,000.00 555,000.00 Variable cost per unit: (Total variable cost/ total sales units) $21.00 $18.50 Table 1: Variable cost per unit (Sources: Created by author) Analysis of costs and sales forecast in the budget A It is mentioned that the lower and middle management presented the budget A while the senior management presented the budget B presenting the sales forecasts by considering 20,000 units and 30,000 units respectively. Since the budget A has been prepared by the lower and middle management, it can be said that it has been prepared with the conservative or bottom- up approach. On the contrary, senior management prepared budget B hence it was carried on by considering the higher amount of sales and lower amount of costs. Another reason could be lack of awareness about the complete information on costs incurred in the production of products (Azzimonti, Battaglini and Coate 2016). iii. Analysis of costs and sales forecast in the budget B Budget B has been prepared by considering the top- down approach, which is prepared for the organization as a whole including the management at lower level. Hence, the sales forecasts taken to prepare the budget B are higher than that of budget A while the fixed cost is lower. Fixed costs in the business activities does not change with the change in production quantity and if it is considered for the entire organization then the proportionate fixed costs reflects a declined value (Delgado, Falcn and Ramrez 2016). Therefore, in case of budget B, the total cost is lower and the sales is higher therefore net profit is also higher for the entire organization. Further, the behavioral implications of the top- down approach are dysfunctional behavior, systematic planning, co- ordination and communication behavior. Top down approach provides the implication on the culture, processes and structural changes concerning the employees of the organization that improves the business activities. Consensus on the budget and advantages of the approach In the present situation, budget A has been prepared by using the bottom- up approach whereas the budget B has been prepared by using top down approach. In order to come to a consensus on the budget the higher management and lower level management teams are required to prepare a detailed schedule on the production and administration costs. Both the groups are required to identify the business activities and related cost pools along with the cost drivers that reflects the accurate results (Azzimonti, Battaglini and Coate 2016). Further, both the groups are required to forecast the sales by considering the market structure, consumer preferences as well as the organizational brand name. Considering the consensus on the budget, it provides several benefits with respect to the inclusion and participation of the groups. It empowers and increases the co- operation between the groups involved in preparation of the budget for the production processes. The budgeting approach establishes the understanding and equalizes the group power that assist in making better business decisions (Delgado, Falcn and Ramrez 2016). 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