Friday, November 29, 2019
Superior Manufacturing free essay sample
Although Exhibit 4 was useful to understand what changes (i. e. o cost items) helped Superior improve its profitability, it does not explain the reasons behind such changes and therefore we cannot be sure that 2005Ã¢â¬â¢s results reflect a true improvement in profitability as shown. For example, if the reduction in depreciation was due to a change in method in 2005, we would need to take account of this and apply the same method to 2004Ã¢â¬â¢s figures in order to reveal a fair profitability comparison between the two time periods. Q4. Why is it Important that Superior has an effective cost system? What is your overall appraisal of the companyÃ¢â¬â¢s cost system and its use in reports to management? List the strengths and weaknesses of this system and its related reports for the purposes management uses the systemÃ¢â¬â¢s output. What recommendations, if any, would you make to Waters regarding the companyÃ¢â¬â¢s cost accounting system and its related reports? Simple cost system: Strategic planning, product-line decisions, identifying manufacturing process-improvement opportunities, profitability analysis, performance evaluation, cost control, and inventory valuation purposes (value inventories, prepare budgets, and analyze performance). We will write a custom essay sample on Superior Manufacturing or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page There are several reasons why it is important that Superior has an effective cost system. Firstly, accurate budget planning of a production is central to the success of a business. That is to say, allocating oneÃ¢â¬â¢s resource in the right place in the beginning is particularly essential to achieve a promising result. Secondly, SuperiorÃ¢â¬â¢s manufacturing strategy was based on the Ã¢â¬Å"dedicated factoryÃ¢â¬ concept, which means each factory has its own direct cost, such as raw material, used in its production line. That implies that it is easy for the managers to tell whether a product generates money and to calculate the direct/indirect costs in order to control costs in each factory. Furthermore, an effective cost system would provide Superior high-level executives advantages to position their goals in terms of profitability and improve their decision making process towards such goals. Strengths: Ã¢â¬ ¢ Entire view of costs (direct/indirect costs, variable/non-variable costs) Ã¢â¬ ¢ Performance tracking in each production line.