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UNIVERSITY OF PORTSMOUTH
UOP BAAFM Intake 14
P22991 Operational Management Accounting (OMA)
OMA Main Assignment
Submission Date: 23 October 2019
Individual Assignment (15%)
The following assignment contains one case study. Please answer all questions.
General Productions (GP) is an electronics manufacturing specialist. It customises electronic components for sale to various customers, from SMEs (Small Medium Enterprises) to MNCs (Multi-National Companies). As part of its strategy, it has made plans to create its own line of mobile phones. However, being a traditionally outsourced manufacturing business, it does not have much experience in manufacturing mobile phones.
In the aspect of sales and marketing, the company had depended heavily on sales managers to execute whatever strategies they deemed necessary. As a result, it was not uncommon for sales managers to under quote potential customers in order to generate revenue, this practice was even more widespread due to the commissions being pegged against revenue.
During the last quarterly management meeting, the chairman held a meeting to hear out the different views of various senior management staff. Within the same dialogue, there were various contrasting views.
The chief marketing officer proposed the use of social media to market the company’s new mobile phones. He also described the prospect of tying up with the various local celebrities, as well as celebrity bloggers.
The head of research and development proposed placing more attention on developing attractive features on the new line of mobile phones. He believed that good design will be critical in ensuring the success of these new mobile phones. These will also enable the company to price the new phones at a premium.
The vice president for finance disagreed about the need to invest aggressively on design and features of mobile phones. He highlighted the unnecessary risks in investing in technologies which are easily displaced by newer ones. These investments are likely to cause potential strains on cash flows, which he believed was not prudent.
Finally, the production director has disagreed on having too many product lines and shortening the product life cycle. He highlighted that the addition and removal of product lines should be carefully considered, since these will inevitably drive up the research costs. Another issue that was raised was the lack of experienced staff to help in maintaining the quality of production output. The replacement of such staff has proven to be difficult, since the required skillset is extremely niche.
Required:
(a) Discuss the views proposed by each member of senior management and propose how the company can best achieve growth in revenue and profits. Maximum 800 words.
(20 marks)
(b) Discuss the common issues in the process of establishing budget systems and suggest how the use of budgets can be helpful in cost management for the company. You should relate your answer to the given case study. Credit will be given for relating the answer to the context. Maximum 600 words.
(10 marks)
(c) The company frequently had difficulties in ensuring appropriate pricing and this problem was further exacerbated by sales managers who aggressively quote clients. It was not uncommon for sales managers to under quote to win deals from clients.
Discuss how the ABC costing methodology can help contribute to more appropriate pricing. Maximum 600 words.
(10 marks)
(d) The vice president for finance was surprised that the gross profit had an adverse variance from budget figures. He was puzzled over whether this was the result of a change in inventory accounting method from the first-in-first-out (FIFO) basis to the weighted average basis.
Discuss whether such an adverse variance will only arise from a change in inventory accounting method.
(5 marks)
NOTE: Please remember to provide references using the APA Referencing Standard. Additional 5 marks will be allocated for proper presentation (i.e., structure, clarity, use of grammar, correct spelling and referencing). Ensure all sections are numbered.
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