Question

The production planning division in the factory needs to ensure all details pertaining to the product design are clear before issuing work order. This process often involves frequent communication with the customers.

At the production floor, timbers are pulled from the warehouse and sawn into different sizes, then passed on to molding and sanding process before being assembled together. Different kinds of paint will need to be sprayed on the furniture before sending them for polishing and packing. The complexity of the design and the timber species used will influence the time taken on all these processes.

The major process losses from the production include scrapped sawn timber (of various sizes which cannot be recycled in the production), sawdust and leftover paint from the painting process. The amount of sawdust collected from the sawing process depends on the sharpness of the bandsaw blade. A blunt saw blade will normally result in having more sawdust. The band saw used in sawing the timber requires set up and testing before the actual production run.

Question : Suggest, with explanation, FOUR possible ways that GH can implement in order to improve production efficiency and productivity. You may apply various contemporary management accounting systems such as process value analysis, activity based management, TQM and other relevant techniques.

Answer 1

The TQM methodology involves execution of the following:

• Provide quality.
• Quantify client requirements.
• Produce incentives associated with goals related to quality.
• Develop efficient measures related to service and product quality.
• Promote leading by example.
• Educate workforce to utilize new advanced technology and professional processes.
• Design services and products to meet the quality requirements most cost effectively.
• Recognize existing and upcoming customer requirements.
• Encourage a zero-defect culture in all activities
• Acquire efficient feedback mechanisms that ensure continual perfection.

All the above measures can be taken to reduce the process losses occuring in the manufacturing

Activities for Value Analysis that need to be applied in the present situation

Activities for value analysis are separated into following activities:

Product/Service - The 1st step is to identify the product or service which is based on usage/demand, complexity in development and future potential.

Cost Analysis: The next step understands in detail cost structure in developing and manufacturing the product.

Define product and function: The next step is to define all the primary function of the product and service through satisfying the basic need and then taking next step in delighting the customer. For this better understanding of product components and characteristics is required.

Evaluation of alternatives: Through brainstorming possible alternatives can short listed which can provide value to the primary function of the product. Cost evaluation at high level needs to be done for all the alternatives, and the cheapest alternative is short listed.

Secondary Function evaluation: Secondary functions of the product and services are studied and evaluated.

Recommendation: Value Analysis done has to communicate to the various level of the management team as to get acceptance.

Even in the present the situation all the above steps have to be analyzed to know reason for wastage, whether any alternatives exist, whether there can be a change suggested in design. etc

Key points about activity-based costing that can be used in the present situation

1. The allocation of indirect costs is at least somewhat arbitrary, even using sophisticated accounting methods.
2. Activity-based costing provides more detailed measures of costs than traditional allocation methods.
3. Activity-based costing can help marketing people by providing more accurate product cost numbers for decisions about pricing and which unprofitable products the company should eliminate.