Cost Management Systems
Assessment objectives
This assignment provides students with a number of learning opportunities.
1. Students learn to collaborate with others to achieve a collective goal. Being able to work in a team is an important skill as management accountants increasingly work as part of integrated teams in practice.
2. Students are required to apply cost accounting concepts and techniques to solve a practice-based problem. This encourages students to learn about how cost accounting is applied in a real-world setting, and further develop critical thinking and problem solving skills.
3. Students need to develop an understanding of how to tailor cost accounting techniques to a specific organisational setting. This promotes the development of research skills and critical evaluation.
4. Students will need to make estimates of costs to demonstrate their cost accounting solution. A fundamental aspect of management accounting is preparing information based on estimates and making decisions with limited information. This furthers the development of logical reasoning and analytical skills.
The assignment must be based on one of the following organisations. Tutors will randomly allocate each group an organisation.
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Unilever
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Proctor & Gamble
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Goodman Fielder
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Johnson & Johnson
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Nestle
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Bega Cheese
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Billabong
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Kathmandu
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Treasury Wine Estates
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Colgate Palmolive
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Kraft Heinz
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Campbell Soup Company
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*Selected organization - Kathmandu Australia
The focus of the assignment is a product division of the organisation. If the organisation has multiple product divisions, you can choose one product category to focus on. For example, if your organisation is Unilever, you could focus on ice creams, deodorants, or another product category (as long as the category contains multiple products). Please seek advice from your tutor if you are unsure of what would be an appropriate focus.
Assignment submission
There are three points of submission for this assignment.
Meet all of the following requirements below.
a. A diagram of the value chain for the selected product category of the assigned organisation.
b. An analysis of the value chain with a focus on the operations component. As a guide, you should aim for the analysis to be around 600-800 words in length, excluding tables and diagrams (Size 11 font; Times New Roman or Calibri; 1.5 line spacing, 2.5cm page margins).
c. Formatting must follow the UTS Guide to Writing Assignments.
d. A reference list with a minimum of five referenced sources. References must follow the Harvard referencing style.
Assignment requirements
Your group is a consulting team hired by the Chief Financial Officer (CFO) of your assigned organisation (see above). Your team has been asked to prepare a report to address product costing issues in the organisation. Your report is to have three main parts.
Part 1 - Business Processes
Your team is required to present an analysis of the value chain of the product category of your organisation. The value chain model should be tailored to the specific industry context, operations and characteristics of your organisation and the selected product category. This section should include a detailed diagram or other figures representing the value chain or aspects of it. While the full value chain should be briefly outlined, the main focus of this section should be on the operations component of the value chain.
Part 2 - Costing System
Your team is to design a costing system for the product category of your organisation. The costing system must be based on the principles of Activity Based Costing (ABC). Assume that your organisation has not adopted ABC and currently uses a conventional costing system. Your team should present:
1. An outline of ABC and how it differs to traditional costing systems.
2. An outline of the benefits and disadvantages of ABC for your specific organisation.
3. Presentation of a product costing system that has been tailored to cost products in the product category you have selected. The system must incorporate overhead allocation based on ABC principles. The system only needs to incorporate product related costs (period costs can be ignored) and the chosen costs must relate to the value chain specified in part 1 of this assignment. You need to:
a. Identify all relevant direct and indirect costs associated with the product category.
b. Identify the relevant activity cost pools (we recommend no more than 6 activity cost pools).
c. Identify cost drivers for each activity cost pool.
d. Classify whether the activity cost pools are at the unit, batch, product or facility level (cost hierarchy).
The report should explain the rationale for identifying and classifying the direct and indirect costs, activity cost pools, cost drivers and cost hierarchy classification.
Part 3 - Product Costing
Show how your costing model can be used to cost products for your business. Select one product as an example from the product category of your organisation and estimate the full product cost (direct materials, direct labour, and overheads). All estimations and assumptions for direct costs, indirect costs and activity drivers must be clearly justified and referenced. Direct costs can be estimated for the selected product only. Indirect costs and activity rates should be estimated for all products in the product category, and then allocated to the example product, based on estimated overhead driver usage. Supporting cost data, assumptions, tables and diagrams etc. may be shown in appendices.
You can make the following assumptions:
1. All products in your product category are produced in a single factory in Australia.
2. Production is for the Australian market only.
Some cost information is publicly available, while other costs will need to be estimated based on available information and realistic assumptions. For example:
1. Direct materials: If you are costing a chocolate bar, then the main ingredients can be identified and costed (e.g. cost of sugar). Remember, the costs are for the organisation, not what you would pay at the supermarket!
2. Direct labour: Identify the types of labour likely to be involved in manufacturing the product. Wages for different job types can be located on the Internet.
3. Overheads: Some costs will be publicly available (e.g. electricity rates) while other costs will have to be estimated based on assumptions. Some overheads may be estimated from annual report information (for instance, using a percentage estimate of how much of the cost relates to your product category, and how much would relate to the Australian market). Market information may be available on the Internet or databases such as IBIS World or MarketLine Advantage, which can be accessed through the UTS library website.
While the assignment is largely practical, marks will also be awarded for the breadth and quality of references used. Ideally, a range of references should be used from a variety of sources. Reliance on textbooks is insufficient - teams should seek information from consulting reports and professional and academic journals to support ABC related arguments. A wide variety of sources should be used to support the use of cost data and assumptions (not just annual reports).
To gain high marks the assignment will need to refer to academic literature to support arguments (in particular for Part 2), in addition to Internet and practitioner-based literature. We suggest between 4 to 10 academic articles. These can be located through search engines (e.g. Google Scholar) and the UTS library website. Journals that you might consider reviewing are as follows:
1. Accounting, Organizations and Society
2. Management Accounting Research
3. Accounting and Finance
4. Journal of Management Accounting Research
5. Journal of Cost Management
6. Accounting Horizons