Discuss the below:
Managerial Accounting
Go to the website of Procter & Gamble on the internet.
How much detail about product costs did you find in Procter & Gamble's annual report?
The company's annual report is divided into two, quarterly data and annual data. Their cost of product of the present year was 20,463 and 18,694 of the previous year in the fast quarter which represented 9% increase. On the other hand at the year end they had 62,237 and 57,204 respectively for the whole year. Their gross margin in production were also provided and they were as follows during the first quarter 9,974 and 9057 respectively while at the end year they had the following data, 29,887 and 27,210 respectively. The quarterly manner of reporting is being used to clearly demonstrate the power of the company product category and how they are diversified in order to capture their cost of production and the cash generated.
Why do you think Procter & Gamble reported this amount of detail regarding its product costs?
The company is using this form of illustration to ensure they are in a position of showing their stake holders a clear illustration to their manner of production and cost incurred during different quarters and their percentage change in the cost of production across different quarters and in different years. It's important to come up with such clear data which will enable the firm to strategize in their future production activities. For the purposes of forecasting, an organization is deemed right to ensure they are in a position of delivering the right output and having a strategic picture which represents the targeted reports and planning on their future production and what cost they can anticipate during each period.
Its important for an organization to keep trend on their production activities to ensure they are well prepared to avoid being held in state they cannot avoid In the long run. Having the right information in relation to their cost they can strategize on what want to ensure they don't incur more than they can earn.
Part 2
You are a Manager at a Benefit Corporation tasked with the following: The production manager just called you to say something is awry with the costs involved with their "green" detergent production. She asks why workers are using more materials than usual in the production of the detergent. In addition, she wants to know why the direct labor cost has increased in comparison with previous months.
What documents and data might you want to examine and why?
Under the production department, there are several documents which are used and some are crucial in the determination of efficient production and compliant to the company production requirement.
Some of the documents which needs to analyzed are:
Inspection document:
Under this document, the manager is required to check whether what was received in the store complied with the quality standards of the company. This is suitable decision making in relation to quality set.
Ledger;
This document will be used to look at the costs associated with the production of products. Production cost increase could be as a result of the increase in the cost of products. Ledger could show the reason as to why there is the change; on the other hand it could indicate the price changes from the previous month in case it has been indicated.
This document is used to check on the description of materials received from the supplier whether they conforms the materials they supplied in the previous bunch. These documents can help in revealing the reasons as to why there are such variations.
Discuss the potential issues that might prevent the company from buying cheaper materials.
Sometimes, prices are used as a measure of quality. Therefore, organization can decide not to buy raw materials which are of cheap price since they might end up compromising with the price. It's important to consider the going concern of the organization as they might tie large sums in the raw materials which will end up comprising on the quality of their products in the long run.
When they buy products which are made of low quality they might be creating a loop hole to incur more losses as majority of them might not be worth to be used and they cannot got back the supplier for exchange since the supplier might give conditions that once raw materials are sold they are non refundable.
Some of these reasons are substantive enough to deter the organization from buying some raw materials as they can end up making losses.
Therefore, it's important to ensure they are in a position of considering the price level against the quality.
Also, discuss the potential issues that a manager confronts when he/she needs to incur more direct labor cost in order to comply with the production deadlines
In production, organizations look at a situation whereby they will be able to minimize the prices of their products. In case they raise the direct labor cost they will be in other words raising their product prices. One of the major issue which arises when the product price increases is competition. Under such situations they end up being in a compromising situation which in the long run they can make low returns contrary to their anticipations.
According to profit oriented organizations, it's important to ensure they are producing their products at the cheapest price possible. When a production manager happens to increase their production cost then he/she will be in a situation of giving explanations to the management the reasons as to what happened so that they could increase their overheads so that they could meet their deadlines.
In profit maximization, cost is of production is a vital factor and it ought to be considered at all time since profit can be maximized only when their production costs are lowered.