Cost and Management Accounting Decision



Cost and Management Accounting Decision

Part.1

Introduction

The US manufacturing company selected for the cost and management accounting decision assignment is Coca-Cola. Coca-Cola was founded in 1886 by pharmacist Dr John S Pemberton in Atlanta, Georgia. Coca-Cola Company is the world's largest marketer, distributor and manufacturer of non-alcoholic beverage syrups and concentrate, and produces close to 400 brands. This research paper will describe the organizations costing techniques, budget and sales forecasting, the cost accounting system used by company and the strategies Recommendations about how the cost system can be improved will also be outlined. 

Currently, the Coca-Cola Company is based in Georgia with subsidiaries all over the world with a strong product portfolio including well known brands such as, Sprite, Coke Zero, Fanta, Oasis, Abbey Well water and PowerAde (Coca-Cola, 2012). Coca-Cola Enterprises Ltd in Edmonton, is the local bottler responsible for the distribution, manufacturing, trade marketing and sales of the brands throughout UK, this is the system that will be discussed throughout this report. However, this system is likely to be replicated throughout the organization both in the UK and abroad

Part. II

To excel as a world-class manufacturer a company must be totally committed to quality - that is, each component, subassembly and finished good should be produced in conformity to specifications (Kaplan, 1984). Such a commitment to quality entails major changes in the way companies design products, work with suppliers, train employees, and operate and maintain equipment, but this commitment must also extend to a company's measurement systems (Kaplan, 1984). Data on the percentage of defects, on frequency of breakdowns, on percentage of finished goods completed without any rework required, and on the incidence and frequency of defects discovered by customers should be a vital part of any company's quality enhancement program (Kaplan, 1984).

A nonfinancial indicator of manufacturing performance is inventory and American managers are well versed in optimizing inventory levels according to the economic order quantity (EOQ) model, which balances the cost of additional setup time with the cost of carrying inventory (Kaplan, 1984). They are less familiar with the effort, common among Japanese producers, to eliminate setup times and to implement just-in-time inventory control systems, which together reduce drastically overall levels of work-in-process inventory (Kaplan, 1984). Direct measures of productivity are important set of nonfinancial indicators since in companies publicly committed to productivity improvements, accurate measurement of productivity is often impossible because accounting systems are designed to capture dollar-based transactions only (Kaplan, 1984). Without precise data on units produced, labor hours used, materials processed, energy consumed and capital employed, administrators must deviate dollar amounts by aggregate price indices to obtain approximate physical measures of productivity (Kaplan, 1984).

Improving manufacturing performance requires more of accounting systems than the timely provision of relevant financial and nonfinancial data (Kaplan, 1984). Fundamental changes in management control systems are also needed (Kaplan, 1984). In particular, there is a need to rethink the way companies use summary financial measures like ROI to coordinate, motivate and evaluate their decentralized operating units (Kaplan, ...