management accounting

I need only introduction and Literature review total of 800 words.

*introduction (500word )

*literature review (300 word )

*5-10 references

Zubair Technologies Co (ZTC) produces and sells Gadgets for children. The company’s main customers are Super stores like Lulu and Carrefour that sell a Gadget, which can survive rough handling by children. The Gadgets are individually specified by Stores for each order and pricing has been on a product cost plus basis with a mark-up of 35%. The company uses an absorption costing system based on labour hours in order to calculate the production cost per unit.

The main control system used within the company is the annual budget. It is set before the start of the financial year and variances are monitored and acted upon by line managers.

Further financial information is provided in the below table:

Volume (units)

12,300

Total

OMR‘000

Direct variable costs Material

21,200

Labour

1,890

Packaging and transport

1,200

Subtotal

24,290

Overhead costs

Customer service

3,650

Purchasing and receiving

1,250

Inventory management

1,060

Administration of production

1,350

Subtotal

7,310

Total

31,600

Labour time per unit

2 hours

Data collected for the year

No of minutes on call to customer

420,600

No of purchase orders raised

11,200

No of components used in production

310,800

Order # 5656

Units ordered

40

Direct costs for this order:

OMR

Material

70,328

Labour

6,600

Packaging and transport

3,400

Their activities relating to this order:

No of minutes on call to customer2,604

No of purchase orders raised160

No of components used in production 1,250

Administration of production (absorbed as general overhead)2 Labour hours per unit

The board papers contain a high-level summary of financial information, comparing performance against budget for revenue, costs and profit. The CEO is concerned about the performance information, which is provided in the monthly board papers.

ZTC Key Performance Indicators are profit, profit margin, free cash flow and return on capital employed. Although the CEO acknowledges that the fall in profitability is a concern for ZTC he believes that the company’s performance measurement systems should not focus solely on financial information, but also non-financial information such as quality, or flexibility in meeting customer specifications etc.

Required

You being the Management consultant of Zubair Technologies Co (ZTC) have been asked by the management to write a detailed report on evaluation of traditional absorption costing system against Activity Based Costing.

Your report should include the following points with supporting calculations and working notes:

  1. An Ideal Introduction to the report which should include relevant literature review

INSTRUCTIONS

  • Use of the relevant academic literature to support ideas and issues discussed.The range of academic sources such as texts and journals to support your arguments and comments.
  • Any reference to authors and other writers shall be quoted with due acknowledgement in your assignment report using the Harvard Referencing System. For details of Harvard referencing style refer the student’s hand book page 46-47 section7.2..

 
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