7AC013: A large manufacturing company producing medical supplies has appointed you as their senior Management Accountant: Management Accounting and Decision Making Assignment, UOW, UK

A large manufacturing company producing medical supplies has appointed you as their senior Management Accountant. The firm operates a factory in India and another in the United Kingdom. Each factory produces a different product range, with the Indian factory producing mass products such as face masks, syringes, and needles, whilst the UK factory produces bespoke medical equipment such as MRI machines.

There are two routes to market: sales to distributors as well as sales directly to the end customer. As part of your role, you are expected to review the current practices of the business and advice on areas for short, medium, and long-term improvements. Based on the above, you make the following observations:

• Managers of each of the factories had recently completed a CPID training on Management Accounting and have put forward recommendations for moving from the current absorption costing technique to other options. However, both managers could not agree on which alternative is best for the company.
• The company uses only financial measures to appraise factory performance. The company seems not to comprehend or explore non-financial factors affecting the business.
• The company prepares budgets using a top-down approach and does not allow for flexing the budgets given their desire to have firm control of cost. The company tends to struggle to cope with significant changes in market conditions.
• Reports from the Indian factory show that there have been shortages of materials required to complete the production process. This has resulted in rising idle time and costs incurred on expensive substitute materials.