Role of Management Accountant
The managers in Annovim Plc will have implement cost determination to ensure proper accounting and that transfer pricing will not result in disfavourable figures to their own departments. Cost determination at Annovim Plc across the three processes including mixing, cooking and packaging is one of the functions of management accountant in understanding the processes within Annovim Plc. Then financial control of maintaining that Annovim is able to sell its products after having mark-ups of 25% in each division and the management accountant needs to identify if it is going to drain the profitability of the company.
Next, the need for provision of information to carry out the duties of management planning and control. This is seen as a management activity but in a staff role. Usually, it involves staff (management) support to line management through the use of technologies such as decision analysis and responsibility accounting. The management controls are oriented towards manufacturing and internal administration in Annovim.
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This is to ensure that Annovim’s divisions do not over produce or under produce to the market demands. Over productions of candy bars, chews and other sweets will result in increase cost of storage and warehousing.
While, under-production of the 3 products may result in losing out market share to competitors in fulfilling the demands of the market place. Purchasing managers of the three divisions will also need to ensure that raw material purchases are forecasted ideally to meet the production requirements. Any excess purchase of raw materials will incur additional storage cost and preferably ‘just-in-time’ production strategy should be practiced i. e. ordering and delivering of raw materials aims at reducing in process inventory and associated carrying cost.
This process, of course, need to be carefully planned if one of the raw materials like sugar that may be in short supply. Then, warehousing and storage of such raw materials may be necessary to allow a smooth flow in production. Furthermore, as the senior management accountant, there is a need to understand the production processes involving mixing, cooking and packaging of the wide variety of differently Annovim’s products. By having a detailed and comprehensive knowledge of the business processes, the management accountant could help to reduce resources wastage.
Take for example, Annovim’s products mostly passed through the 3 processes of mixing, cooking and packaging. Questions arise whether the company should centralize the 3 processes for the 3 divisions or each manager set up and control the processes of their products. Or perhaps, Annivom should change its organisational structure with a production manager to control the production of all its products and reverse the roles of its divisional managers to marketing & sales managers for its products.
To coordinate the production and the marketing & sales, an appointment of operations director for snacks to overall in charge and coordinating production, sales, marketing and branding. Thus, the design, maintenance and interpretation of information about the business processes will become of considerable importance in effective management. The challenge for management accountants will be the primary providers of this information for strategic decisions.
This is to ensure that through the use of process analysis and cost management technologies that appropriate information is available to support managers and employees at all levels and not just information from the divisional managers. Finally, management accountant needs to create value through effective resources use. As mentioned above, the necessity to avoid duplications of workflow may be required if the product is not warranted for having its own mixing, cooking and packaging processes.
Annovom could even consider outsourcing its production as it may even be cost saving to let the manufacturing of candy bars, chews and other sweets to a third party. With the further increased and emphasized the challenge of global competition, the tailoring of supply to meet market demands, downsizing or increase in production capacity can be done through outsourcing which Annovim itself may have problems doing it alone. This could be a solution to made lean manufacturing a key element in its strategy to be world-class competitors.
Take for instance, US chocolate manufacturer, Hershey outsourced the production of its low- value products in 2007. Alternatively, like Cadbury, for example, began with the goal of selling a Dairy Milk Chocolate bar to every Chinese citizen. Toward that end, Cadbury decided to manufacture chocolate in China rather than assume the costs of exporting it from Australia. At first blush, that was a logical, economical plan. But Cadbury failed to anticipate how hard it would be to get a steady supply of quality milk within China; the Chinese are not milk drinkers, and good dairies are few and far between.