1.0 Introduction...............................................................................................................

2
1.1 Purpose and Scope................................................................................................. 2
1.2 Sources................................................................................................................. 2
2.0 Findings.................................................................................................................... 2
2.1 Analysis of Cost of New Zealand (NZ di!ision.............................................................2
2.2 Analysis of Cost of Australia di!ision.......................................................................... 4
2." Analysis of cost of Asia di!ision................................................................................. 5
2.# Analysis of $esin Product......................................................................................... 5
".0 Conclusion................................................................................................................ 6
".1 New Zealand and Australia Seg%ent.......................................................................... 6
".2 Asia Seg%ent......................................................................................................... 6
"." $esin Product seg%ent............................................................................................ 7
#.0 $eco%%endation....................................................................................................... 7
#.1 &'e role of %anage%ent accountant tea%..................................................................7
#.2 Action plan............................................................................................................. 7
(.0 &'e ris) co%pany needs to consider for 2012.................................................................8
*.0 Su%%ary of article..................................................................................................... 8
+.0 $eference................................................................................................................. 9
1
1.0 Introduction
Nuple, Industries -i%ited is a %anufacturer of poly%er resins. It .usiness is operated t'roug'
two seg%ents/ resins and specialities. It 'as its presence in Australasia0 Asia0 1urope and 2nited
States. &'e Co%pany 'as consolidated its t'ree .rands F3I0 Nupol and NS$ into Nuple,
Co%posites 2011 was a c'allenging year for t'e co%pany 'owe!er4 it %anaged to generate
consolidated re!enue of NZ 510(+( %illion in 20110 an increase of 67 o!er financial year 2010.
&'e 18I&9A stood at NZ 51"1 %illion0 *7 lower t'an pre!ious year on account of strengt'ening
of NZ dollar relati!e to 1uro and 2S dollar. Furt'er0 t'e Co%pany 'as incurred oneti%e
e,penses for strategic policy re!iew.
1.1 Purpose and Scope
&'e report is prepared wit' purpose of analysing seg%ent wise cost and pro!ides
reco%%endation for reductions. It pro!ides infor%ation a.out e,pected role of %anage%ent
and 'ig'lig'ts t'e ris) t'at co%pany %ay face in 2012.
1.2 Sources
&'e report is prepared on t'e .asis of infor%ation fro% co%pany:s we.site0 Annual $eport
2011 and t'e infor%ation pro!ided for t'is assign%ent. $eference to ot'er articles is
pro!ided0 w'ere e!er used.
2.0 Findings
;e 'a!e prepared following inco%e state%ent on .asis of infor%ation a!aila.le in Annual report
2011 and infor%ation pro!ided in t'e assign%ent
2.1 Analysis of Cost of New Zealand (NZ di!ision
New Zealand 2011 % 2010 %
2011 Benchmark
Company %
Revenue
159,071
.0
100.0
%
145,770
.0
100.0
% 1,575,014.0
100.0
%
COGS
128,847
.5 81.0%
116,616
.0 80.0% 1,234,811.0 78.4%
Gross Margin
30,223.
5 19.0%
29,154.
0 20.0% 340,203.0 21.6%
Material wastae
!
3,865.4 3.0% 3,498.5 3.0% 24,696.2 2.0%
Mar"etin
#$%ense
12,725.
7 8.0% 7,288.5 5.0% 85,050.8 5.4%
&'(inistrative
#$%enses
15,907.
1 10.0%
11,661.
6 8.0% 64,575.6 4.1%
2
Total Epenses
32,498.
2
22,448.
6 174,322.5
Net !ro"t#loss
$
2%2&'(& $1('% )%&0*(' '()% 1)*%++0(*
10(*
%
,
as % o- C.G/
&'e re!enue 'as increased .y <.17 in 2011 along wit' increase in C=3S (as 7 of re!enue
fro% 60.07 in 2010 to 61.07 in 2011. As a result0 gross %argin 'as fallen fro% 20.07 in 2010
to 1<.07 in 2011. ;'ereas o!erall gross %argin is 'ig'er at 21.*7 in 2011.
>aterial wastage (as 7 of cogs 'as re%ained constant for .ot' t'e years4 'owe!er it is 'ig'er
t'an co%pany .enc'%ar) of 2.07. Furt'er0 t'e idle ti%e fro% factories 'as increased fro%
10.07 in 2010 to 12.07 in 2011 and o!erti%e wor)ed fro% factories 'a!e increased fro%
10.07 in 2010 to 1#.07 in 2011. 8ot' of w'ic' are a.o!e co%pany .enc'%ar) of 6.07 for
idle ti%e and <.07 for o!erti%e.
>ar)eting e,penses (as 7 of re!enue 'a!e increased .y ".07 to 6.07 in 2011 and
ad%inistrati!e e,penses 'a!e increased .y 2.07 in 2011 to 6.07 of re!enue. 8ot' t'e
e,penses are 'ig'er t'an co%pany a!erage of (.#7 of re!enue and #.17 of re!enue0
respecti!ely. &'e increase in ad%inistrati!e e,pense is attri.uta.le to increase in unplanned
%aintenance0 as t'e unplanned %aintenance e,penses (as 7 of %aintenance cost 'as
increased fro% 1#.07 in 2010 to 1(.07 in 2011.
3
&'e seg%ent capacity is under utilised as it operates at actual capacity of +6.07 in 2011 and
62.07 in 2010.
&'e nu%.er of custo%er 'as increased .y 20( to 122( in 2011 and nu%.er of supplier 'as
increased .y (0 to "60 in 2011.
2.2 Analysis of Cost of Australia di!ision
01stralia 2011 % 2010 %
2011
Benchmark
Company %
Revenue 581,819.0
100.0
% 568,707.0
100.0
% 1,575,014.0
100.0
%
COGS 488,728.0
84.0
% 466,339.7
82.0
% 1,234,811.0
78.4
%
Gross Margin 93,091.0
16.0
% 102,367.3
18.0
% 340,203.0
21.6
%
Material
wastae
!
14,661.8 3.0% 13,990.2 3.0% 24,696.2 2.0%
Mar"etin
#$%ense 34,909.1 6.0% 34,122.4 6.0% 85,050.8 5.4%
&'(inistrative
#$%enses 52,363.7 9.0% 45,496.6 8.0% 64,575.6 4.1%
Total Epenses 101,934.7 93,609.2 174,322.5
Net !ro"t#loss $+%+'2()
$
1(*% +%&*+(1 1(*% 1)*%++0(*
10(*
%
,
as % o- C.G/
&'e re!enue 'as s'own no%inal increase of 2."7 in 2011 o!er 2010. ?owe!er0 cogs 'a!e
increased fro% 62.07 in 2010 to 6#.07 in 2011. &'ere.y0 gross %argin 'as fallen fro% 16.07
in 2010 to 1*.07 in 20110 lower t'an o!erall co%pany:s %argin of 21.*7.
>aterial wastage 'as re%ained constant at "7 for .ot' t'e years. Furt'er0 t'e idle ti%e fro%
factories 'as increased fro% 12.07 in 2010 to 1#.07 in 2011 and o!erti%e wor)ed fro%
factories 'a!e increased fro% 12.07 in 2010 to 1*.07 in 2011.
&'oug' %ar)eting e,penses as percentage of re!enue 'as re%ained constant for .ot' t'e
years0 it is 'ig'er t'an co%pany a!erage of (.#7 in 2011.
4
&'e seg%ent is functioning at su. opti%al le!el of +*.07 in 2011 and 607 in 2010.
&'e nu%.er of custo%er 'as increased .y 2+0 to 1(10 in 2011 and nu%.er of supplier 'as
increased .y *0 to 1*#0 in 2011.
2." Analysis of cost of Asia di!ision
0sia 2011 % 2010 %
2011 Benchmark
Company operation %
Revenue
284,320.
0
100.0
%
278,314.
0
100.0
% 1,575,014.0
100.0
%
COGS
210,396.
8 74.0%
208,735.
5 75.0% 1,234,811.0
78.4
%
Gross Margin 73,923.2 26.0% 69,578.5 25.0% 340,203.0
21.6
%
&'(inistrative
#$%enses 8,529.60 3.0%
11,132.5
6 4.0% 64,575.57 4.1%
Net
!ro"t#loss 65,393.6 23.0% 58,445.9 21.0% 275,627.5
17.5
%
&'e re!enue 'as increased .y 27 in 2011 and cogs 'as fallen fro% +(.07 of re!enue in 2010
to +#.07 of re!enue in 20110 increasing gross %argin to 2*.07 in 2011.
Ad%inistrati!e e,pense of t'e di!ision are lower t'an o!erall co%pany as accountant ser!ices
is supported .y NZ and Australian seg%ent and researc' e,penses are co!ered .y NZ.
&'us0 net profit for t'e seg%ent 'as increased fro% 21.07 in 2010 to 2".07 in 20110 w'ic' is
'ig'er t'an o!erall co%pany %argin of 1+.(7 in 2011.
&'e following c'art s'ows co%parison of gross %argin of eac' seg%ent considered a.o!e wit'
o!erall co%pany .enc'%ar)
5
2.# Analysis of $esin Product
!artic1lars
3esin
!1
3esin
!2
3esin
!2
Manu)a*ture' C+st 250.0 200.0 300.0
Mar" ,% a%%lie' t+ -r+'u*t C+st .30% 75.0 60.0 90.0
/+tal -r+'u*t C+st 325.0 260.0 390.0
Mar" u% )+r %r+0t *+ntri1uti+n 220% +)
t+tal *+st3 65.0 52.0 78.0
Sellin -ri*e 240(0 212(0 ')+(0
4u%le$ Mar"et S5are +) ea*5 %r+'u*t 20% 25% 10%
C+(%etit+r sellin %ri*e +) e6uivalent
%r+'u*t 300.0 240.0 350.0
C+(%etit+r (ar"et s5are +) e6uivalent
%r+'u*t 2Mar"et s5are lea'er3 50% 40% 60%
&'e selling price is %uc' 'ig'er t'an price c'arged .y its co%petitor. &'e price .y t'e
co%pany for $esin P1 and $esin P2 is 'ig'er .y "0.07 t'en t'ose c'arged .y its co%petitor0
w'ereas for $esin P" t'e price is 'ig'er to t'e e,tent of "#.07. (3oe)tuer)0 200(
".0 Conclusion
".1 New Zealand and Australia Seg%ent
&'e C=3S 'as increased o!er period 2010@2011. &'e Co%pany s'ould analyse its cost of
production of eac' indi!idual raw %aterial co%ponent and co%pare it wit' t'e cost of si%ilar
product is purc'ased fro% e,ternal supplier. If t'e co%ponent is a!aila.le c'eaply in %ar)et
t'en t'e Co%pany %ay .uy it0 and reduce its %aterial wastage cost.
&'ere is si%ultaneous increase in idle wor) ti%e and o!erti%e wor) If t'e Ao. is allocated to
wor)ers on ti%e0 t'e co%pany could reduce wor)ers idle ti%e and also would not reBuire
wor)ers to wor) o!erti%e during pea) de%and0 w'ic' could sa!e su.stantial cost. Furt'er0 it
s'ould de!ise plan for ti%ely %aintenance (i.e. Buarterly or 'alf yearly of its eBuip%ent0 as
su.stantial a%ount is spent towards unplanned %aintenance. Furt'er0 .ot' t'e seg%ent are
6
utilising its installed capacity to its opti%u% le!el t'ere.y %a)ing functioning of t'e seg%ent
inefficient.
&'e seg%ents incurs su.stantial %ar)eting e,penses and t'e sa%e 'a!e increased in 20110
t'e co%pany can %a)e efforts to reduce its ad!ertise%ent e,penditure .y focusing on single
Co%pany le!el ad!ertise%ent0 rat'er t'an product focused ad!ertise%ent.
&'e co%pany s'ould de!ise a policy for selection of supplier0 to ensure t'at Buality raw
%aterial is recei!ed and wastage is reduced. In spite of increase in nu%.er of supplier during
t'e year0 t'e co%pany was not a.le to control its o!erall wastage. Also0 t'e increase in
nu%.er of custo%er signifies t'at t'e co%pany is not dependent on any specific custo%er.
&'e seg%ents incur co%%on ad%inistrati!e e,penses li)e accountant salaries0 t'e .enefit of
w'ic' is o.tained .y all ot'er seg%ent. &'e co%pany s'ould adopt Acti!ity 8ased Costing
(A8C approac'0 w'ic' reBuires assign%ent of cost to respecti!e product .ased on acti!ities
underta)en to produce t'at product. (?a)an 3oe)tuer)0 200(. &'e A8C approac' ensures
proper allocation of cost0 t'ere.y s'ows correct picture of profitCloss. As adoption of A8C
approac' reBuires t'e %anage%ent to understand t'e cost dri!ers0 it ena.les to reduce
indirect cost.
".2 Asia Seg%ent
Co%pared to NZ and Australia seg%ent0 t'e C=3S (as 7 of re!enue 'a!e fallen for t'is
seg%ent in 2011 and are lower t'an o!erall industry .enc'%ar). ?owe!er0 t'is seg%ent
incurs rewor) e,penses to t'e e,tent of (.07 of finis'ed products0 w'ic' can .e lowered .y
underta)ing t'e inspection of raw %aterial and Buality of se%i@finis'ed product. &'is can sa!e
cost in!ol!ed in rewor) of finis'ed product0 t'ere.y increase its profita.ility %argin.
"." $esin Product seg%ent
&'e t'ree product of $esin are sold at co%parati!ely 'ig'er price t'an t'ose c'arged .y its
co%petitor. &'e co%pany can reduce its direct la.our cost .y increasing wor)ers efficiency
and reducing wor)ers idle ti%e and o!erti%e. It %ay furt'er reduce its product related
%ar)eting cost .y encouraging sales%an to ta)e up cross selling of product0 w'ic' will
increase product sales0 i%pro!e sales%an producti!ity and reduce per unit cost. (8ouw%an0
2000
#.0 $eco%%endation
#.1 &'e role of %anage%ent accountant tea%
&o %anage%ent s'ould gat'er all infor%ation a.out issues faced .y organisation and it s'ould
.e discussed to find opti%al solution.
7
Preparing annual .udget considering current pro.le%s and li)ely future opportunities.
>anage%ent s'ould identify cost dri!ers and ensure proper allocation of cost. Appropriate
%easures %ust .e in place to %onitor and control cost.
>anage%ent s'ould assess its co%petiti!e position .y analysing data on ot'er co%petitor:s
products.
#.2 Action plan
If in@'ouse production of eac' co%ponent is costly0 t'e co%pany s'ould underta)e cost .enefit
analysis for in@'ouse production !s. .uy.
;or)ers idle ti%e s'ould .e reduced .y adopting standard costing %et'od.
Adopt A8C %et'od for allocation of cost to product or depart%ent.
1%ployees and wor)ers s'ould .e encouraged to identify current %is%atc' .etween actual
production and .udgeted target. &'ese causes s'ould .e analysed and appropriate solution
s'ould .e de!ised0 t'is will 'elp to set realistic target for ne,t year.
Furt'er0 %ont'ly %onitoring of actual and .udgets perfor%ance %ust .e underta)en.
1%ployees %ust .e %oti!ated .y pro!iding per)s to ac'ie!e .udgeted target and co%e up
wit' inno!ati!e alternati!e to sa!e cost.
&'e Buality of product s'ould .e %onitored at eac' production stage. &'is will ensure t'at
rewor)0 if reBuired0 is done at rele!ant stage and only Buality product reac'ed final stage of
production.
Duality of product .e i%pro!ed and t'ere.y reduce rewor).
Increase wor)ers efficiency .y educating and training t'e%.
It s'ould stri!e to reduce indirect cost li)e ad%inistrati!e and %ar)eting cost0 t'ere.y reduce
t'e selling price of its $esin product.
&'e Co%pany s'ould adopt co%petiti!e pricing strategy .y collecting and analysing
infor%ation.
(.0 &'e ris) co%pany needs to consider for 2012
9uring 20110 t'e Co%pany saw a s'arp rise in cost of its raw %aterial and it %anaged to
reco!er incre%ental cost t'roug' 'ig'er selling price. ?owe!er0 if t'e co%petitor is efficient
8
enoug' to not pass on t'e incre%ental cost to custo%er or c'eaper i%ported products are
a!aila.le0 t'en t'ere is li)eli'ood t'at Nuple, product:s popularity will .e reduced0 as
custo%ers prefer to 'a!e low cost product.
If t'ere is occurrence of any natural cala%ities near any %anufacturing site or ot'er location0
t'e co%pany would faces losses towards erosion or destruction of %ac'ines and loss of
'u%an li!es.
&'e co%pany in!ests su.stantial a%ount towards $E94 t'ere.y pro!ide new products to t'e
%ar)et. ?owe!er0 w'ile conducting researc' none of t'e co%panies can guarantee t'at all its
researc' will .e successful. Furt'er0 e!en if t'e researc' is successful and t'e product is
de!eloped0 t'ere is a possi.ility t'at product %ay not .e accepted in t'e %ar)et or co%petitor
%ay pro!ide si%ilar product at low cost.
Any re!ersal of .enefit e,tend .y go!ern%ent %ay 'a!e negati!e i%pact on t'e Co%pany.
As t'e co%pany 'as its operation across t'e glo.e0 any uncertainty or !olatility in glo.al
econo%ic condition %ay 'a!e its ad!erse effect on t'e co%pany:s operation. &o o!erco%e t'e
negati!e effect of glo.al crises and sustain its growt'0 it s'ould e,pand its operation in
e%erging %ar)et and pursue organic growt'. Furt'er0 it plans to e,pand its geograp'ic reac'
.y acBuiring co%panies0 'owe!er0 if adeBuate due diligence is not conducted4 t'e co%pany
%ay face unforeseen ris).
*.0 Su%%ary of article
Acti!ity@8ased Costing (A8C 'as .een adopted as a .asis for %a)ing strategic decisions and
for i%pro!ing profit perfor%ance (Cagwin and 8ouw%an0 2000.&o ensure t'at t'e Co%pany:s
resources are put to rig't use and are .eing utilised at opti%u% le!el0 t'e co%panies %ust adopt
A8C %et'od of allocating cost. &'ere is a positi!e relation in use of A8C and c'ange in financial
perfor%ance0 t'us successful i%ple%entation of A8C %et'od 'as led to i%pro!e%ent in $=I
(Cagwin and 8ouw%an0 2000. Furt'er0 t'e dri!ers for A8C are transaction .ased li)e nu%.er of
custo%er order0 custo%er co%plaints0 credit c'ec)s or ti%e dri!en li)e ti%e reBuired to 'andle
single custo%er order0 ti%e to process custo%er co%plaint0 t'e articles states t'at ti%e .ased
dri!er of A8C %et'od are %ore accurate and i%pro!es profita.ility .y greater %argin. (Faplan
and Anderson0 200#
&'e %anage%ent %ay adopt target costing approac'0 w'erein it %ust underta)e product
researc' on para%eter product feasi.ility in t'e %ar)et0 ideal selling price and desired profit
%argin. &'ereafter deter%ine total cost t'at co%pany plans to incur on it and de!ise %easures to
control cost. &'us0 t'e %anage%ent is e,pected to %ange cost fro% product design stage to its
launc' p'ase. (CI>A0 200(
9
+.0 $eference
?a)an 3oe)tuer)0 200(0 Acti!ity@8ased Costing (A8C @ Ad!antages and 9isad!antages/ ?ow
A8C can .e applied to institutions of 'ig'er education0 p.#
Cagwin and 8ouw%an0 (20000 &'e Association 8etween Acti!ity@8ased Costing and
I%pro!e%ent In Financial Perfor%ance
CI>A 9iscussion Paper/ &arget costing in t'e N?S (200(0
'ttp/CCwww.ci%aglo.al.co%C9ocu%entsCI%ported9ocu%entsC$efor%ingt'eN?Sfro%wit'in.pdf
Faplan and Anderson0 (200#0 &i%e@9ri!en Acti!ity@8ased Costing0 ?ar!ard 8usiness Sc'ool.
10