Global Business Management : 688958
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The rubric by which your report will be assessed follows in the Assessment Grid. It is important that prior to submitting your work, you read this and assess your response objectively against the rubric. This will ensure that you have done enough to attain the marks you wish to achieve.
|Scale 2 (20%)||Scale 3 (40%)||Scale 4 (60%)||Scale 5 (80%)||Scale 6 (100%)|
Three aspects of management
|20%||No attempt||Limited explanation of the three aspects of management||The three aspects have been explained but lack examples||The three aspects have been explained and examples provided||Detailed explanation and suitable examples for each aspect||Very clear explanation, clearly distinguished and the example are contextualised|
|15%||No attempt||Limited explanation of inventory valuation||Inventory valuation has been explained and identified some aspects of its importance||Inventory valuation has been clearly explained and its importance has been discussed||Detailed explanation of the inventory valuation and its importance has been provided in a logical manner||Very clear explanation, clearly distinguished and contextualised its importance from a business accounting perspective|
|3||Application of knowledge
Part b) four main types of inventory valuation
|40%||No attempt||Limited explanation of the four types of inventory valuation||All four types of inventory valuation have been clearly explained||All four types of inventory valuation have been clearly explained and the distinguished accordingly||Detailed in all four types of inventory valuation; very clear distinctions are shown||A very detailed discussion has been produced, there is clarity of justifications and well-contextualised|
|4||Structure and presentation of the report||10%||Structure is disorganised;
Very poorly presented
|Some evidence of a report format, but not consistent||Presented in a report format; with a table of contents||A report has been presented with the table of contents, introduction, discussion of the issues, in clear sections
|A report with the table of contents, brief introduction about the report content, and the discussion flows and reads well||A well-presented report with detailed table of contents; introduction and the discussion have logic and consistently well-structured points are evident|
|15%||No referencing done||Very few references mentioned||A shortlist of references has been produced, as per CU Harvard referencing system||Most of the content has been referenced, as per CU Harvard referencing system||A complete list of references has been produced, as per CU Harvard referencing system||A complete list of references has been produced, as per CU Harvard referencing system; the referencing has a good scope and includes a broad range of sources|
The major points of differences between planning, control and decision-making in the context of business accounting are described briefly as follows:
|Points of dissimilarities||Planning||Control||Decision-making|
|Purpose||In this aspect, the future activities of the organisation are planned that take into account maximisation of financial benefits and minimisation of financial consequences (Morden 2017).||In this aspect, the departmental activities are controlled in order to assess the performance of each area. This would help the management of JJ Limited to ascertain if the actual activities are going according to the planned activities for each capital expenditure or each department.||After analysing all the financial benefits and consequences, the accounting managers ascertain those business areas performing efficiently and those areas that need to be changed (Keveson and Garrison 2017).|
|Activities||The planning activities include budgeting, analysis of capital expenditure and production planning (Dengue 2017).||The controlling activities include preparation of monthly budget reports by listing actual expenses and budgeted expenses and then listing the difference.||The decision-making activities include the decisions undertaken on the part of the managers and such decisions are communicated to the top management for implementation purpose.|
|Example||A factory manager could start a program of supplier evaluation for selecting the most feasible suppliers.||A manager could prepare performance reports for gauging the productivity of the staffs.||An accounting manager could assess the costs that vary between advertising choices for each product. However, the manager does not take into account the common costs.|
The four inventory valuation methods and their impact on the overall inventory value are described as follows:
Throughput inventory valuation:
In the words of Collier (2015), throughput is the rate at which purchased components and raw materials are converted into the products sold to the customers. In monetary terms, it is the additional amount, which an organisation makes by selling its products. Thus, throughput could be obtained by deducting the cost of raw material from revenue. Throughput accounting is an approach, which is linked with the Just-In-Time philosophy. This method follows certain concepts, which are evaluated briefly as follows:
- Majority of the factory costs except the raw material costs are constant in the short-run. These fixed costs comprise of direct labour and they are referred as total factory costs as well.
- The ideal level of inventory is nil under the Just-In-Time philosophy. Hence, unless the customer places an order, there is no need to manufacture the products. The valuation of work-in-process needs to be made at material cost only until the sale of the output. The aim is to add value and earn profit until the occurrence of sale (Wild 2017).
Hence, it could be stated that in throughput valuation, inventory is not considered as asset. Instead, it is the output of unsynchronised production and it is considered as the impediment to earning profit.
Direct or variable inventory valuation:
In this method, the cost calculation is utilised in order to make decisions intended at sales and production planning. This concerns direct costing of labour and materials providing a quick insight for making cost indication. This valuation method could be extremely valuable for JJ Limited at the time of making decisions for cost control. However, this method only takes into account direct variable costs by excluding the overhead costs including overhead. This is because this method is useful for short-term decision-making; however, it could not be used in undertaking long-term decisions.
Direct costing could not be used for valuing inventory, since both IFRS and GAAP do not allow the same (Lee, Lee and Lee 2016). The reason is that under the direct costing method, all costs including the direct costs are charged to the present period. Moreover, the valuation of inventory for tax purpose under this method is not allowed according to the legislations, since the application of overhead cost would not be made to inventory. As a result, it would lead to minimised inventory cost.
Full absorption costing:
This is a method for costing inventory, in which all variable costs and fixed costs are allocated to the cost centres accounted to utilise absorption rates. This method is used primarily for external reporting purpose. The major costs apportioned to products under full absorption costing system include the following:
- Direct materials included in a finished product
- Factory labour costs needed to manufacture a product
- Variable manufacturing overhead for operating a manufacturing unit changing with the volume of production
- Fixed manufacturing overhead for operating a manufacturing unit not changing with the volume of production (Feng et al. 2014)
However, since absorption costing needs the allocation of a bigger portion of the costs of a product, it could not be traced directly to the product. This is a needed inventory costing method for external reporting. However, if JJ Limited uses this method, it might be misleading in order to undertake management decisions due to the component of fixed overhead. Hence, it might result in either overvaluation or undervaluation of inventory on certain occasions.
Activity-based costing system for inventory valuation:
Activity-based costing could be defined as the process of apportioning cost to services, products, tasks, acquisitions depending on the activities passed to them and the consumption of resources on the part of such activities. However, most of the organisations do not use this method for external reporting, since it fails to provide detailed information. The costs related to individual products are not revealed. Even though it reports the cost of sales and the inventory valuations, it does not provide any breakdown of accounts in terms of products (Weygandt, Kimmel and Kieso 2015).
In case, there is under-costing or over-costing of some products, the products are added together for cancelling the errors. In addition, for external reporting, only manufacturing costs need to be taken into consideration. However, this method takes into account certain non-manufacturing costs as well while excluding few manufacturing overheads. Hence, it might result in wrong valuation of inventory, if utmost care is not undertaken.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.
Dengue, C., 2017. Principles of Management. Evidence-Based Critical Care: A Case Study Approach, p.513.
Feng, M., Li, C., McVay, S.E. and Skaife, H., 2014. Does ineffective internal control over financial reporting affect a firm’s operations? Evidence from firms’ inventory management. The Accounting Review, 90(2), pp.529-557.
Keveson, B. and Garrison, G.W., 2017. Principles of Management. Evidence-Based Critical Care: A Case Study Approach, 1, p.453.
Lee, A.C., Lee, J.C. and Lee, C.F., 2016. Credit, Cash, Marketable Securities and Inventory Management. World Scientific Book Chapters, pp.989-1041.
Morden, T., 2017. Principles of management. Routledge.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John Wiley & Sons.
Wild, T., 2017. Best practice in inventory management. Routledge.