(a) Shebbits is a leading specialty retailer and the worlds largest direct marketer of hunting, fishing, camping and related outdoor merchandise. Founded in 1961, Shebbits is one of the most well-known outdoor recreation brands in the world and it is recognized as the worlds foremost outfitter.

The Hong Kong office, established in 2005, includes a supply chain team that is responsible for social compliance audits. These audits are conducted to make sure that Shebbits vendors, factories and suppliers are in compliance with requirements in social responsibility.

Esther Yeung, manager of the supply chain team, knows that cost data is crucial in everyday decision making in the supply chain team. Some of her challenges involves answering questions from her management such as, How we can increase the proportion of unannounced audits while keeping the budget unchanged, though unannounced audits cost more? And any other budgeting and costing related questions.

In order to answer these questions, Esther prepares a cost analysis every time she plans an audit trip. She has found that identifying factories located in the same region and combining them into a single audit trip increases output while keeping the budget constant. She has also been able to outsource some audits to qualified third parties.

a) Critically explain how a budget can help answer Esthers question for her business.

(b) Explain the features of just-in-time manufacturing system.

(c) Explain the difference between the variable and absorption costing methods and analyze which method(s) are required for external reporting and internal reporting.