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REQUIRED: expected to conduct research relating to competitive advantage/competitive strategy; activity-based costing (ABC) and activity-based management (ABM) and relate this back to the case study

REQUIRED: expected to conduct research relating to competitive advantage/competitive strategy; activity-based costing (ABC) and activity-based management (ABM) and relate this back to the case study requirements. research sources can include practitioner articles, academic articles, and also information from relevant websites found via Google, Google Scholar, and other search engines, etc. The assignment should be in REPORT format

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REQUIREMENTS

The senior managers at P&B Natural Co have approached your project team and have asked for advice on the current situation and the future direction of the company. expected to conduct research and analysis to prepare a report for the next executive management meeting which addresses the requirements below:

1.

required to present to P&B Natural Co's senior management a recommendation of the best strategy you believe that the company should adopt in order to be competitive, given the nature of its business. In order to achieve this, your team should conduct research into the fundamental ways in which manufacturing companies can achieve a sustainable competitive advantage. Specifically, your team is required to:

(i)Discuss in detail two of these strategies, and for each one identify and discuss in detail one Australian or US, publicly listed manufacturing company (include the listed company code of each one) that has succeeded in using the particular strategy, the reason why your team believes the strategy was chosen and implemented by each company, and how this has been effective for each company.

(ii)Using your research from Requirement 1(i), present the senior management team with a recommendation of the best strategy you believe P&B Natural Co could adopt in order to be competitive and why your team believes this is the best one. Your discussion should include and justify what you believe to be the critical success factor(s) in achieving this strategy. Explain also why the other strategy, as identified by your research above, may not be as effective for P&B Natural Co as the one recommended by your team.

2.

P&B Natural Co's senior management team have agreed that the company needs to become more focused in implementing Activity Based Costing (ABC) and Activity Based Management (ABM) and have asked your project team to research this further with respect to product costing analysis. Discuss in detail how ABC and ABM can be used by companies in gaining a competitive advantage. also identify and discuss in detail one Australian or US, publicly listed manufacturing company (include the listed company code) which has implemented ABC and ABM analysis highlighting how this company has used this approach and discuss what the overall outcome has been for this company.

3.

determine the labour and overhead costs for the Small, Medium and Pump Naturisan bottles using the original costing approach (as outlined by Peita), which resulted in the Small, Medium and Pump bottle unit costs for P&B Natural Co, in Figure 3. Show all calculations.

4.

Peita and her team are working on designing and using the new costing system based on the principles of ABC. As you are helping them in designing this new costing system you are required to:

(i) Describe in detail the elements of this new costing system and explain/justify the activity cost pools and activity cost drivers included.

(ii) Determine the conversion cost per bottle for each of the Naturisan bottle sizes (Small, Medium and Pump) by preparing a bill of activities for each size.

5.

Discuss in detail your ABC results for P&B Natural Co with an emphasis on analysing the activity costs and also highlighting the differences to the original costing approach.

6.

Based on project extended research, on competitive strategy and ABM, along with your team's ABC analysis for P&B Natural Co, discuss in detail what information the senior management team may need to consider before making product line decisions.

Jennifer Price, the Production Manager and Paul Low the Marketing Manager both at P\&B Natural Co were sitting in at an inhouse presentation on operations and strategy by Jo Hallow, General Manager of P\& B Natural Co. Here is an excerpt of what Jo said during the presentation: "Covid-19 has prompted many businesses to re-think their operations and cut costs. I was reading a business update and saw an article on Berksmen Ltd, a global manufacturer of a wide range of consumer goods. Did you know that the company has developed programs to save $1.90 million by streamlining processes and constituents used in its products and condensing these to a much smaller range? For example, Berksmen Ltd has streamlined the constituents used in its cleaning and laundry products and also reduced the twelve different specifications, for a common cleaning agent, to only one in dishwasher powder and liquid. These two actions alone have generated savings for Berksmen Ltd of over $982,000 ". Jennifer and Paul left at the conclusion of the presentation, and continued to discuss the information of Berksmen Ltd. They went to Paul's office PC and Googled the information on Berksmen Ltd that Jo Hallow had referred to during the presentation. They found that Berksmen Ltd had reduced the number of items in a given brand line by 18% over the last three years and the company was seeking to further this by 10%. For example, one the company's brands, MoistureCare initially had 15 items in its product line but these were reduced to 8 items. Other brands such as SmoothCare and BotanicsPlus Range were also simplifying their product lines. Paul printed this information and gave a copy to Jennifer who went back to her office to re-read it. Jennifer continued to muse over the information on Berksmen Ltd. Despite the overwhelming objection of some of the production personnel who argued that the setup costs were significantly large, P\&B Natural Co had introduced a small sized bottle of its hand sanitizer, Naturisan, last year in response to Covid-19 along with the medium size and pump bottles. Sales had not met expectations. Jennifer decided to meet with the Naturisan team to discuss the costs associated with the three sizes of the hand sanitizer. At this meeting the management accountant, Peita Simi, who was also there, presented some costing information and other relevant data. Refer to Figures 1, 2 and 3 below. Figure 1: Budgeted Labour and Overhead Costs for 2023 Figure 2: Additional Annual Budgeted 2023 Data Figure 3: Comparison of Labour & Overhead Costs per Bottle of Naturisan suggested the company reduce or eliminate the output of the medium bottle given the unit cost data. She pointed out that the unit costs, for both the small and pump bottles are less than the industry average and the small bottle unit cost is also less than that of Greenmore, P\&B Natural Co's main competitor. Whilst reviewing the information, Jennifer asked Peita how the labour and overhead costs had been allocated. Peita explained that depreciation was allocated based on machine hours; labour costs were allocated based on direct labour hours and the remaining costs were allocated based on production volume. Jennifer was not very convinced that allocating the labour costs based on direct labour hours was ideal as 45 of P\&B Natural Co's 155 employees are managers/supervisors. Furthermore, the way the remaining employees categorized their time is questionable. Jennifer exclaimed "I believe the labour hours do not capture set-up costs. In addition, it appears arbitrary to allocate the remaining $4,835,000 based on production volume! Isn't there a different way of allocating such costs?" Peita suggested an Activity Based Costing (ABC) study could be undertaken to determine more accurately the costs of each of the different bottles of Naturisan. She briefly explained the ABC concept to everyone at the team meeting. Once the team members had a better understanding of ABC they all agreed that Peita and her team should pursue the ABC study and design a new costing approach based on ABC principles which would then be used to re-allocate the labour and overhead costs to the three different sizes of Naturisan. After the meeting Peita and her team designed a questionnaire to help identify the activities undertaken by employees and to also identify cost drivers for the ABC task. Once the questionnaire was finalised, Peita administered it to the employees so they could provide her with information to use in the ABC analysis she and her team was undertaking. The completed questionnaires were returned to her for analysis. Peita reviewed the information in the completed questionnaires. The employees indicated that they engaged in up to thirty five different activities which included over twenty two different cost driver possibilities. She knew that this would be difficult for the management accounting area to comprehend and it would also be impossible to communicate effectively to managers and other staff. As a result of this, Peita readministered the questionnaire to employees after reducing the number of potential activities on the questionnaire to ten. The questionnaire results indicated that the employees spent 96% of their total time on nine specific activities as follows: They spent 4% of their time on quality inspections; 5% was spent on packing containers; 25% of their time on making and bottling Naturisan; 10% of their time was attributed to downtime/repairs (idle time) due to equipment breakdown; 15% was spent on setting up (or shutting down) equipment; 12% was spent on rework/recycling; 10% of time was spent on breaks; 5% went towards attending team meetings and 10% of their time was spent on moving material. The remaining 4% of total staff time was unaccounted for and was classified as time spent on "miscellaneous activities". After conducting interviews and discussions with Jennifer, the production team, and also extracting as much information as possible from P\&B Natural Co's existing management accounting system, Peita had to decide how to assign the non-labour costs to the activities identified above. Both Peita and Jennifer agreed that due to the nature of the costs, all of the administrative overhead cost be assigned to the category of "miscellaneous activities", whilst IT and engineering costs and, research and development costs be assigned to making the products. Table 1 shows how all the costs should be assigned to activities as determined by Peita and Jennifer. Table 1: Activity Based Costing Information for Assigning Activity Costs After determining how the labour and overhead costs be assigned to the activities, the next step was to analyse the collected information and identify potential activity drivers. During the interviews with the production team, Peita discovered that the production process was highly automated. After reviewing all the collected information, Peita and Jennifer decided that breaks taken by employees and also team meeting activities would have to depend on the number of production employees even though these employees were not truly unique to a product. They also decided that production volume would be the most suitable activity driver to use for miscellaneous activities category. Table 2 shows all the activity cost drivers that Peita and Jennifer identified relevant to the project. Table 2: Activity Cost Driver Data

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