Established In 1904 as a Tobacco Company †Myassignmenthelp.Com

Question: Discuss About the Established In 1904 as a Tobacco Company? Answer: Introduction Coca-Cola Amatil (CCA) was initially started as a local manufacturer for beverages and foods and then expanded their business around six countries and is also creating possibilities for more than 100 years. Initially, they started their business as British Tobacco Company Limited during 1904 and soon started diversifying their business through purchase of printing company and moved to Australian beverages and food industry during 1963. Moreover, to focus on the snack foods and beverages, they set aside their interests for tobacco. Finally, Coca-Cola became the major stakeholders for the company and they named as Coca-Cola Amatil. Their mission is to delight their customers with exceptional brands portfolio and are always try to generate value for their partners through driving the productivity with minimization if cost. Further, they make a positive and distinctive contribution to the area in which they operate. Their well-known values are that they are open and straight forward, focus on tomorrow and today and take initiatives for the innovations. As per the company, their vision is the main factor that unites them and increases their energy level to do the best of what they perform. Their vision reflects their business scale and the people with whom they are connected create an emotional attachment with the company (Coca-Cola Amatil | Home, 2017). Product Mix CCA distributes and manufactures various alcoholic and non-alcoholic beverages and various food products all around Australia. Various products they are dealing with are as follows: Non-alcoholic beverages Energy and sports: Powerade Isotonic and Mother Juices: Crusta fruit juices and Goulburn Valley fruit juices Still drinks: Nestea, Pumped, Mount Franklin, Peats Ridge Water, Pump, flavoured milk from Goulburn Valley, vitamin water and Glaceau Carbonated soft drinks: Coke Zero, Coca-Cola, Diet coke with Vanila Flavour, Fanta, Appletiser, Kirks, Bisleri Chinotto, Sprite Zero, Lift and Sprite. Alcoholic beverages Scotch: Highland park, The famous Grouse, Tamdhu, The Machine and Laphroaig Bourbon: Old Crew, Bakers, Bookers, Jim Beam, Basil Haydens, Makers Mark Liqueurs: Harveys, Galliano, Cockburn, Bols, Courvoisier, Cognac and Sherry and Port Tequila: Sauza Food services Grinders coffee, Quirks Australia, packaged vegetable and food products from Goulburn valley and SPC Ardmona (Coca-Cola Amatil | Home, 2017). Production process The eastern creek distribution centre of Coca-Cola Amatil, which is situated at Sydney, employs 250 employees for their distribution centre. The facility has the capacity of producing 210 pallets out and 140 pallets in per hour. Pacific brewery has an annual capacity of 150 million litres that produces the premium beers. On the other hand, the bluetongue Brewery has the capacity of 50 million litres per year and can produce 1 million bottles per day for the beverages. Using these above facilities, CCA produces various products that are mentioned above under the product mix (Coca-Cola Amatil | Home, 2017). There production process involves the following activities: Product and package changeovers Cleaning procedures of the equipments Preventive activities for maintenance (Kaplan Anderson, 2013). Ingredient batch making and processing Using the systems to report and record the production data accurately Monitoring the activity process, troubleshooting and follow-up the proper escalations (Kaplan Atkinson, 2015). Activity based costing in manufacturing firms Activity based costing (ABC) is one of the most widely used method of costing and it allocates the overhead cost for the indirect costs through using the activities. ABC is a crucial aspect for reliable and accurate cost information for producing the true cost and presenting the financial data (Frazier, 2014). Implementation process, changes and applications under the ABC system are represented as a guide for better understanding of the ABC in the manufacturing firms. In most of the cases, the organization is unaware about the creation and origin of the costs that are involved in the manufacturing processes of the company. Further, they are not even concerned regarding the formation of the costing strategies. If the employees are aware about the benefits of proper costing that can save lot of money and contribute to the sustainability of the company, they will for sure try out for the better costing system (Balakrishnan, Labro Soderstrom, 2014). With the growth of business, the business executives become more concerned regarding the operational costs and are pressurised for increasing the strategies and profits. ABC system is there for so many years. It is identified that the ABC system improves the consistency for the information related to costs, better representation for the organizational cost and assists in producing true cost. Various manufacturing organizations use the activity based costing for the costing of the product, analysis of customers profitability, profitability analysis of product line and pricing of the products and services. The ABC system is the leading method for costing for producing the most accurate and reliable costing information for the manufacturing organizations (Simons, 2013). Knowing the strategy for the ABC is the crucial factors for getting better understanding of the costing system. The company can create better corporate focus and better strategy if the costs can be understood in better way. ABC refines the system of costing through focussing on the fundamental objects of cost and individual activities. The term activity is described as the unit, task or event with a particular purpose, for instance, distribution of products, operation of machines, setting-up of machines and designing the products (Saunders Cornett, 2014). To be stated in more simple way, ABS system is systematic use the effect and cost methods for for allocating the activity costs to the products, customers, services or any other objects of cost. Further, the ABC system is regarded as a tool for accounting that established the breakthrough role in the wide segment of cost and it can be applied in manufacturing or retail sector from the large corporations to sole proprietorship. Many managers and the accountants thinks that the inventory cost methods give accurate figures for cost, however, in practice this is not the case. The actual cost for any particular product is management better through calculation of the other associated costs (Mitra, 2016). Most of the companies are required to have better idea regarding the general costing for assuring the unified approach to the operations. Some benefits of ABC systems are Improve the business procedures: under the ABC systems, the procedures of the business assigns the overheads of the manufacturing processes on the basis of the cost driver of the products or the factors that are used for the generation of cost. Cost are assigned per product and the outcome clearly shows that which business are performing well and which are not and which one need to be improved. ABC system can be used to recognize the activities that are non-value added and assists in better allocation of overheads. It also contributes to regular improvement of the business procedures (Govindan, K., Khodaverdi, R., Jafarian, A. (2013). Recognize the wastes: ABC system takes into account the costs in the same way in which the production is performed and allows the business to understand better that where the overhead costs are going. Further, the overall services and products quality can be improved as the data from the ABC give the details regarding the cost and production issues that are required to be solved (Estampe et al., 2013). Data accuracy: reports shown as per the ABC systems are more accurate as compared to the traditional method. Further, the data obtained from the ABC system can be used for minimization of cost as the management are in better position to identify the products where most overheads are associated (DRURY, 2013). An organization can target the efforts into the methodology of ABC that will recognize the categories of costing in better way. Further the non-value added services are recognized in better way. However, there are some complex procedures involved in the manufacturing process where the application of ABC systems required in-depth knowledge. It is expected that the system will become simpler with the implementation and will become easier to execute. Irrespective of the benefits, the software and the systems shall be proved as user-friendly before implementation of the ABC systems. The ABC and the other improvements considerably enhance the ability of an organization to set its focus and respond to the requirements. It further reduces the complexities and minimizes the money and time in association with other benefits from the ABC systems. Activity-based costing for Coca-Cola Amatil Various costs are involved in the implementation of ABC system in CCA. These are: Direct cost It includes the labour cost and material cost as shown below Hypothetical direct cost for Coca-Cola Amatil Particulars Product A Product B Product C Total Produced and sold units 5,00,000 3,50,000 6,50,000 15,00,000 Selling price per unit $ 12 $ 8 $ 15 Direct material cost per unit $ 4 $ 3 $ 6 Direct labour cost per unit $ 3 $ 2 $ 4 Revenue from sales $ 60,00,000 $ 28,00,000 $ 97,50,000 $ 185,50,000 Direct costs Direct material cost $ 20,00,000 $ 10,50,000 $ 39,00,000 $ 69,50,000 Direct labour cost per unit $ 15,00,000 $ 7,00,000 $ 26,00,000 $ 48,00,000 Total direct costs $ 35,00,000 $ 17,50,000 $ 65,00,000 $ 117,50,000 Manufacturing overhead cost Manufacturing overhead costs are as follows: Purchase orders on the basis of number of purchase orders: $ 1200 per unit of cost drivers Product packaging on the basis of number of packages packed: $ 0.50 per unit of cost drivers Machine set up based on number of set-ups: $1000 per unit of cost drivers Machine calibration and testing based on number of tests: $ 200 per unit of cost drivers Cleaning and maintenance based on number of batch runs: $ 800 per unit of cost drivers Manufacturing overhead activities It includes the machine set-up costs, packaging of products cost, machine calibration and testing costs, machine cleaning and maintenance cost and order costs for material purchase Finanacial. Estimation of costs for the manufacturing overhead activities Cost drivers Activities Activity pool Activity units Unit cost Product A Product B Product C Total Cost Purchase orders No. of Purchase order $ 1,200.00 50 35 65 $ 1,80,000 Product packaging No. of packages packed $ 0.50 500000 350000 650000 $ 7,50,000 Machine set-up No. of set-ups $ 1,000.00 100 70 130 $ 3,00,000 Machine calibration testing No. of tests $ 200.00 750 500 1000 $ 4,50,000 Cleaning and maintenance No. of batch runs $ 800.00 150 100 175 $ 3,40,000 Total cost $ 20,20,000 Assigning the cost of the manufacturing overheads Allocation under ABC Activity pool Product A Cost per unit Product B Cost per unit Product C Cost per unit Purchase orders $ 60,000 0.12 $ 42,000 0.12 $ 78,000 0.12 Product packaging $ 2,50,000 0.5 $ 1,75,000 0.5 $ 3,25,000 0.5 Machine set-up $ 1,00,000 0.2 $ 70,000 0.2 $ 1,30,000 0.2 Machine calibration testing $ 1,50,000 0.3 $ 1,00,000 0.29 $ 2,00,000 0.31 Cleaning and maintenance $ 1,20,000 0.24 $ 80,000 0.23 $ 1,40,000 0.22 Total $ 6,80,000 $ 1.36 $ 4,67,000 $ 1.33 $ 8,73,000 $ 1.34 Bill of activities for each product Particulars Product A Product B Product C Produced and sold units 5,00,000 3,50,000 6,50,000 Selling price per unit $ 12 $ 8 $ 15 Direct cost per unit $ 7 $ 5 $ 10 Indirect cost per unit $ 1.36 $ 1.33 $ 1.34 Total Cost per unit $ 8.36 $ 6.33 $ 11.34 Gross profit per unit $ 3.64 $ 1.67 $ 3.66 Gross profit margin 30% 21% 24% It can be seen from the above table that the gross profit margin for product A, Product B and Product C is 30%, 21% and 24% respectively. It is identified that product A is more profitable as compared to the other two products and product B is the least profitable as the selling price for product B is the least and the direct cost and indirect cost are also high and that led to gross profit of only $ 1.67 per unit, which is least among the three products. Recommendation and conclusion It has been included from the above discussion that the ABC system contrasts with the traditional methods of allocation of overheads that assign the overheads using the arbitrary percentage of allocation whereas, the ABC system allocates the overheads based on the cost driver of each product. The ABC system can be used to recognize the individual profitable and unprofitable products, to recognize the actual cost of the product, so that the pricing strategy can be established and to reveal the unnecessary costs that can be eliminated. However, the ABC system requires the in-depth knowledge regarding the resources and activities that are allocated to overheads. Therefore, the experts shall be well versed with the ABC system. Further, cost drivers and the activities must be recognized properly to allocate the overheads in appropriate manner. Moreover, if the overhead cost is less for the company them implementation of ABC will not be fruitful as the implementation of ABC requires huge c ost. Although the implementation of ABC is not easy and simple, using ABC to trace the activity costs assist in development of better forecasting, better planning and better strategies. However, the most significant part of ABC is that it enables to save lots of money. For any business, the bottom line is to maximize the wealth of the shareholders. Therefore, if an organization has clearer picture for the costs of each activity, it will be in a better position to earn higher profits References Balakrishnan, R., Labro, E., Soderstrom, N. S. (2014). Cost structure and sticky costs.Journal of management accounting research,26(2), 91-116. Coca-Cola Amatil | Home. (2017). Ccamatil.com. Retrieved 13 May 2017, from https://www.ccamatil.com/ DRURY, C. M. (2013).Management and cost accounting. Springer. Estampe, D., Lamouri, S., Paris, J. L., Brahim-Djelloul, S. (2013). A framework for analysing supply chain performance evaluation models.International Journal of Production Economics,142(2), 247-258. Frazier, W. E. (2014). Metal additive manufacturing: a review.Journal of Materials Engineering and Performance,23(6), 1917-1928. Govindan, K., Khodaverdi, R., Jafarian, A. (2013). 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