Managing Business Performance Assignment Sample

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Introduction of Managing Business Performance Assignment

Task 1

Question A

Product life cycle concept

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The product life cycle is the time pride of a product that is introduced to the consumers for understanding its longevity before removal from the marketplace. Management of accompanists has needed to make this concept for marketing strategies. Due to consumer behavior companies need to focus on consumer expectations (Taddese et al. 2020). Moreover, the natural behavior of consumers is searching for long-life products at affordable prices. Marketing professional teams always make an advertisement schedule of the product. Moreover, this concept also helps to establish the price of the product, redesign, and penetration in new markets. Additionally, the product life cycle also pushes out old products from the market to establish new products.

Explanation of each step of product life cycle

A product has gone through five product life cycles where marketing professionals have broken down a product lifeline between five phrases. Through phase explanation of each step helps to understand the overall product life cycle evaluation process. 

 presentation of product life cycle

(Source: He et al. 2019)

The development phase of the product: The development phase has included market analysis, design, and testing of products. For a start-up, this phase has been used for analyzing the performance of the product in the market (He et al. 2019). Moreover, this phase only focuses on product development for future revenue. The approach of a product in the market without a development phase will reduce the revenue.

The introduction phase of the product: The introduction phase focuses on launching the product with huge advertising expenditure. In the introduction phase management uses capital for advertising that would generate more revenue in the next phase. The advertising fund was arranged by investors and the owner of the company.

Growth phase: The growth phase is focused on more sales in the market, through increasing sales growth on a quarterly or yearly basis and also increasing the production of products (Horvat et al. 2019). More production would impact reducing operational expenditure to increase the gross margin. Through the growth phase, analysis profitability of each unit of production will increase the consolidated profit of products.

Maturity phase: In this phase product touches a high level of demand cycle where expending on advertising would add more revenue. The financial flow is generated from higher profitability volume.

Stability or declining phase: when products come to cross higher demand where further demand of products has decided about declining or stability phase. Management decides about the next strategy about product retention or rejection.

Importance of product life cycle concept in the modern manufacturing process

These tools work as forecasting tools that help marketing professionals to decide products efficiency to make a profit (Ali et al. 2019). All phases are being used as a paling tool for product performance in certain periods. Additionally, marketing plans have been decided through these tools that also prove forecasts about profitability. This tool helps to launch new products in the market through the development phase.

Question B

Difference between traditional and lifecycle costing

 Both accounting systems are important for any organization but those accounting processes have differences in terms of approach and result. Those are differences are being delivered below for clarifying different facts regarding both accounting processes:

  • The traditional accounting methods are being used to make quarterly, monthly, and yearly. Through this analysis, an organization has a tally about financial improvement or deficit. But life cycle costing methods consider a particular product revenue and cost for a certain time (Van et al. 2019). Moreover, this life cycle has been calculated for making revenue through introducing new products in the market. Additionally, traditional accounting operational and manufacturing costs decide about the total cost of the organization where the life cycle is considered a product costing through its lifetime.
  • In the lifecycle method marketing term, get classified analysis on every product that helps this professional to decide on which product fails to generate revenue. But in the traditional system, particular product revenue is not being analyzed where lifecycle costing includes determining the product revenue after a certain time. Traditional accounting has periodic analysis to help organizations to analyze the quarterly performance of the organization. Meanwhile, analyzing financial reports helps to describe the financial growth of the organization. The life cycle is continued by the marketing team to develop the sales volume of the company. Moreover, the life cycle also adds more potential to product improvement.
  • In the traditional system product development-related activity has not been considered in this accounting but in the lifecycle method products quality to enhancement has been covered in this analysis. In the traditional system, accountants prescribe financial conditions through the “profit and loss” and “balance sheet”. On the other hand, lifecycle accounting does not provide any of these statements to explain the organization's financial condition.
  • Through the traditional accounting process, an organization evaluated sales and revenue for a certain time. That means traditional accounting was analyzed by the time. On The other hand, the life cycle costing invested cost and revenue as being calculated through the entire life of the product (Fatimah et al. 2020). Particular product revenue and cost evaluation has not been helpful for overall growth. But the marketing aspect of a specific product helps to make a profit from this particular product that enhances the return on investment of this product.
  • Traditional accounting involves overall financial transactions after a certain period where the lifecycle is the continuous process to establish a product in the market. This lifecycle consists of the initial investment cost whereas traditional accounting focuses on financial aspects that come from certain practices of business. In life cycle accounting due to focus on products is basically dealing with maintenance, transport cost of the product.

Question C

The implication of life cycle costing:

  • Life cycle costing has been used for making physical assets costing on the basis of the required time. This tool is useful for the assessment of asset acquisition to optimize productivity through lower costs to the company. Moreover, asset disposal and usability depend on the life cycle costing tool. Through the life cycle costing method, management has decided about existing assets valuation and life for usability. Moreover, numbers are being included in the costing method to ensure maximum return from products. The earlier activity of the costing method has delivered about revenue or minimum cost to identify the high return-oriented products.
  • This costing method calculates the life cycle of products and assets that has produced more clarity about product performance. In the costing activity, launching product life and costing help to assess the selling price. Advance prediction of the selling price of products are being useful to marketing professionals to compete in the market. Decision-making activity becomes strong due to using this costing process.
  • Implementation of this costing approach has an effect on presenting long-term benefits from the assets and products. Moreover, this approach has delivered the life of the particular assets to evaluate the further necessity of funds for arranging assets in the future. Rewarding the management of the company in the long term period provides positive results compared to short-term gain.
  • Through implementing the costing of life cycling method increment on initial investment through the span of the product. Implementing this costing model in a marketing plan helps to allocate funds for marketing that has reduced the costing of the product through the analysis life cycle. This cycle also covers the entire incentive of a product in a lifetime. This analysis provides highly efficient products for the company. This life cycle has focused on the development of a product to make efficient products for consumers. Comparison with traditional accounting product development is not part of this accounting.

Question D

Explanation of Activity-based management (ABM)

Components of ABM model

(Source: Lee et al. 2020)

The ABM management procedure is the combined process of analyzing the profitability of the organization through considering its strength and weakness. The ABM explorer which is part of the business has made a financial loss that could be improved or rejected by the management. Improvised strategy enhances the return of those business parts or eliminating those parts also prevents the organization from further losses.

Benefits of the ABM

 Objectives of the ABM

(Source: Lee et al. 2020)

  • Through using ABM in organization improved optimization of assets and resources would be used for optimization level. Moreover, this accounting management evaluates the accounting of resources that helps to enhance the use of resources.
  • This ABM accounting about the sales cycle where management becomes able to meet up short duration for sale that has improved inventory management (Lee et al. 2020). Moreover, low sales cycles have increased the liquidity of the organization. Additionally, this accounting management provides a comparative advantage through a low amou8nt of inventory for increasing sales of products.

Task 2

Question A

Calculation of the target cost of a unit of printer ShacPac company

Particulars

Target cost (£)

The maximum selling price of a printer

200

Expected direct cost due to use of polymer

60%

181.8182

Table 1: Calculation of target cost of one unit of the camera

(Source: Created by the learner)

The ShacPac company expansion plan includes both products where the target costing of polymer is £ 181.8182. The calculator of the targeting price is presented in the above table. This table has been created by using a targeting cost method. In the calculation of polymer, “Target Cost = Selling Price / (1 + Profit %)” target cost this formula has been used in the calculation. This calculation of the target cost would help to make revenue through the selling of each printer. This cost targeting method also helps to make a comparative advantage in the market that will generate revenue through selling huge printers.

Question B

The maximum selling price of one unit camera of ShacPac company

Particulars

Amount (£)

Software expenses 40% of direct cost

76

another direct cost

190

gape of target cost per digital camera

23.7

Total fixed cost

289.7

The selling price of each camera

318.67

Table 2: Calculation of Maximum selling price of one unit camera

(Source: Created by the learner)

Assuming the principle of target costing ShacPac Company has delivered £76 as the software-related expenses for each camera. Additionally, this cost is 40 percent of the direct cost whereas other direct costs are 60 percent. This other direct cost is £ 190 and the gap in targeting cost is £ 23.7. The total fixed cost of each camera has come out to £ 289.7. Considering all that information about the cost of a camera the ShacPac Company could set the maximum selling price of a camera should be £ 318.67. The formula of calculating the selling price of a camera using “Selling price = fixed cost + (markup percentage X fixed cost)”presents the maximum selling price of a camera.

Question C

Definition of target costing:

Target costing is more than an accounting process where it can rather be known as a management tool. Through this management technique, the price of resources is being identified by the market condition. Through the managing tool pricing of products is being calculated through market conditions (Ahn et al. 2018). The organization is the price tracker that decides the cost of products. This management approach has been considered as an effective strategy for managing over expenditure on costing. This target costing approach set the costing price that would set the selling price of the product according to the corporation’s product price. The target costing model is considered product design and consumer expectation for making the selling price of the product. 

Possible options to reduce the target cost gap:

The target cost gap is the difference between the estimated production cost and target cost. Moreover. This gap is being calculated by the formula “Estimated product cost – Target cost”. The possible option is to reduce the gap where management focuses on components. The use of components is being considered as a minimum level where the component cost comes down to the lowest level that has influenced the gap. Using a minimum cost-related component has created an advantage to reduce the gap between target cost and estimated cost.

Moreover, using cheaper staff in operation has reduced the cost of labor and has improvised the cost structure that could reduce the gap. Additionally, implementing efficient technology in production enhances the volume of production that helps to take advantage in a comparative way. Training to the staff for making efficient production in the manufacturing process where waste-reducing training to employees saves extra expenditure of the organization. This gap has become higher due to the current cost of resources and materials where high life cycle machinery in production has benefited organizations for long term benefits. Introducing different materials in production has reduced the gap of target costing where substitute material used in production reduces the cost of production. Less or high production cost affects the target costing where making products to different materials would affect the gap. The cost saving approach in targeting costing has been able to reduce the gap between those cost methods. Moreover, the targeting gap could be reduced by implementing the process of managerial costing accounting.

Question D

The target costing could be used in the service industries, but it raises problems for these industries. The target costing approach in the service industry has become difficult for making market- driven prices. The costing process has been considered in the service industry where pricing of products are not able to be calculated by the unphysical resources (Clifton et al. 2019). On the other hand, in the manufacturing industry the costing approach through the resource management costing but in service industries the target costing approach becomes valueless due to uncertain fluctuation in market demand. Salary is the main expenditure of the service industry where the costing has been considered by the salaries. Expenditure like salaries is not possible to reduce throu8gh out using target costing. It is a low budget campy weather using these tools depends on market pricing where service industry has been difficult to analyses the market price.

This cost analyzing method is being used in cheaper materials that could not be used in the service industry. Moreover, the costing approach in the service industry, there are no material costs are now considered in the calculation. Additionally, service industry production cost related to any expenditure is not considered in the analysis. Moreover, this unrealistic cost has not been able to be analyzed by this costing method. In the service industry quantity matters but in this coating method the service industry becomes an unreachable option. The service industrious also get revenue through providing service to their client where initial investment has not been continued in this process that make problems for accounting target cost of the service. Additionally, this method requires specific inputs for sufficient output where the service industry is not able to provide such inputs to calculate the result. Hence, this method is not possible for the service industry where making critical analysis is not possible for the service industry. Target costing also analysis the market cost of the product but in service fluctuation rate of service is not possible to deliver adequate information.

Reference list

Ahn, H., Clermont, M. and Schwetschke, S., 2018. Research on target costing: past, present and future. Management Review Quarterly, 68(3), pp.321-354.

Ali, M.M., Rai, R., Otte, J.N. and Smith, B., 2019. A product life cycle ontology for additive manufacturing. Computers in Industry, 105, pp.191-203.

Clifton, M.B., Townsend, W.P., Bird, H.M. and Albano, R.E., 2019. Target costing: market driven product design. CRC Press.

Fatimah, A. and Santoso, A.A., 2020. Peningkatan Efisiensi Biaya Melalui Activity Based Management. Jurnal Riset dan Aplikasi: Akuntansi dan Manajemen, 4(2), pp.229-238.

He, B., Luo, T. and Huang, S., 2019. Product sustainability assessment for product life cycle. Journal of cleaner production, 206, pp.238-250.

Horvat, A., Granato, G., Fogliano, V. and Luning, P.A., 2019. Understanding consumer data use in new product development and the product life cycle in European food firms–An empirical study. Food Quality and Preference, 76, pp.20-32.

Lee, M.E. and Driver, B.L., 2020. Benefits-Based Management: A New Paradigm for Managing Amenity Resources 1. In Ecosystem management: adaptive strategies for natural resources organizations in the twenty-first century (pp. 143-154). CRC Press.

Taddese, G., Durieux, S. and Duc, E., 2020. Sustainability performance indicators for additive manufacturing: a literature review based on product life cycle studies. The International Journal of Advanced Manufacturing Technology, 107(7), pp.3109-3134.

Van Overbeeke, E., Janssens, R., Whichello, C., Schölin Bywall, K., Sharpe, J., Nikolenko, N., Phillips, B.S., Guiddi, P., Pravettoni, G., Vergani, L. and Marton, G., 2019. Design, conduct, and use of patient preference studies in the medical product life cycle: a multi-method study. Frontiers in pharmacology, 10, p.1395.

 

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