Strategies For Cost Reduction In Exhibition Furniture Business

Revenue budget 2018

 Part c

 Part d

Part f

Part g

Part h

Part j

Cost of Goods Sold

Part k

Part l

To: Managing Director, Exhibition Furniture

From: Management Accountant

Re: Strategies for cost reduction

Date: 10-02-2018

The budgeting process that has been carried above for the exhibition furniture has determined the estimated amount of profit that will be achieved by the firm, if everything goes according to the budgeted plans. However, the estimated profits and sales could be increased if successful strategies are implemented. The firm must offer various kinds of discounts and other offers on the sale of furniture products so that it can attract wide customer base. Also, the profitability can be increased by adopting possible methods of cost control and cost reduction. Instead of using the manual labour force, the firm must implement machines for the manufacturing of desk so that it can enhance the firm’s productivity. The use of machine capital in place of labour capital will also reduce the training and staffing cost of the company to a certain extent. The firm must also take its business on the electronic mode so that wide range of potential customers can be generated. Further, the firm must adopt various strategic management accounting initiatives to improve its overall profitability from the sales. Management accounting has introduced advanced level of techniques and tools such as Activity based costing, just in time technique, cost volume profit analysis, balanced scorecard, Kaizen costing etc. (Bromwich, and Bhimani, 2005). Employment of such techniques in the business will allow the furniture firm to manage its cost appropriately. Activity based costing technique will enable the firm to determine the accurate cost involved in the manufacturing of desks and other furniture products. The better cost allocation will allow the firm to determine the appropriate selling price of the furniture products so that reasonable profits could be generated. Moreover, the firm must strive to bring uniqueness to its products so that it can gain competitive advantage over the rival firms of the industry. The method of depreciation must also be examined to check its appropriateness for the business of the exhibition furniture. If the method is not reasonably correct as per the situation of business, the firm must try to change the depreciation method so as to reduce its fixed cost. Also the application of just in time technique will help the business to maintain an adequate level of inventory that is necessary for the successful operation of the business and that will avoid the excessive cost of blocking unnecessary funds in holding the inventory. Also, it will help the business to meet the unexpected demands of the customers in specific situations. These techniques will certainly help the business to manage its costs and improve its overall profitability (Horngren, Bhimani, Datar, Foster and Horngren,  2002). 

References:

Bromwich, M. and Bhimani, A., 2005. Management accounting: Pathways to progress. Cima publishing.

Horngren, C.T., Bhimani, A., Datar, S.M., Foster, G. and Horngren, C.T., 2002. Management and cost accounting. Harlow: Financial Times/Prentice Hall.