Voodoo Ltd Business Case Study

2146 words - 9 pages

Introduction

Australia’s food and beverage industry is anticipating significant growth, with a majority of food and beverage executives expecting increases in revenues (84% of executives) (Thornton, 2013). For the purposes of this report, the focus will be on the product costing systems in place at Voodoo Ltd, concentrating on their applicability and effectiveness. Our aim is to identify the weaknesses in Voodoo Ltd’s current operations which may impede its growth in what is a dynamic and fast paced industry. Currently Voodoo Ltd is in a battle to retain its momentum as a leading firm in the food and beverage industry as it faces strong competition from competitors who are out performing them in production rates and at lower prices for shelf-space. An analysis of the current costing measures and information will allow Voodoo Ltd to reassess its current operation and implement new initiatives to tackle increasing competition to ensure it maintains its velocity moving forward.
Main Recommendations
After analysing Voodoo Ltd’s current costing and production process we have carefully formulated our recommendations that we believe would greatly assist Voodoo Ltd in remaining competitive and ensuring exponential growth can be achieved within the coming financial years.
Below is an outline of our recommendations which will be further discussed later on in the report:
• Voodoo Ltd needs to consider R&D costs when designing product costing system. This is to avoid unwanted failure in its sales and marketing departments.
• Senior management should look to streamline the delivery and transportation across all three production plants.
• Voodoo Ltd should look to appoint a head of innovation to ensure its three production plants can be closely monitored and improved.
• Voodoo Ltd should ensure that investments in information technology are effective.
• Voodoo Ltd should ensure they control and monitor the accounting procedures involved in costing processes.
• Voodoo Ltd would benefit from using a tailored product costing system

Discussion
i. Benefits of a product costing system for Voodoo Ltd
According to Smith, Throne and Hilton (2012), product costing systems can be used for accumulating product related costs and using further procedures to assign these costs to the final product. Moreover, product costing analysis can increase the accuracy of this process, especially when it comes to variable costing, where the cost changes in direct proportion to a change in the level of activity and leaves fixed costs to other expense accounts. This is able to enforce the matching principle, attaching costs to the value they create throughout the business. As a result, Voodoo Ltd can predict costs that are accumulated in the production of tea and can decrease costs that are not necessary and reduce the price of the product. Therefore, they are able to compete with the competitors’ price in the market. Furthermore, product costing systems...

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