Cost Management and Analysis for Colgate-Palmolive

Running head: COST MANAGEMENT AND ANALYSIS
Cost Management and Analysis
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1COST MANAGEMENT AND ANALYSIS
Executive Summary:
For this report, the oral care product category of Colgate-Palmolive is taken into consideration.
The oral care products of Colgate-Palmolive are a specific type of consumer goods that take care of the
oral problems of their customers. The presence of four major segments or brands can be seen in the
business operations of Colgate-Palmolive; they are Colgate, Palmolive Naturals, Hill’s and Ajax. It has
been evaluated that the organisation would be highly beneficial, if it decides to adopt activity-based
costing for allocating overhead costs to products. Finally, it has been found out that the organisation is
performing well in terms of social disclosures; however, conservation of water is the only environmental
issue that it has encountered in the recent years.

2COST MANAGEMENT AND ANALYSIS
Table of Contents
Introduction:...................................................................................................................................................3
Component 1: Business Processes.................................................................................................................3
Introduction of the Company:....................................................................................................................3
Oral Care Products of Colgate-Palmolive:................................................................................................4
Value Chain Analysis of Colgate-Palmolive:............................................................................................4
Component 2: Designing activity based costing system................................................................................6
Description of Activity Based Costing (ABC)..........................................................................................6
Difference between ABC and Traditional Costing....................................................................................6
Benefits of ABC Costing...........................................................................................................................6
Disadvantages of ABC Costing.................................................................................................................6
Preparation of an activity-based costing system:.......................................................................................7
Significant points of the ABC spreadsheet model:..................................................................................10
Component 3: Corporate Social Responsibility and Sustainability Reporting............................................11
Important social and environmental issues of Colgate and Palmolive:...................................................11
Three social and three environmental indicators of Colgate and Palmolive for the past four years:......11
Performance of the organisation in the area of social responsibility:......................................................13
Performance of the organisation in the area of environmental responsibility:........................................13
Explanation of whether social and environmental performance of the organisation is improving or not:
..................................................................................................................................................................13
Social and environmental issues likely to be encountered in future:.......................................................14
Conclusion:..................................................................................................................................................14
References:...................................................................................................................................................15

3COST MANAGEMENT AND ANALYSIS
Introduction:
The current report aims to address the different issues related to product costing, corporate social
responsibility and sustainability reporting in the context of an Australian entity. Therefore, Colgate and
Palmolive Australia has been chosen as the organisation, which is a global firm involved in the
production, distribution and provision of healthcare, household and personal care products. The first
segment of the report would lay emphasis on providing a brief description of the organisation and its
value chain analysis. The second portion of the paper would explain the design of an activity-based
costing overhead system for the selected products of the organisation. Finally, the report would shed light
on evaluating the corporate social responsibility and sustainability reporting in the context of Colgate and
Palmolive Australia.
Component 1: Business Processes
Introduction of the Company:
Colgate-Palmolive Pty Limited (Colgate-Palmolive) is regarded as one of the major Australian
companies having business operation in the industry of consumer goods. The company was established in
the year of 1806 and it is headquartered at 300 Park Avenue New York, NY, United States. It needs to be
mentioned that the main business operations of Colgate-Palmolive can be found in manufacturing,
marketing and distribution of personal care as well as household cleaning products. Colgate-Palmolive
offers the customers of Australia with major oral care products including toothbrushes, toothpastes,
mouthwashes, dental floss and different kid’s products. Apart from this, major involvement of the
company can be observed in providing contract manufacturing services. Colgate-Palmolive is based in
Sydney, Australia and it is a major subsidiary of Colgate-Palmolive Company (colgatepalmolive.com
2018).
It can be seen from the above that Colgate-Palmolive operates in the consumer goods industry of
Australia and it is regarded as a major industry in Australia as it largely contributes towards the
development of Australian economy. However, it needs to be mentioned that the Australian consumer
goods industry has been struggling over the years due to weak economic growth and volatile customer
sentiment. In the recent year, this industry has been able in generating $169 billion of revenue. From the
period from 2013 to 2016, this industry has a growth rate of 0.7% that is very low. More than 75,500
businesses can be seen in this industry along with more than 705,302 of employees (Ibisworld.com.au
2018).