Managerial Accounting Techniques for Triton Corporation

The report assesses the managerial accounting methods employed by Triton Corporation to identify lower value-added products. It emphasizes the importance of focusing on the bathroom accessories division, which has a higher profit before interest and tax as well as market share compared to the pipes division. The high level of debt or gearing imposes monetary burdens in terms of interest payments, affecting profitability. The liquidity position of the firm is also good, according to the financial ratio evaluation.

MANAGERIAL
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
A. Drafting report to managing director.....................................................................................1
(a) Assessing each product divisions..........................................................................................1
(b) Implications of low value added items in context of financial returns and profitability.......4
B. Critical analysis of arguments of selling bathroom division and pipes division....................5
C Reducing the financial gearing................................................................................................7
D. Introduction of decentralisation programme which will be beneficial and decision making 9
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
In the recent times, managers of business unit lay high level of emphasis on undertaking
accounting tools and techniques for evaluating performance. Moreover, accounting tools enables
manager to make evaluation of monetary aspects and take suitable decisions for the upcoming
time period. In addition to this, investment appraisal tools also provide assistance to the manager
in assessing whether proposed investment will contribute in the organizational success or not.
The present report is based on the case situation of Triton Corporation which comes under
manufacturing sector. In this, report will provide deeper insight about the manner through which
manager of firm can take decision about working capital investment and other matters pertaining
to the operations. Further, report also depicts the reasons due to which company prefers to reduce
the level of gearing. Along with this, report also entails how financial ratios and budgetary
control tools assists in identifying possible risk areas and give indications for improvements.
A. Drafting report to managing director
(a) Assessing each product divisions
While evaluating the divisions in light of competition which is growing day by day. The
organization consists of six operating divisions such as electrical products, Floor Boards, Car
Accessories, Industrial services, bathroom services and Pipes. In last year Triton Corporation is
generating huge sales of all electrical products followed up by Industrial services (Weygandt,
Kimmel and Kieso, 2015). For floor board cost of sales is in large proportion as compared to
other six divisions profit. In the context of salaries and wages highest has been consumed by
industrial services but it is generating profit not like pipes which is consuming seconding highest
of wages but its market share is least along with profit (Cost Controlling techniques, 2018).
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40.00%
27.00% 30.00%
25.00%
8.00%
3.00%
Illustration 1: Market Share
Electrical Products
Floor Boards
Car Accessories
Industrial Services
Bathroom Services
Pipes
Divisions Revenue Operating profit
Operating profit
margin
Electrical products 40 2.2 5.500
Floor boards 25.4 1.4 5.512
Car accessories 17.1 3 17.544
Industrial services 33.7 8 23.739
Bathroom Accessories 7 0.5 7.143
Pipes 6 0.1 1.667
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5.500
5.512
17.544 23.739
7.143
1.667
Illustration 2: Operating profit margin
Electrical products
Floor boards
Car accessories
Industrial services
Bathroom Accessories
Pipes
 Electrical Products : Market share of electrical products is 40% during recession also
because it is basic necessity of every organization and even for household as well. It is
indirectly linked to sales which is highest of this division and even material cost is higher
of this (Edmonds and et.al., 2016). The operating profit margin of these electrical
products that is 5.5 which indicates the margin of Triton Corporation after paying all the
variable cost such as salaries and wages, material etc. It is not so efficient, Triton
Corporation is not able to control cost of this division. Huge working capital is required
in this division.
 Floor boards : The market share is 27% but it is not able to be a major contribution of
operating profit because of huge material cost, high salaries in other words Triton
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Corporation is not having capability to control its variable cost. Huge working capital is
required in this division (Butler and Ghosh, 2015).
 Car Accessories : The sale of car accessories is not appropriate according to other
division but due to less variable cost that is material cost, salaries and other is
controllable by Triton Corporation so it is contributing huge proportion of 17.54 that is
second highest in all divisions with great market share.
 Industrial services : The aspect of industrial services given the best example for
operating profit margin, in which it has maintained sales instead of controlling its
variable cost. In the proportion of sales and variable cost both are not equal so this leads
to huge market share along with the highest operating profit margin (Epure, 2016).
 Bathroom accessories : It is the division which is less contributing in sales but while
generating sales it is controlling its variable cost i.e. low salaries and wages leads to less
market share but it is generating profit margin through operations is of 7.14 which is
highest than electrical products and floor brands.
 Pipes : The division which consists of less sales, operating profit margin and even market
share as well. As its sales are of 6 m but its variable cost is of 5.9, it clearly depicts that it
is not even reaching to break even (Kim, Schmidgall and Damitio, 2017). The Triton
Corporation has huge working capital requirement in this division.
(b) Implications of low value added items in context of financial returns and profitability
In the context of financial returns and profitability, the highest operating profit is of
industrial services and followed up by car accessories but at average is of bathroom services
(Ionescu, 2017). The Triton Corporation must track on sales of these accessories along with
variable cost. According to operating profit margin most low value added services are considered
as :
 Pipes with 1.67 operating margin
 Electrical products with 5.5 operating margin
 Floor Boards with 5.5 operating margin.
With the context of pipes, there is requirement of huge working capital so they should
work on that. For basis of electrical products Triton Corporation must check on its material cost
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which should be controllable because this is directly linked to margin. Whether it is generating
huge sales but they should implement some efficient techniques which will be controlling there
cost. They should use techniques like EOQ analysis and all for controlling the variable cost.
With the perspective of floor boards, sales is average but major proportion is used in material
cost so similar to electrical products they should apply some techniques which will be effective
for both divisions and even they should be promoted very well so this will lead to generate more
sales and they should try to control the variable cost. The bathroom accessories are at average
position (Bernardi and Collins, 2018), they should keep track of there sales by applying effective
techniques for promoting and for best reach to consumers. Bathroom services are considered as
most essentials for every human so they should use effective tools for promotions by satisfying
there existing customer and to make new target group.
B. Critical analysis of arguments of selling bathroom division and pipes division
Bathroom accessories Pipes
Sales 7 6
Variable cost 6.5 5.9
Operating profit 0.5 0.1
Operating profit margin 7.14 1.67
Market share 8 3
The present era is very competitive in nature as all the divisions of same Triton
Corporation are competing with itself for revenue and profit margin. According to long term
viability strategic decision has to be undertaken in context of Triton Corporation for both
division such as bathroom accessories and Pipes. In the context of sales they are somewhat
similar and both has huge requirement of huge working capital or capital expenditure for
improving the level of efficiency (Yousefi, and et.al., 2018). Both the division can be sold of for
making it more competitive by selling them. As there is need of more capital for generating more
profit but in the same context market share of bathroom accessories is of 8 but division of pipe
has very less market share. Bathroom accessories are very profitable in both purpose that is
household and for corporates as well. Even, while observing the operating profit margin of this is
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7.14 which is recommendable to the organization in all aspects. They should work on division of
bathroom by controlling variable cost in proportion of sales.
For increasing sales they should use various promotional techniques such as advertising
cost, satisfying existing customer which will lead to word of mouth. They can create strong
online presence by creating blogs of there employees and quality team. There search engine
optimisation should be attracted to various people such as creating great content and viral it
through online. In the same series they might launch social media presence as it is interlinked to
search engine optimization (Tyler and et.al., 2018). Even they can use social media such as
Twitter and all. For increasing sale they might explore opportunities into new market overseas.
There is requirement of extensive research for finding new potential.
In the same context for bathroom accessories it is contributing good in operating profit
margin but for generating more margin it should be able to control variable cost such as material
cost, Labour cost control and even it should be able to control the cost of overhead by various
techniques. For controlling the cost of material they should try to get the best possible price and
they must reduce or even eliminating cost. They might check with various suppliers and they
should get best manufacturing material in best price (Dang, Hoang and Tran, 2017). The material
should be purchased in specific quantity according to space of inventory, there should be not
over inventory and it should not be very less. The inventory should be according to capital and
waste should be controlled by tracing mistakes and forming strategies such as use of every piece
of cloth, metal etc.
Even they can control variable cost by controlling labour cost and on contrary they
should make there worker very efficient. There operations of each product must be tracked by
senior management that from where it is coming and its expenditure (Weygandt, Kimmel and
Kieso, 2015). Staffing arrangements must be observed according to scheduling of labour within
specific duration. In same series variable overhead cost must be controlled which will lead to
great contribution in aspect of operating profit margin. Energy use must be audited and there
should be proper use of machines and lights. Thus, division of Bathroom must not be sold
because it will generate huge profit to the Triton Corporation but on contrary side if it is sold
then it will be improving the final margin of Triton Corporation at the end of year. Its variable
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cost to the Triton Corporation is of 6.5 but its operating profit margin is 7.11, so this will
indirectly increase margin of Triton Corporation without incurring any variable cost.
The division of pipe is generating sales of 6 million with its variable cost of 5.9 which is
clearly giving picture of less profit before interest and tax and after paying its tax and interest it
will directly incur loss to the Triton Corporation. But this scene is hypothetical, tax structure is
not known. So according to operating profit margin it is giving 1.67 and its market share is of 3%
which is very low as compared to other division (Edmonds and et.al., 2016). Division of pipe is
not contributing too much and indirectly it is generating cost to Triton Corporation instead of
generating profit. Accordance with its market share, if it is sold to the organization who is only
dealing with pipes then it will not generate cost but it will be referred as margin to Triton. So it
should concentrate on margin instead of cost.
C Reducing the financial gearing
In terms with analysis operational gains of Triton Corporation in due period there will be
various techniques which are needed to be considered by business professionals such as reducing
costs of assets. Similarly, the professionals are planning to improve the sum of capital for
equipment replacement and modernisation programmes (Butler and Ghosh, 2015). Firm
approaches towards reducing financial gearing in the due period which will be effective and
helpful as per meeting financial goals. Requirement of financial capital in the operational
activities are the main areas of concerning in a business unit. Therefore, there have been
increment in debt securities which are by selling marketable securities among investors of firm.
On the other side, they have also considered factors which increase profitability for all products
which are being produces and marketed in environment. If comprised with analysing the
activators which will be used on managing profitably of entity such as Payback period.
1. Identification of influential factors which will be used for building long term payback
period:
For making appropriate project palliating and administration of the operations which will
require suitable changes in the operations. Therefore, to improve the probability of the period
which will be consideration by making effective changes in the operating in each activities. In
Accordance with the electrical products of the firm in the due period they have made the highest
revenue of 40 million (Epure, 2016). The costs incurred in production are for material it was
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34.5, for salaries it was 1.2 and the other relevant costs are of 2.1. Therefore, in relation with
such analysis it can be said that the firm is making fewer payments to the employees in the
manufacturing the Electricity products. Considering the period of recession which insist that
there will be fruitful changes in the operational practices of the firm which in turn will have
effective revenue generation as well as profitable gains at the same time. The highest revenue
rented by electric products of Triton Corporation which has the negative impacts as the salaries
payable to the employees are lower than other product line of firm.
Concerning revenue generated by other departments of business such as floor boards,
cars accessories etc. on which Pipes and Bathroom Accessories are having poor performance as
they are contributing lower income gains to business. Thus, the highest salaries is being payable
by the firm in industrial services in due period. Therefore, to concern the wealth of individual as
well as firm it can be said that they have to balance the operations as well as pay employees as
per their efficiencies and ability to operate activities (Kim, Schmidgall and Damitio, 2017).
Thus, concerning the lower income retained by the other department on which it can be said that
there is needed to have satisfactory improvements in sales as well as reduction in the costs.
Moreover, it has been planned by Triton Corporation to make investments in operational
activities of firm on which they will have effective rise in revenue and operations.
2. Strategies for reducing gearing:
Triton corporation can take major steps for reducing gearing and for improving debt to
capital ratio. These strategies can be applied for raising the profitability of sales, restructuring the
debt and for managing inventory in very efficient manner (Ionescu, 2017). It will be representing
the total financial soundness of Tritorn corporation and even it will reveal appropriate proportion
of equity and even for financing debts. In gearing, 0.5 is considered as ideal ratio or less than it.
Any organization who is representing gearing 1 or more than that it is considered as insolvent
technically.
One of the most common and logical way for reducing debt to capital ratio then it should
be capable for raising sales revenue and profitability. This can be attained by increasing prices,
sales or even by decreasing costs. The cash which is extra used for paying in context of existing
debt. Gearing can be also reduced by managing inventory in most effective pattern. Unnecessary
inventory should not be managed because it is blocking money or it is referred as waste of cash
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flow (Bernardi and Collins, 2018). The most logical way for raising capital is to restructuring
debt and it will lead to decrease debt to capital ratio. If Triton Corporation will be financing at
huge interest rate, and present interest rate is simultaneously lower so organization can attain
refinance to its own existing debt at lower rates. So this will directly decrease the expenses of
interest and monthly payments which leads for raising bottom line of Triton and cash flow.
D. Introduction of decentralisation programme which will be beneficial and decision making
1. Advises to the managing directors:
On the basis of given case situation, Triton Corporation is planning to cut staff from 48 to
20. Given scenario presents that managing director believes effectual control can be exerted on
financial aspects through using ratio and variance analysis technique (Yousefi, and et.al., 2018).
In the context of Triton Corporation both such techniques are highly effectual which in turn
gives clear indication in relation to undertaking strategic actions for improvement.
Ratio analysis may be served as the most effectual technique which assists in evaluating
financial performance under different areas such as profitability, liquidity, solvency and
efficiency. Hence, using the tool of ratio analysis Triton Corporation’s manager can evaluate
financial performance over the years and compare the same with rivals (Tyler and et.al., 2018).
Hence, by performing ratio analysis firm can assess its weak areas and thereby become able to
take measure for performance enhancement. In the context of Triton Corporation, by taking into
account final accounts following ratios have been calculated.
Liquidity ratio analysis
Particulars Formula Figures
Current assets 35
Current liabilities 20
Current ratio Current assets / current
liabilities
1.75:1
Interpretation: Outcome of ratio analysis presents that Triton Corporation has maintained
enough current assets for meeting obligations. From assessment, it has identified that ideal
current ratio accounts for 2:1. On the basis of this, firm must have 2 current assets for meeting 1
obligation. Hence, by taking into account overall evaluation it can be presented that business unit
is able to meet obligations from current assets prominently.
Solvency ratio analysis
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Particulars Formula Figures
Loan 48
Total shareholders’ equity
(Share capital + reserves)
22
Debt-equity ratio Loan / shareholder’s equity 2.18
Interpretation: Tabular presentation shows that debt-equity ratio implies for 2.2:1
respectively. In the context of Triton Corporation, solvency position can said to be sound when
debt-equity ratio accounts for .5:1. It presents that firm should 2 equities over 1 debt. Currently,
Triton Corporation has maintained high debt over equities which in turn considered as not a good
indicator. The reason behind this, in the case of debt, firm has to make interest payment
irrespective of profit generation. On the other side, under equities, firm offer dividend to the
shareholders only when it generates enough margin during the concerned period. Hence, it can
be mentioned that higher debt level imposes financial burden and impacts firm’s profitability.
Thus, at the time of raising funds Triton Corporation should keep in mind ideal ratio such
as .5:1.
2.Critical analysis over fruitful needs of management accounting techniques in business
practices:
Impacts of managerial accounting techniques in business operations which will be helpful
as it creates the appropriate internal analysis over the operations. It consists of preparing all the
reports such as income statements, financial statements, budgets as well as various accounts of
the different operations incurred in the business (Dang, Hoang and Tran, 2017). Moreover, the
main motive of preparing such reports is that it will be a helpful tool which initiates the internal
auditing of the venturi. Derived outcomes from the operations of firm will have effective control
over business gains and profits of the entity. Budgeting and various costing use in management
accounting methods benefits in organising the operational activities. Thus, it provokes the
managerial professionals as well as accounting personal to undertake the research through
financial of firm as well as generate the new ideas which will have impacts on managing
operations of entity (Weygandt, Kimmel and Kieso, 2015). Ideas and the decisions made bay
professionals are in relation with improving the operational activities as well as managing the
profitable gains of firm in the right time. Reduction in costs and expenses will be effective as it
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rises the operational gains as well as brings the better internal administration of the firm's
operations.
CONCLUSION
By summing up this report, it has been concluded that techniques of managerial
accounting assist manager in identifying lower value added products. Hence, by identifying
lower value added item manager of Triton Corporation would become able to take strategic
decision in relation to the same. Further, it can be summarized from the report that emphasis
should be placed by Triton Corporation on bathroom accessories division over others. Moreover,
profit before interest and tax as well as market share is higher in the case of bathroom
accessories division in against to pipes. Thus, by offering and selling bathroom accessories to the
customers Triton Corporation would become able to gain a competitive edge or position over
others. It can be summarized from the evaluation that high level of debt or gearing imposes
monetary burden in terms of interest payment and thereby affects profitability. Referring the
results of financial ratio evaluation it can be depicted that liquidity position of the firm is good.
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REFERENCES
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MANUFACTURING. U.S. Patent Application 15/655,549.
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5752828-techniques-cost-control-manufacturing-companies.html>.
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