Management Accounting: Value Chain Concept, Company Description, and Cost Allocation

Running Head: Management Accounting
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Project Report: Management Accounting

Management Accounting
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Contents
Part A................................................................................................................................3
a.Value chain concept...................................................................................................3
b.Company description.................................................................................................4
i.Mission and vision..................................................................................................4
ii.Competitive strategy:.............................................................................................5
iii.Value chain model................................................................................................5
iv.Value adding process............................................................................................6
v.Relevance and usefulness of value chain concept.................................................7
Part B................................................................................................................................7
a.Estimated allocation rate............................................................................................7
b.Total overhead cost allocated....................................................................................8
c.Total cost of job 20....................................................................................................8
d.Amount of fixed and variable cost in Oct..................................................................9
e.Cost pool method.......................................................................................................9
Part C..............................................................................................................................10
a.Cost pool and cost assignment.................................................................................10
b.Cost drivers for each cost pool................................................................................11
c.Allocation rate and interpretation............................................................................12
References.......................................................................................................................14

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Part A:
a. Value chain concept:
Value chain analysis is a strategic tool which is used in an organization to identify the
primary and secondary activities of the business in order to reach over the final product of the
company to evaluate the activities of the business. This process helps an organization to
reduce the overall associated cost with the production and service delivery of the company
and it also helps the company to improve the differentiation. The main goal of the value chain
analysis process is to identify the most valuable activities of the business and evaluate them
in order to set the competitive advantage of the company and improve the overall
performance of the company (Mihm, 2010). Below are the 2 main benefits of value chain
concepts which are used in an organization to improve the overall performance and set the
better position in the market:
i. Ensure value creates exceeds cost:
There are mainly 5 primary activities of an organization which defines about the main
operations of the business and associated with the management of cost and profit level of the
business. On the basis of evaluation over those 5 primary activities of the business, it
becomes easier for an organization to ensure about the exceed value of the business and the
cost to create the overall value of the business. The five value chain activities of the business
are as follows (Lang, and Stice-Lawrence, 2015).
 Inbound logistics
 Outbound logistics
 Operations
 Service
 Marketing and sales (Madura, 2011)
These primary activities ensure that all the process of preparation and delivery of a
product or delivering a service are managed efficiently. It assures that the cost level of the
business could be reduced and it can set a better competitive advantage in the market
(Kozlowski, Searcy, and Bardecki, 2015).
ii. Gain competitive edge and boost profit:

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Further, the value chain analysis also helps the business to gain a competitive
advantage and manage the profitability level of the business in the market. If an organization
could create an advantage in any of the below five activities then it becomes easier for the
business to capture the competitive advantage in the market and improve the overall
profitability level in the market.
 Inbound logistics
 Outbound logistics
 Operations
 Service
 Marketing and sales
In order to capture a competitive state and advantage in the market, an organization
should map out all the activities within the main 5 value chain activities and improve the
efficiency level of the business in the market. It would help the business to meet the common
goal of the business (Lysons and Farrington, 2012).
b. Company description:
In the report, Caltex Australia has been chosen to identify the concept of value chain
and the importance of value chain analysis in an organization. Caltex Australia is a subsidiary
company of Woolworths limited. It is an Australian chain which operates under the
automotive and retains industry in the Australia. The main products of the business are petrol,
convenience and grocery. Company has been founded in the year of 1996 by the name of
Woolworths petrol. Later on, the company name changed to Caltex Woolworths in the year
of 2013.
i. Mission and vision:
Mission and vision statement of Caltex Australia has been studied further to understand
the main goal and aim of the company. Vision statement of company depicts that company’s
main vision is to be the leader in oil and refinery industry in Australia and company further
focused towards to be more admired and loved by the people, stakeholders and society
because of the performance and policies of the business (Our vision, 2019).