AUB Group Limited: Management Accounting Analysis and Report

This report provides a comprehensive analysis of AUB Group Limited's management accounting practices. It begins with an executive summary, followed by an introduction to the company, its operations, and its historical background. The report then delves into the concept of the value chain, explaining its benefits to organizations and applying it to AUB Group Limited. It examines the company's mission, objectives, and competitive strategy, including its efforts to differentiate itself in the insurance industry. A value chain model is presented, highlighting key processes such as marketing and acquisition, as well as supportive departments. The report also includes an analysis of overhead allocation and cost management, incorporating financial data and calculations. Overall, the report offers a detailed examination of AUB Group Limited's business operations, financial performance, and strategic approach, making it a valuable resource for students studying management accounting and business development. The report provides a good understanding of the company's competitive landscape and its strategies for achieving its goals.

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MANAGEMENT ACCOUNTING
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Executive summary
For purpose of this paper, the selected company from the top 100 ASX Company listing is AUB
Group Limited. The company is an Australian based insurance organization that provides
underwriting, risk and broking services. AUB Group limited operates various insurance networks
which are represented by almost one hundred businesses. Also, the company distributes various
ancillary products. Further, AUB Group Limited distributes, manages and underwrites insurance
portfolios and products on behalf of Australian "Licensed insurance Companies." Also, the
company manages risks for its customers and claims for different solutions for its insurance
brokers, insurance companies and clients. Previously, the company was well known as
"Austbrokers Holdings Limited" before changing to AUB Group Limited way back in 2015. In
1885, the company was incorporated and is based in Australia. AUB Group limited was the first
insurance company to be listed in the ASX

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Table of Contents
Introduction.............................................................................................................................................4
Concept of the value chain......................................................................................................................4
Benefits of the value chain to organizations............................................................................................6
Company’s mission and objectives..........................................................................................................6
A description of the competitive strategy...............................................................................................7
Value chain model for the company........................................................................................................7
Value-adding processes of your company...............................................................................................8
The relevance and usefulness of the information concerning the concept of the value chain................9
Question 2.............................................................................................................................................10
(a)..........................................................................................................................................................10
Estimated Rates of allocation for the current period..............................................................................10
(b)..........................................................................................................................................................10
The Job overhead allocation for job 20 in October................................................................................10
(C).........................................................................................................................................................10
Overall cost for job 20...........................................................................................................................10
D. Fixed and variable overhead for jobs in October..............................................................................10
Question three......................................................................................................................................11
Total overheads....................................................................................................................................11
Question three.............................................................................................................................11

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Introduction
AUB Group has obtained high profits for over thirteen consecutive years. Currently, the wealth
of the AUB Group represents over one hundred thirty-five business parterres in around four
hundred twenty-five locations across New Zealand and Australia. Since 1985, the company
committed its self to protect a well-established future for its partners, employees, shareholders,
and employees. The company illustrates that it is building its strategy by involving its clients in
everything that is done in the business such as providing solutions, services, and products hence
protecting them from damage, financial burden, and harm. Further, the company works for hand
in hand with its advisors and partners who provide trusted guidance and support to various
clients on a combination of people, financial and physical risk solution. The approach of AUB
Group limited is supported by similar levels of commitment to providing "high-quality services"
that it has had from the beginning. The services of the company are designed with the intention
of helping its partners operate safely and manage its business effectively thereby achieving better
results for its clients.
Concept of the value chain
A value chain is referred to as a collection of various activities that are performed by a given
organization with the intention of creating value for the customers. In this case, companies create
their value chain obtaining their raw materials and later use them so as to produce any useful
thing. Value chain involves various activities such as production, marketing, distribution, and
design. The value chain of companies which produce goods begins with the use of raw materials
to make products. The first scholar to introduce the concept of the value chain was "Michael E.
Porter" from Harvard school of business (David et al 2009). Porter indicates that "Competitive
advantage cannot be understood by looking at a firm as a whole, it stems from the many discrete
activities a firm performs in designing, producing, marketing, delivering and supporting its

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product. Each of these activities can contribute to a firm's relative cost position and create a basis
for differentiation."
Also, Porter explained that "the concept of value added, in the form of the value chain, can be
utilized to develop an organization’s sustainable competitive advantage in the business field of
the 21st Century." In addition, all organizations across the world are made up of various
activities that are connected together with an intention of developing the business's value chain
and together the activities make up the value chain of an organization. Organizations use the
framework of the value chain as a major tool for their strategic planning for a long period of
time. The major reason as to why the framework of the value chain is used is to increase the
creation of value by minimizing the costs. According to Porter, business activities are divided
into two major categories such as support and primary. The primary activities of the business
include the following, outbound logistics, sales and marketing, operations, service, and inbound
logistics. On the other hand, supportive activities are procurement, technology development,
Human resource management, and firm infrastructure. These support activities are considered to
be important elements to the business because they support the "primary function" of the
business. According to the insight of strategic management, there are 2 major value chain
approaches that is to say: differentiation advantage and cost (Katie, & Ricketts 2014).
Cost advantage; after an organization has finished identifying the supportive and primary
activities, it should be in the position to identify the costs which drive each activity. For labor-
intensive activities, they could involve cost drivers like, work hours, the rate at which a given
piece of work is completed, wage rate and many others. The business is also supposed to identify
the various links that exist within their activities in order to understand that “if costs are reduced

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in one area, they can be reduced in another." Organizations can be able to identify various
opportunities so as to reduce their costs (Gamble et al 2010).
Differentiation advantage, organizations make it a priority to identify various activities that help
in creating the customer's value. These activities include using various marketing strategies, fast
answering of phones, meeting the expectations of customers and knowing about systems and
products. In order to improve the value chain activity, organizations must be in the position to
focus on the services of customers, adding features to their products, increasing customer options
to services and products and offering incentives. Businesses are required to "identify
differentiation" that is easily maintained and can be able to increase value (Kiechel 2010).
Benefits of the value chain to organizations
The concept of value chain provides various benefits to the management of organizations. First,
it helps in supporting organization managers to understand linkages that exist between the value
activities of an organization and to "think in terms of process rather than function or
department." Lastly, value chain helps managers to identify the abilities of strategic alliances
which have different actors in the value system of an industry. By identifying both the linkage
and cots drivers, managers can be able to concentrate on reducing costs and finding means of
optimizing their returns throughout their value chain (Jonathan, et al 2009). The organization is
bound benefit from low cost advantage. Undertaking a value chain analysis helps the company to
be identify the profitable and value generating activities as well as those which are not. By
undertaking the assessment of the value generating activities, it makes it possible for the
organization to establish the cost drivers for every single one of the processes. This creates a
platform for the improvement of the strategies that are to be implemented while also ensuring
that the value of the customer is maintained or improved. It is through such a process that the

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organization will be in a position of identifying all the areas which have a lower access cost to
the raw materials, channels of distribution or the innovative technology processes.
Value chain analysis also helps the organization to differentiate its products or services. Through
the application of value chain analysis, the organization will have the opportunity to make
comparisons of its activities with what the competition is doing. By undertaking comparisons of
the organization’s actions with those of the competitors, management is able to focus on the
customer’s perceived value of the services and products. It will henceforth be able to evaluate the
differentiation strategies such as product features, pricing, and channels of marketing as well as
service support for the purpose of value enhancement. That will ultimately help the organization
to establish the innovative ways through which the performance of value generating activities
can be undertaken. This would result into an improved general performance of the entity as well
as enhancing its competitive advantage.
By conducting the value chain analysis, the organization is able to identify the Core
competencies as well associated activities. Through the value chain analysis, the organization
will be in a position of identifying the kind of activities which are value generating as well as
their associated cost drivers. Through the reduction of the cost of specific value chain actions or
the reconfiguration of the value chain, it will be possible for the organization to create a cost
advantage. A major advantage associated with this kind of operation is that the value chain is a
highly flexible strategy tool through which to examine the organization, the competitors as well
as the respective places within the value system of the organization. It makes it possible to
comprehend the issues of the organization associated with making customer value assurances
and promises since it has its focus on activities that aid the delivery of value proposition.

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Company’s mission and objectives.
The mission of the company is to eradicate all sorts of avoidable blindness that may affect its
clients by serving as a "trusted advice" for various business risks. The objectives of the company
include the following, (I) Widening its solutions offering (ii) drive the operation of the business
with various value services (iii) Maximizing its partnership model (IV) strengthening the
foundations (Pierre, et al 2013).
A description of the competitive strategy
In order to tackles the increasing competition in the insurance industry, AUB Group limited has
focused on implementing various measures and they include, forming a "sustainable
differentiation", the company tries to accomplish this strategy by creating more products and
upgrading the current ones with "incremental features." Also, the company is building a scale
with the intention of competing better. AUB is building its scale by considering its business
demoniacs. By building its scale, the company can be in the position to gain a market advantage
over its rivals hence impacting its profit margins. In order to effectively build its scale, AUB can
identify its trends early enough so as to use the emerging chance or opportunity. Lastly, the
company collaborates with its competitors with the intention of increasing the size of its market
instead of competition for the small market size (Angel 2012). The company is also involved in efforts
aimed at ensuring that it is able to negotiate profitable prices while ensuring that it does not
compromise on the value of the customers. The organization also implements aspects of the focus
strategy. Through this strategy, the organization targets a specific niche segment which include
professionals such as accountants, teachers and medical professionals for the purpose of
providing uniquely customized services to them. There have been massive investments made by
the company into such focused segment and the projection is that it will attain a much faster and

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enhanced growth other business. It is further advisable for the company to make use of Porter’s
universal strategies to improve on its competitive advantage. In the same manner, the company
can make use of the value chain model to establish a solid foundation where its competitive
advantage can be further enhanced..
Value chain model for the company
Figure one: Value chain model
Source: https://www.irmau.com/site/PDF/2846_1/2017AGMChairandCEOAddressesandPresentation
According to the above Value chain model for AUB Group limited, the identified value-adding
processes include marketing, investment, finance, acquisition, and finance. On the other hand,

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the supportive departments include technology, partner development support, and AUB
employees and services (Angel 2012).
Value-adding processes of your company
The major two value-adding processes of AUB Group limited include marketing and acquisition. In this
case, the company uses marketing value-adding process to persuade its clients so as to conduct business
with them instead of their competitors. Marketing helps the company to obtain lifelong customers by
gaining a competitive advantage over its rivals. By deciding various marketing strategies such as video
marketing, reviewing of generic revenue, creating and using email marketing, the organization is in the
position to keep in touch with its customers by enforcing their brand, informing policyholders about the
new brand and provide important updates. Today's clients or consumers are obsessed with research and
therefore offering them different information keeps their attention on an organization (Pierre, et al
2013).
On the other hand, the company uses acquisition processes to support its growth. The organization uses
this process to gain opportunities in the insurance company across New Zealand and Australia. Since
2013, the company has executed over 31 acquisitions. A total of US$ 168 million was considered to be
paid to the company. The company builds a strong strategy for its future acquisition chances by
considering various execution and evaluation stages. This targets the return of an organizations capital
after paying a tax. The value adding process helps an organization to add value to its operations by
creating an integration platform. In addition, it helps the company to obtain increased financial returns
in the long run. By using this process, the company has been in the position to obtain increased
"shareholding" in major broking groups (Gamble et al 2010).

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The relevance and usefulness of the information concerning
the concept of the value chain
In relation to my theoretical knowledge of the value chain concept, the information obtained indicates
that internal and external data is a major driver to the value-creating processes of an organization that
offers a continuous overview or monitoring of the "strategic competitive advantage" of the company.
This involves inputs from various strategic partners’ that is to say physical risks, financial risks, AUB
solutions and products, and people risks. In brief, the value chain helps the organization to effectively
conduct its business activities and outcompete its rivals. Therefore the framework is an important
strategy for developing and analyzing competitive advantage (Gamble et al 2010). In addition, the
value chain concept is also massively relevant in terms of how it helps to shape the company’s
operational strategy. It is worth noting that the importance as well as application of the value
chain analysis has it dependency on the distinctive circumstantial elements and these must be put
under consideration when assessing the roles played by the value chain analysis. The application
of the value chain analysis further enhances the capacity of any organization particularly in its
bid to establish the manner in which to maximize its competitive advantages. It is further shown
that the information which is obtained in the course of analyzing how the value chain approach is
useful helps the organization to exploit the associated opportunities and use them as sources of
economic rent. Additionally, the value chain and its activities can be used as barriers to new
entrants while also causing cost complications to the competitors.
Question 2
(a)
Estimated Rates of allocation for the current period
Variable rates = (the variable overhead costs/ the direct labor costs)
= ($150,000/75,000)*100%
=2
For the Fixed rate,

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=12000/3000hours.
=$40.0
(b)
The Job overhead allocation for job 20 in October
The Variable overhead= (250.00*2) =$500.000
The Fixed overheads are given by (10hrsX$40) =$400.
Overall allocation for job 20 in October =$900
(C)
Overall cost for job 20
Equipment $1,000
Allocated fixed over head $400
Labor $250
Variable overhead $500
Work in progress $3,500
Total cost allocated to job 20 $5,650.0
D. Fixed and variable overhead for jobs in October
=229*$40
=$9160
The variable cost assigned to tasks over October
$5725*2
=$11450
(E.)
The accountant would choose to use two cost pools instead of one to provide a better reflection
of the variable overheads flow. The combination of the fixed overhead costs and variable
overhead costs into one activity pool would mean that the jobs that have more equipment
compared to the available labor would have to be allocated smaller values within a two pool
system as opposed to how it would be in a single pool system.

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Question three
Total overheads
Question three
A)
Cost pool cost
Food supplies (125000/675000)*75000 13888.89
Building and related costs( Director and training) (200000/675000)*3000 888.8889
Building and related costs( Animal shelter) (100000/675000)*5000 740.7407
Animal trainers (40000/675000)*50%*27375 811.1111
Veterinarians and technicians (150000/675000)*2000 444.4444
(B)
Cost pools cost drivers
Director and staff salaries square feet Directors room size
Animal shelter employees’ salaries square feet Animal shelter size
Veterinarians and technicians Number of visits People visiting
Animal trainers percentage of trainer time used Cost of training labor
Food and supplies supplies used for vet services Cost of supplies
Building related costs square feet Building sizes
C. Allocation rates for each cost pool and cost driver.
Cost pool Rate Interpretation
Director and staff
salaries 20.00 Cost of labor/hr
Animal shelter
employees’ salaries 0.05 Cost of employment/ employee

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Veterinarians and
technicians 0.01 Labor cost per hour for the technician
Animal trainers 0.01 Trainer cost/hr
Food and supplies 0.6 Meal costs
References
Angel, G. 2012. The Emergence of Global Value Chains: What Do They Mean for Business. G20
Trade and Investment Promotion Summit. Mexico City: OECD
David, H., Taylor, et al. 2009. Demand management in fresh food value chains: a framework for
analysis and improvement. Supply Chain Management: An International Journal, Vol. 14 Iss 5,
pp. 379-392
Gamble, Arthur A. Thompson, Jr., A.J. Strickland III, John E. 2010. Crafting and executing
strategy: the quest for competitive advantage: concepts and cases (17th ed.). Boston: McGraw-
Hill/Irwin. p. 149. ISBN 9780073530420

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Jonathan, M., Christopher, C., & Jodie, K. 2009. "Upgrading Along Value Chains: Strategies for
Poverty Reduction in Latin America" (PDF). Comercio y Pobreza en Latino América (COPLA).
Briefing Paper. London: Overseas Development Institute
Katie, D., Ricketts. 2014. Value Chain approaches to development. Journal of Agribusiness in
Development and Emerging Economies, Vol. 4 Iss 1 pp. 2-22
Kiechel, W. 2010. The Lords of Strategy. Harvard Business Press. ISBN 978-1-59139-782-3
Pierre, L., Stephen, M., Kirsti, M. 2013. The Tax Policy Landscape Five Years after the
Crisis (Report). OECD Taxation Working Papers. France: OECD