Analysis of Management Decision Making: UKM's Cost and Pandemic Impact

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This report analyzes management decision-making at UKM, a subsidiary of AHS, focusing on the impact of the COVID-19 pandemic on decision-making processes and planning. It examines the reasons behind the 2019 SPx512 product cost drop, the impact of full utilization of natural resources, and the drivers of manufacturing and product costs. The report also assesses the practicality of reducing direct wafer fabrication costs and whether other areas besides wafer fabrication should be considered for cost reduction. The analysis includes an evaluation of Activity-Based Costing (ABC) and its effectiveness in cost reduction, and a comparison of full costing and manufacturing cost application to the amount produced. The report highlights the importance of identifying cost drivers and the potential for optimizing costs to improve profitability. The findings suggest the possibility of reducing wafer fabrication costs and the need for a broader approach to cost reduction, exploring various areas within the manufacturing process.
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MANAGEMENT DECISION
MAKING
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INTRODUCTION
For the effective working and operations of the business it is very essential for it to take
effective decisions. Decision making is been defined as the process of choosing between the
alternative solutions in order to attain the objectives of the business. Hence for the success of the
business it is very essential that the effective management decisions so that operations of
company can be conducted in proper and effective manner the current study is based on u k m
manufacturing company and a wholly owned subsidiary of AHS that is Advance Hardware
system. .
The current study will start by outlining the harsh effects of current pandemic over the
decision making process relating to management and the factors ignored by company such as
important planning for 2020 and beyond. For the report will also analyse the causes of 2019 SPX
512 product cost to drop. in addition to this the impact of using full utilisation of natural also be
discussed was the manufacturing cost application to the amount produced. Further the drivers of
manufacturing and product cost will also be highlighted. Moreover it will be analysed that was it
practical to reduce the direct v for fabrication by 34% for 23 million. In the end it will be
highlighted that whether meth look than all the areas other than we fabrication to identify the
further cost reduction along with the pricing advantage to the competitor of UKM.
MAIN BODY
1. Evaluating the impact of covid-19 pandemic over management decision making process with
respect to UKM and senior management and criteria they have ignored such as impact on
the planning for 2020 and beyond.
Currently covid-19 pandemic has created major impact over the management decision
making process with respect to UK and the senior management. This is particularly because of
the reason that due to the current pandemic situation the market has been crashed to a great
extent. As a result of this the profitability and the operations of the company has also declined to
a great extent which has resulted in a decrease in profitability of the company. In addition to this
the operations of the company was also closed due to the current pandemic situations and this
resulted in not accomplishing the objectives of the business (Abubakar and et.al., 2019). This
pandemic has affected the planning process of the company UKM and to a great extent. This is
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particularly because of the reason that the pandemic has affected the whole economy and all the
related businesses. Thus, as a result of this whole planning process of UKM were affected to a
great extent. In addition to this, another impact over the management decision making process of
the company was that the people were not able to easily plan the operational process of the
company. This was pertaining to the reason that there were many fluctuations within the
operations of the company. Hence due to this created major impact over the management
decision making process.
2. The reason behind 2019 SPx512 product cost drop by ÂŁ227 after collecting ABC review and
new costing approach method.
Simon Smith started their preparations for reviewing the SPx512 product cost Hans Ford
this week comprised team involving different peoples (Hampton, 2019). This was undertaken by
Simon in order to develop a new course that is activity based costing and he knew that this
method is much better in order to bear the cost of the product. In order to improve the product
SPx512 the company analyse the use of ABC analysis and this provided the fact that the product
cost can be reduced by 166 marketing had requested. Hence after that the whole team analyse the
process of the operations and re assign the cost on the newly defined activities based on ABC
analysis. Only the key activities were costed and the whole manufacturing operations supported
it. And due to this the ABC team of the company reset the prices and cost of SPx512 with respect
to the practical applications and capacity of the manufacturing process. The capacity utilisation
was undertaken as a major driver of product cost. This is particularly because of the reason that if
the capacity will not be utilised then the cost will increase of the product. Thus the decrease to
product cost was good but not much surprising to Smith. Hence new SPx512 product cost was
437.5 which were decreased by 227. 61 and earlier it was 66.11. Moreover, in order to attain the
objective of product cost goal of 332.50. Further, Smith and his team analyse the activity based
costing results. For the day study highlighted the fact that water fabrication is the largest area and
the manufacturing cost. Hence, Smith analyse that if SPx512 water cost will be reduced then the
total product cost will be decreased by 105 and this can assistant attaining the objective of cost
332.50.
ABC analysis that is activity based costing is a method of allocating the different
overheads and direct expenses relating to the crucial activities of the company first (Howarth and
Brooks, 2017). This is a process which assistant manager in order to better define the areas of
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their manufacturing and two generating maximum profit. Simon undertook the use of ABC
analysis and this was beneficial for UK and in decreasing the product cost by 227. The benefit of
using the ABC analysis by Simon is that it provides the management a structured view that how
all the inventory items will be managed and what value of inventory is being required. In
addition to this it also allows the company to control each and every item which results in
requirement of working capital. Also this method of ABC analysis is assistive to company and
saving the unnecessary expenses because the major focus of this method is over less essential
items to be eliminated from the production cost. Hence this was a good costing approach method
for finding the actual price of the product SPx512 (Buetikofer, 2020).
3. Impact of using the full utilisation approach to product costing versus The applying
manufacturing cost to the amount produced
The full costing method is an accounting to which is used in order to determine the
complete cost of producing the product of the service (McWilliams and et.al., 2020). Hence this
is known as full cost or is option costing because it is required in most common accounting
methodology. This full costing is an accounting tool which includes factors in all the direct fixed
and the variable overhead cost. The full costing method ensures the complete compliance with
all the reporting rules and to ensure greater transparency within the production. Full costing
method the cost is being levied as a summation of direct overheads, fixed overhead and the
variable overhead at the end of the project. this direct cost include all the expenses which are
directly related with the manufacturing process like raw material cost, wages and salary of the
employees and many other cost related to manufacturing. For the fixed cost includes the
overhead expenses like salaries etc which remains same for the company even the production is
not there. The variable overhead cost involves the indirect expenses which fluctuate with the
level of the manufacturing. Example of this cost that if the production is increased then some
more additional staff will be hired for helping this is a variable cost.
Under the application of manufacturing costume only to the amount being produced
refers to as the system where in the cost is being levied only to the amount of production. For
instance the full capacity of the companies to produce hundred products but in actual the
company e reduces only 80 products simply mean that the company is applying the
manufacturing cost only to the amount produced (Bird and et.al., 2019). This method is very
important for the company to ensure because in case the manufactured other only 80 and the
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company undertake full course then this will result in loss for the company. Thus application of
manufacturing cost to the amount produced is more beneficial for the company as compared to
the full utilisation of approach. Hence UKM will be benefited with the use of manufacturing cost
only to the amount being produced rather than the full utilisation approach.
4. Drivers of manufacturing cost or product cost
The cost driver directly affects the business activities and there are multiple cost drivers
which are associated with the activity of the business (Doidge and et.al., 2019). For example,
direct labour hours are the driver for most of the activities within product manufacturing. This is
particularly if the cost of labour is higher than this will increase the cost of the production. In
against of this if the cost is low then this will result in decrease in the cost of production. The
direct cost is generally does not meet any cost driver because they are themselves cost driver as
they can be traced directly to the product. Hence all the other factory and manufacturing cost
requires some cost drivers. There is always a link between a pool of cost within the activity
centre and product.
Hence it is very essential to trees the overhead cost to the protectors so that appropriate
growth drivers can be identified. There are generally two categories of cost driver that as
resource cost driver and activity cost driver. The resource cost driver is a measure of quantity of
the resources which are consumed by an activity. On the other hand the activity cost driver is a
type of frequency and intensity of demand which are placed on the activity the cost of objects.
Hence it is very essential for UK and to analyse the various drivers of manufacturing cost and
product cost. This is pertaining to the fact that in case the company will identify the various
drivers of both these cost then the production cost will be minimised and be set as optimal that is
resulting in profitability increase of the company.
5. Practicality of reducing direct wafer fabrication by 34% or 23 million
With the analysis of the SPX 5.2 target product cost analysis it was evaluated that the
desired wafer cost and the actual fabrications spending has a large difference. Thus, because of
this reason there is a practicality and possibility of reducing the direct before fabrication by 34%
or 23 million. This is pertaining to the fact that with the analysis of the product cost it was
identified that the desired fabrication cost was 1866 and 37.3 to cost is idle (Baker and et.al.,
2021). In addition to this the current fabrications pending pertaining to before was relating to
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67392000. On the other hand the desired level of spending was only 41917 824. There is a total
difference of 254 74176 that is approximately 38% or 23 million around.
Hence it is very essential for the company UKM in order to reduce the way for
fabrication cost (Keel and et.al., 2017). This is particularly because of the reason that hear this
cost is being idle and rather using it here this amount can be used somewhere else for the
improvement of the production process of company. Hence it can be stated that the reduction
within the Vivo fabrication cost is a possible and a good outcome for the improvement of the
company. This is particularly because of the reason that currently it some cost relating to way for
fabrication as ideal and in case it will be reduced then it will result in effective and efficient
attainment of the cost reduction objective. Thus the decrease is within the idle cost is beneficial
for the company in order to improve the working efficiency of the business.
6. Should Smith have looked at the areas other than the fabrication in order to identify for the
cost reduction
With the further evaluation of the information and data provided it was evaluated that
Smith must have also looked into other areas rather than focusing on only the fabrication. This is
particularly because of the reason that there are many elements which makes up the total cost of
the seductive. Thus for Smith also it was necessary to look into the other areas as well in order to
improve the cost reduction objective of the business (Cidav and et.al., 2020). This was
particularly because of the reason that there are many other factors as well other than the
particular product cost which makes up the total cost of the product. Hence, for this Smith must
have effectively analysed the Spencer alternative capacity and spending plan. This was
particularly because of the reason that in accordance to this plan the cost before was 1845 which
is less than the cost which the Smith has calculated. Smith had calculated 1866 work before cost
for the desired level of spending. Hence there is a difference of 21 and this can affect the total
cost and the production cost to a great extent.
Hence it was also necessary for Smith to have a look at the proposed plan of Smith in
order to evaluate the cost reduction objective. Do the Smiths plan included increasing the total
wafers start capacity and the fabrication line as well (Quesado and Silva, 2021). But with this the
annual completion of wafer currently was to 2464 but the proposed level will provide a annual
completion of 37500. In addition to this it will also reduce the per cost to 1845 rather than 1866.
Instead of analysing the plan of Spencer Simon directly stated that the spending needs to be
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decreased not increased. In addition to this Smith focused over cost reduction efforts over the
packaging cost which is another major cause component for SPX 512. This is particularly
because of the reason that you km spent closely 28.8 million annually on the packages. In
addition to this Smith asked UKM purchasing manager to pressurize the supplier to lower their
prices (Areena, 2019).
Hence this was also another area which Smith could have identified for cost reduction.
This is particularly because of the reason that they can analyse the market and see for different
suppliers who are providing the same materials at the lower cost. Thus in cases when it would
have analysed the different suppliers then this could have resulted in cost reductions
automatically.
7. The pricing advantages which UKM’s competitor Top Telecommunicating PLC have after
knowing that TT256 has 33% more wafer then the SPx256
With the evaluation of the data it was visible that UK is coming up with the new product
SPX 256 which is 20 nanosecond CPU and is having 256 MHz manufactured like SPx512 using
385 micron technology (Almeida and Cunha, 2017). But unlike SPX 5.2 D new product SPX 256
is not having a floating point processor. This elimination of floating point processor reduces the
size and power requirement of the CPU. In addition to this SPX 256 and SPX 384 are being
packaged in 168 pin grid array (PGA) which cost 15 that is 35 less than the 339 PGA used in
SPx512. this is the area where the cost has been reduced of the new product as compared to the
earlier one. On the other hand top telecommunication which is a competitor and market leader
with 384 micron integer- only microprocessors. The company's TT 256 CPU which is also
having 20 MHz and 20 nanosecond is selling for 500.
In addition to this TT 256 has just announced with volume shipments to coincide with the
beginning of UK financial year 2019. In the UK and new marketing department is estimating that
the demand for the new product that is SPX 256 by AHS will be existing 1000 units per year. In
addition to break the market the recommended strategy of UKM is to have heavy market
promotions and the price two times the competition. This simply means that the prices of the
new product of UKM and that is SPX 256 will be twice as compared to the competitive. Hands
for this the estimate of unit sales from the advertising for 100000 will be 1000 Euro for first
thereafter for next 500000 2nd will be 1000.
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Hence this decision of UKM in order to market the new product will provide a pricing
advantage to the competitor top telecommunicating PLC. This is pertaining to the fact that the
company is coming up with the double the price of the competitor hence the consumer will not
like the product. In addition to this the cost structure of both the product is similar (Hofmann and
Bosshard, 2017). This simply means that all the cost of the variables will be same like the
assembly and test cost, the probe same way firm and all the other variables are also seen and the
cost are almost similar first up and then also the company is planning to introduce the new
product with the doubled price. Hence this will not be like by the consumers and they will not be
going to buy the product and services. Thus as a result of this the pricing advantage will be with
the competitor that is top telecommunicating PLC.
CONCLUSION
In the end above the report concluded the fact that management decisions are very
essential for the success of the business. This is particularly because of the reason that in case
team management decisions are not taken in proper and effective manner then it will affect the
working of the company. The above report evaluated the fact that I'm for the successful running
of the business effective decisions are very essential to be taken by the company. The present
study highlighted the fact that the covid-19 has affected the planning process of UKM and to a
great extent. In addition to this it was also highlighted that team ABC analysis assisted the
management of company to reduce the product caused by 227. Further it was highlighted that the
impact of full utilisation and the application to only manufacturing cost is better for the costing
of company. For that highlighted that different drivers of manufacturing cost involves the
different elements like salaries wages and others. Furthermore it was highlighted that it was
practical to reduce the direct way for fabrication cost as it is beneficial for the company. In
addition to this it was analysed that there was a pricing advantage to the competitor of UK and
UKM was bringing the product with doubled price of the competitors.
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REFERENCES
Books and Journals
Almeida, A. and Cunha, J., 2017. The implementation of an Activity-Based Costing (ABC)
system in a manufacturing company. Procedia manufacturing, 13, pp.932-939.
Areena, S.N., 2019. A review on time-driven activity-based costing system in various sectors.
Journal of Modern Manufacturing Systems and Technology, 2, pp.15-22.
Baker, K.F., and et.al., 2021. COVID-19 management in a UK NHS foundation trust with a high
consequence infectious diseases centre: a retrospective analysis. Medical Sciences, 9(1),
p.6.
Bird, C.O., and et.al., 2019. Autonomous monitoring of nearshore geomorphology and
hydrodynamics to assist decision making in coastal management, using shore-based
radar systems: A case study on the Fylde peninsula, UK.
Buetikofer, N.M., 2020. How could shared patient experience support the process of decision-
making in starting insulin therapy in non-insulin-treated adults with type 2 diabetes in
the UK? (Doctoral dissertation, University of Oxford).
Cidav, Z., and et.al., 2020. A pragmatic method for costing implementation strategies using time-
driven activity-based costing. Implementation Science, 15, pp.1-15.
Doidge, C., and et.al., 2019. To prescribe or not to prescribe? A factorial survey to explore
veterinarians’ decision making when prescribing antimicrobials to sheep and beef
farmers in the UK. Plos one, 14(4), p.e0213855.
Hampton, S., 2019. Making sense of energy management practice: reflections on providing low
carbon support to three SMEs in the UK. Energy Efficiency, 12(6), pp.1473-1490.
Hofmann, E. and Bosshard, J., 2017. Supply chain management and activity-based costing.
International Journal of Physical Distribution & Logistics Management.
Howarth, C. and Brooks, K., 2017. Decision-making and building resilience to nexus shocks
locally: Exploring flooding and heatwaves in the UK. Sustainability, 9(5), p.838.
Keel, G., and et.al., 2017. Time-driven activity-based costing in health care: a systematic review
of the literature. Health Policy, 121(7), pp.755-763.
McWilliams, L., and et.al., 2020. Risk stratified breast cancer screening: UK healthcare policy
decision-making stakeholders’ views on a low-risk breast screening pathway. BMC
cancer, 20(1), pp.1-11.
Quesado, P. and Silva, R., 2021. Activity-Based Costing (ABC) and Its Implication for Open
Innovation. Journal of Open Innovation: Technology, Market, and Complexity, 7(1),
p.41.
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