Accounting

Part 1

Module 3 Reply Post :Do you agree or disagree with your classmates' posts, or can you offer different insight? Reply to 2 students.200 words each

Student 1 – Benjamin

               Introduction

My organization went through a major change last year when we agreed to be acquired by another company and, on a much larger scale, Toyota went through a major change in production in the early 2000’s when it led the development and change of its new process. This innovative new idea was Lean Six Sigma Production which eliminates waste from the process.   

Developing and Communicating a Compelling Change Picture

Hiroshi Okuda, who was the Toyota Motor Corporation chairman during this time, states in the Bodek (2007) article that the unwillingness or inability to change is a vice. Since change in that industry was rapid at that time, a process was in place to ensure all Toyota personnel understood the associated change management steps and were accepting of the culture. As senior managers, we discussed presenting the major change to our junior management and employees through honest dialogue and reasons behind the move. Going through this major change once again demonstrated to me the importance of ensuring the manner, style, and timing of internal stakeholders was key to gaining both acceptance and even support.

Roadblock Analysis and Removal

Understanding the obstacles or roadblocks associated with a major change is both part of the planning process and ongoing. Resistance to change is typical, especially in my organization where employees enjoy long stretches of stability during extended contracts. We were transparent regarding the perceived impacts and explained the key points of our decision with junior managers and our influential employees. We determine and present the most probable, along with the worst case, change results to ensure stakeholders understand that senior management is entering the change with our eyes wide open. Okuda discussed that he viewed many of his Toyota managers as potential roadblocks and wanted to ensure information was properly presented to his employees. He stated that he did not want one individual to be an obstacle for another to change (Bodek, 2007). Roadblocks to change were removed through the integration of change into the culture displayed in company messaging along with employee/manager growth plans and evaluations.  

Implementing Change

Our company allowed change to slowly occur over a period of time and announced October 1, 2018 as the change implementation completion date. Employees understood that their previous stability level would be impacted but the tradeoff was their ability to provide feedback and contribute in preferred areas to build our new company. We put out carefully developed surveys to gather feedback on what direction employees wanted to head both collectively and individually. We conducted town halls and made sure junior managers were consistently discussing the change with their team. Once the full change occurred, we highlighted and celebrated it with our employees ensuring that they understood that it was complete and also to express our gratitude for the role they played in the execution. Toyota had established a culture of successful change management and their implementation was well received. Their lean process demonstrated immediate process improvements and this short-term success greatly aided manager and employee change acceptance.

Conclusion

Our situation was different from Toyota’s since their industry called for constant change and it had been woven into their culture. There is no comparison between the size of our companies; however, change for both requires the same steps; planning, roadblock analysis/removal, and change implementation. Senior management is responsible for making change decisions, after research and analysis that positively affect the company and its employees and shaping conditions while other internal stakeholders must assist the change management process by accepting and adapting.

                                                                                                         Reference

Bodek, N. (2007, August 7). The Toyota Secret: Constant Change And Growth. Retrieved from Industry Week: 

            https://www.industryweek.com/companies-amp-executives/toyota-secret-constant-change-and-growth

Student 2 –Brittany

“Change with the Change otherwise change will change you” is a famous quote in the management. To survive and succeed in this competitive world many organizations are going with change management. The successful change management process leads the organizations towards the growth.

Here one organization, I explained below who undergone successful change management process.

SHELL

·        In 2004 Shell was facing an oil reserves crisis that hammered its share price. The situation was arisen by the departure of the oil group’s chairman, Sir Philip Watts. The new group chairman, Jeroen van der Veer, believed that in order to survive, the corporation had to transform its structure and processes.

Systemic efforts and Developing a change picture

·        A standardized process was identified in the world.

·        They understood that If these processes were introduced it will impact more than 80 Shell operating units.

Communicating this picture to all stakeholders

·        They had taken efforts to communicate the picture to all its stakeholder that how changes were vital and essential to survival.

·        The leadership of Shell Downstream-One, as the transformation was known, needed unflinching determination and to focus on gaining adoption from everyone involved.

·        The major players in all their markets knew and communicated what was required and why. They needed to be aligned with the change requirement. From the start, it was recognized that mandating the changes was the only way for them to drive the transformational growth they aimed for.

Roadblock analysis and Removing Roadblocks

·        Shell proved unpopular in the short term as some countries stood to lose market share.

·        The message was a tough one, and many operating units balked.

·        Shell analyzed all Roadblocks in the change process related to their stakeholder and well communicated to their stakeholders and step by step they had removed all roadblocks in change process.

Implementing Change

·        Shell had implemented all the changes they had planned for survival and growth of the organization.

·        In Shell change leadership started and finished with Jeroen van der Veer, who never drew back from emphasizing how important full implementation of Downstream-One would be.

·        Shell is in a significantly healthier position after successful implementation of Change Program

HOW TO EMBRACE CHANGE. (2015, November 13). Retrieved from Shell: https://www.shell.com/media/speeches-and-articles/2015/how-to-embrace-change.html

Part 2

Min 450 words -Choosing among alternative cost allocation methodologies typically is based on one of the following criteria: cause-and-effect, benefits derived, fairness, or ability to bear. Discuss how the “fairness” criterion can be used in selecting a cost allocation methodology.

Part 3

Case Study: Phonetex

Phonetex is a medium-size manufacturer of telephone sets and switching equipment. Its primary business is government contracts, especially defense contracts, which are very profitable. The company has two plants: Southern and Westbury. The larger plant, Southern, is running at capacity producing a phone system for a new missile installation. Existing government contracts will require Southern to operate at capacity for the next nine months. The missile contract is a firm, fixed-price contract. Part of the contract specifies that 3,000 phones will be produced to meet government specifications. The price paid per phone is $300.

The second Phonetex plant, Westbury, is a small, old facility acquired two years ago to produce residential phone systems. Phonetex feared that defense work was cyclical, so to stabilize earnings, a line of residential systems was developed at the small plant. In the event that defense work deteriorated, the excess capacity at Southern could be used to produce residential systems. However, just the opposite has happened. The current recession has temporarily depressed the residential business. Although Westbury is losing money ($10,000 per month), top management considers this an investment. Westbury has developed a line of systems that are reasonably well received. Part of its workforce has already been laid off. It has a very good workforce remaining, with many specialized and competent supervisors, engineers, and skilled craftspeople. Another 20 percent of Westbury’s workforce could be cut without affecting output. Current operations are meeting the reduced demand. If demand does not increase in the next three months, this 20 percent will have to be cut.

The plant manager at Westbury has tried to convince top management to shift the missile contract phones over to his plant. Even though his total cost to manufacture the phones is higher than at Southern, he argues that this will free up some excess capacity at Southern to add more government work. The unit cost data for the 3,000 phones are as follows:

Westbury cannot do other government work, because it does not have the required security clearances. But Westbury can do the work involving the 3,000 phones. And it can complete this project in three months. “Besides,” Westbury’s manager argues, “my labor costs are not going to be $95 per phone. We are committed to maintaining employment at Westbury at least for the next three months. I can utilize most of my existing people who have slack. I will have to hire back about 20 production workers I laid off. For the three months, we are talking about $120,000 of additional direct labor.”

Phonetex is considering another defense contract with an expected price of $1.1 million and an expected profit of $85,000. The work would have to be completed over the next three months, but Southern does not have the capacity to do the work and Westbury does not have the security clearances or capital equipment required by the contract.

Southern’s manager says it isn’t fair to make him carry Westbury. He points out that Westbury’s variable cost, ignoring labor, is 33 percent greater than Southern’s variable costs. Southern’s manager also argues, “Adding another government contract will not replace the profit that we will be forgoing if Westbury does the telephone manufacturing. See my schedule.”

Required:

Top management has reviewed the Southern manager’s data and believes his cost estimates on the new contract to be accurate. Should Phonetex shift the 3,000 phones to Westbury and take the new contract or not? Prepare an analysis supporting your conclusions.

Part 4

Case Study: Vista View Wines

Vista View Wines (VVW) is a large vineyard that produces a host of varietal wines (premium reds and whites) and fortified wines. Fortified wines such as brandy, vermouth, sherry, madeira, and port consist of wine with additional distilled products. Besides sourcing grapes for its wines from its own vineyard, VVW purchases grapes from surrounding vineyards. VVW is organized around two profit centers: Wines (all of the premium wines) and Ports (all of the fortified wines). A case of wine or fortified wine is sold as soon as it is produced. Each profit center faces its own demand curve as depicted below, and each profit center has different and distinct marketing and distribution channels. Wines sells its products by private labeling them to hotels, whereas Ports sells its fortified wines to liquor stores.

VVW purchased 5,000 tons of grapes that were then crushed and the juice from the first and second pressings was used by Wines and the juice from the third and fourth pressings was used by Ports. Each subsequent pressing applies more pressure, and the resulting juice contains more impurities. The cost of the grapes (including pressing) amounted to $5 million and these costs are recovered from Wines and Ports using predetermined rates based on the budgeted number of juice gallons used in the cases produced (and sold). Based on their budgeted gallons used and cases produced, Wines is charged $19 per case and Ports $13 per case to recover the grape and pressing costs of $5 million. (Grape and pressing cost is charged to each of the two profit centers.)

In addition to the grape and pressing cost, Wines and Ports incur variable costs to ferment, age, bottle, package, and distribute their products. Wines incurs variable costs of $25 per case and Ports incurs $20 of variable costs per case. Wines and Ports have separate fermenting, packaging, marketing, and distribution channels and incur their own fixed costs ($6.3 million by Wines and $2.8 million by Ports). The managers of Wines and Ports are compensated based on the profits of their individual operation, which is calculated based on their own revenues, variable and fixed costs, and the grape and pressing costs.

Case Study: Vista View Wines

Required:

a. How many cases of wines do you expect Wines to produce, and how many cases of fortified wines do you expect Ports to produce?

b. Based on your calculations in part (a), how much profit will Wines and Ports report?

c. If central management has the same knowledge of the demand conditions as Wines and Ports and makes the Wines and Ports price-quantity decisions to maximize firm profits instead of allowing each division to make its own price-quantity decision, would the same price-quantity decisions be made? Justify your answer with supporting calculations and analyses.

d. Explain why your answers in part (a) and (c) are the same or different.

e. Assuming that VVW continues to maintain its decentralized organizational structure and continues to compensate its Wines and Ports managers based on their own profits as described in the problem, what, if any, changes would you recommend VVW make in the way profits of each profit center is calculated?