Reference no: EM132526125 , Length: word count:3000

GAC5010 Performance Management - Gulf College

Assessment Task

Ahmed Ali, the operations manager of Muscat Traders, is not fully convinced that he will be removed from his post any time soon. After he received a letter from the CEO asking for clarifications on the various major decisions he made, he felt that everyone is just perplexed by the implementations of the various performance management tools. He was given by the CEO three days for complete explanation. He hired you as a consultant on this matter. The following details were made clear by Ahmed Ali:

1. Mansoor, the production head, complained about the immediate implementation of Business Process Re-engineering (BPR). He explained that the company is not yet ready for BPR. Instead, he suggested that lean management be applied in all the production processes and procedures.

2. Fathma, the marketing manager, asked for the equal production of the various sizes of bed sheets that the home decoration department manufactures. According to Ahmed Ali, there is limited supply of raw materials used in the production. The decision comes after the preparation of the production budget. He presented to you the following production data.

The home decoration department of the company produces three sizes of bed sheets. The sheet is made from linen fabric that costs OMR 0.550 per metre. The workers are paid for OMR 0.200 per hour. The company incurred fixed costs of OMR1,200 in 2019. The production data for 2019 follows:

Size	Twin	Queen	King
Direct material (metre per unit)	1.3	2	2.5
Direct labour (hours per unit)	2	2.5	3
Direct expenses (per unit)	OMR 2	OMR 2.5	OMR 4
Selling price per unit	OMR 5	OMR 5	OMR 5

The supply of linen fabric is limited to 1,000 metres. The budget production (based upon maximum demand) follows: Twin (200 bed sheets); Queen (220 bed sheets) and King (180 bed sheets).

3. Mahmood, the finance manager, argued that it is wrong decision to reduce the selling price of the personalised mugs the houseware department manufactures. He said that reducing the price does not give them advantage over the competitors. However, Ahmed Ali explained that the selling price reduction gives lower contribution margin but increases the inventory turnover. Relevant to this, he gave the following production data.

The houseware department manufactures personalised mugs used as token on various corporate events. There were 2,000 mugs sold for OMR 3.950 each in 2019.

Cost	Unit price in OMR
Direct materials	OMR 1.100
Direct labour	OMR 0.900
Variable overhead	OMR 0.100
Variable selling costs	OMR 0.150
Fixed manufacturing	OMR 2,200
Fixed non-manufacturing costs	OMR 2,200
Fixed selling expenses	OMR 500

Prepare a report for Ahmed Ali addressing the following:

1. Concerns on production process and procedures: (600 words)
a. Discuss the specific aims and applications of Business Process Re-engineering.
b. Discuss the specific aims and applications of Lean Management.
c. In terms of small-scale productions, discuss the appropriate performance management measures.

2. Concerns on limited resources: (1000 words)
a. Critically analyse the factors affecting limited resources in production management.
b. Based from the given data, prepare a production budget that will yield maximum profit from the material available.
c. Based from your production budget, explain the reasons for unequal production of bed sheets.
d. Discuss measures to maximize profit with limited resources.

3. Concerns on production costing: (1000 words)
a. Discuss the application of variable costing and absorption costing in manufacturing industries.
b. Based from the given data, prepare the income statement using the variable and absorption costing.
c. If Ahmed Ali decides to reduce the selling price of the product to OMR 3, prepare the income statement using both the costing methods.
d. Discuss whether the decision to reduce the selling price is favourable or unfavourable.

4. Recommendation (400 words)
a. Prepare a summary report identifying the major decisions made by Ahmed Ali. State your stand, whether the decision is justified or not.
b. Discuss the implications of the CEO's actions on the performance of Ahmed Ali as production manager.

Attachment:- Performance Management.rar