Reference no: EM132649490

The Covid-19 pandemic forced more than a third of the planet's population under some form of restriction resulting in grave impact on manufacturing firms. Due to the severity of the pandemic, many companies are facing significant operational, financial and liquidity challenges".

Analysts have identified the following as some of the key factors that give rise to these challenges:

1. Collapse of demand due to locked-down imposed by the government.
2. Supply shortages and increased prices - Until affected factories can resume production, manufacturers will need to rely on inventory stockpiles. However, these resources are limited and will run out eventually. When existing inventory runs dry, shortages and/or price increases will occur throughout supply chains if alternate sources aren't secured.
3. Fulfilment delays - Quarantines, travel restrictions and workforce shortages can make it difficult or impossible for affected manufacturers to fulfil their contractual obligations to their customers. A shortage or delay of products can seriously impact a company's reputation and may result in lost customers or even legal consequences.
4. Fast depletion of cash reserve - as cash inflows from revenue decline, cash reserves may be depleted rapidly when cash outflows to pay for expenses and other commitments are not reduced fast enough. This may severely affect the manufacturer's ability to weather the crisis.While most governments were quick to announce measures to soften the blow, many analysts believe that these measures can bring only temporary relief.

Question 1: Explain how the various components of the management accounting systems can be used to help manufacturers face the challenges brought about by the pandemic.