MGT402 Cost & Management Accounting GDB Solution Fall Semester 2013

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MGT402 Cost & Management Accounting GDB Solution Fall Semester 2013


Discussion Question:

Sport Aalaa Footwear (SAF) has been manufacturing footwear items for the last 60 years. Huge footwear market has been captured by SAF. Product reliability and competitive pricing policy has led one of its brand – Shoes to the sky. SAF footwear products are warmly welcomed by the customers in the markets due to its attractive designs, colors and comfort etc.

Recently, the management of SAF has decided to enter into manufacture and market sports shoes for men athletes running in the Regional Olympics. The new brand has been given the name of “Boots”. Although, there are so many companies in the World crafting shoes for professional athletes running in many Olympics in the world. SAF has a totally new system of crafting this proposed shoe in a unique style.

The new manufacturing process is intended to work in three phases – first, the customer (Olympic athlete) goes to SAF Olympic Fitness station, where the SAF employee develops an in- depth customer profiles. In the second phase, the customer goes to Olympic Shoe Design, where scanning of his feet is done through 3-D computer applications along with the personal choices and likings to be felt in the intended shoes. Also, the customer is given the choice to select any design out of 260 fabricated shoes. In the last phase, all these specs are fed into a highly Automated Boot Manufacturing Machine (ABMM) to develop a prototype. This takes only 2 hours to finish. After this, the customer is invited to try this prototype and a test-run is offered to him on the SAF’s especially developed running track. Various goods or bads are recorded at the time by SAF’s especial teams. Later, upon formal approval from the customer, these findings are again fed into the machine. After 5 days, the ordered shoes are shipped to the customers.

SAF has set up a special division in the company to manage its new product. The division is given a special cost accountant for costing this new product. The accountant is well-aware of the modern costing techniques. He has developed a well-defined costing system and it is expected to work well.

Required:

You are required to identify the costing system using by SAF in the above case. Support your answer with logical and factual reasons.