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High-Tech Corporation (H-T) is a computer manufacturer that has a 115-year-long history. The organization was founded in New York in 1901 and employed 1,300 people. It was initially preoccupied with selling tabulating machines in several US states and Canada.
Later, due to several planning strategies and incentives, its market expanded to Europe, Asia, Australia, and South America. Nowadays, with about 300,000 employees, H-T rates among the major manufacturers of computers, hardware, and software, as well as computer-associated services (Bhimani, Horngren, & Foster, 2008). The organization has several plants. The one I have selected for the analysis in terms of managerial accounting system is located in Essenes, France. A friend of mine is currently working there and that is why I have access to this kind of information.
The company produces logic and memory chips made of silicon wafers that are sliced from a silicon cylinder. The production is unceasing: the plant works 24 hours a day, seven days a week, and 52 weeks a year. Each wafer gives 100 logic and 400 memory chips. To minimize losses, the organization contributes a lot of time, effort, and finance to the planning stage of managerial accounting (Heisinger, 2009).
It develops five-year strategic programs that feature annual and quarterly budgets. The former is based on the data received from production managers. Budget-planning is performed by a cross-functional team that is responsible for the ultimate goal congruence. The quality, yield, and lead-time are discussed at weekly board meetings. Monthly budgets are compared with the quarterly ones (Bhimani et al., 2008).
The planned charge-out rate for an information system, according to the accounts, is $10,000 per hour, for utilities is $20,000 per square kilometer, for maintenance is $80 per labor hour, whereas for a quality guarantee – $52,000 per person. Information systems feature the salaries of the employees, accounting costs, and expenses connected with the mainframe central processing unit. Utilities include repair works, electricity, running water, fuel, taxes on property, etc. Maintenance covers the costs of the machinery repairs used in production as well as computers and mainframe systems used throughout the plant.
Quality assurance is provided by those who measure quality and study the factors predetermining suppliers, employees, and customers’ satisfaction. The major goal of the company is to reduce costs improving the quality of the end product. To achieve it, H-T implements a widely accepted costing system, allocating all the expenses of the production to the good products only (Bhimani et al., 2008).
For monitoring quality, the organization does a lot of research in the form of questionnaires for employees, customers, and suppliers. Job satisfaction is regarded as one of the major factors as the leaders of the company believe that if the employees are content with what they do, they strive for quality improvement. It is typical of the French to be concerned about stability. To be able to achieve maximum job satisfaction and perform accurate control, H-T reduced the number of buildings by 60% and the number of workers by 40%. The production has been increased by 100% over the recent years. Thus, a competitive environment helps exercise control and improve quality (Kunda, 2009).
This solution seems to be the most legit one as the company, compared to other organizations, inevitably loses a lot of material at the production stage: 20% of silicon cylinder is lost after the slicing. During the joint processing, there appear other obligatory expenses: equipment-depreciation, taxes. amortization, etc. amounting up to $120,000. Such costs necessitate specific attention managerial accounting pays to quality control. 250 steps of processing require 150 quality control steps to produce a high-quality product with minimum waste. Managerial accounts also leave space for huge equipment costs as the production area requires the use of ultraviolet light. Each end item is charged to the internal consumers at its cost with an additional 10% (Bhimani et al., 2008).
Thus, we can see that the profit of the organization largely depends on its accurate planning and control system.
Bhimani, A., Horngren, C. T., & Foster, G. (2008). Management and cost accounting. Upper Saddle River, NJ: Pearson Education.
Heisinger, K. (2009). Essentials of managerial accounting. Boston, MA: Cengage Learning.
Kunda, G. (2009). Engineering culture: Control and commitment in a high-tech corporation. Philadelphia, PA: Temple University Press.