Cost Management Accounting Essay Example

The research paper contains a general overview of the largest Australian retailer – Coles supermarkets. It presents its history, structure, general strategies, commercial successes, challenges etc. It also reveals the concept of cost management accounting. In other words, it provides answers to such questions as ‘What does it mean?’, ‘What are its elements?’, ‘What are the main aims of the cost management accounting?’ etc. The paper also includes my suggestions regarding a costing system, reports and so on, which would be useful to this organization.

Coles Supermarkets was founded in 1914 as “Coles Variety Store” in Victoria by George James Coles. He came up with an idea of opening a chain of supermarkets while working in his father’s stores named “Coles Stores”. The first supermarket was opened in 1960 in the Melbourne suburb Balwyn North. 13 years later the stores could be found in all Australian capital cities. The company has changed its name a lot of times. In 1924 it was called “Coles Variety Store”. In 1962, the name was changed to Coles New World. Then, in 1991, the stores were rebranded Coles Supermarkets and from 1998 just “Coles”.

In July 2007, Wesfarmers, an Australian company, purchased Coles Group for $22 billion. The  purchase was completed in early 2008. In August 2007 Westfarmers announced that some divisions would include supermarkets, liquor and convenience stores.

Like every successful company, Coles had its ups and downs. It has been accused several times of mistreating its suppliers. Despite the conducted investigation, a decision was still pending.
Coles is a chain of supermarkets, which operates 762 stores throughout Australia.

Coles’ goals and offers differ depending on the location of a particular supermarket. In general it offers a great range of products like Bread and Bakery, Fruit and Vegetables, Meat, Seafood and Deli, Frozen Products, Drinks etc.

Coles exports its items to a wide range of cities, especially those located in the USA and Canada. The target market of the company is quite diverse. Its costumers are people of different ages, nationalities and social groups.

Strategies

Coles Supermarkets is a very ambitious company that never rests on its laurels. Its main competitive strategy is to extend value leadership. The company expects to reach the goal by understanding the needs of its customers, lowering cost of the weekly shopping basket, improving the quality of fresh food provided by Coles Brand etc.

The corporate strategy consists of using an end to end approach and saving money through greater simplicity. This means improved transport control and transparency as well as better flow of products through the supply chain. Moreover, the company opts for simpler stores, thus, leading to improved in-store productivity and more investments in technology. There are other important goals, such as building great careers, transforming its liquor business, delivering a better store network etc.

Commercial/financial successes or challenges

Success of any organization is usually accompanied with a good advertising system. It doesn’t mean that an organization has to spend a lot of money on advertisement; the main thing is to be creative. Coles is aware of it. When compared with such a big company as Woolworths we can see different spending priorities. Woolworths is estimated to have spent 19 million on traditional advertising from January to March this year. Coals has spent about 13.7 million dollars within the same period.

It is widely known that a successful advertising campaign leads to successful sales. Excluding new store openings, Coles food and liquor sales grew by 3.8 per cent in the three months to March 31. Including new stores, Coles food and liquor grew by 5.4 per cent, to $7.1 billion (Madeleine Heffernan, 2014).

Management Accounting System

According to the Chartered Institute of Management Accountants, management accounting is a complex of management, accounting and finance coupled with the latest techniques necessary for conducting a business. It is an integral part of a company`s management process. In this report I have managed to disclose the current MAS of the Coles organization:-

Roles that may perform MA function

• Costing systems used by Coles
• Reports produced

Roles that may perform MA function

Process management accounting is a process of creating and using cost, quality, and information about time on the basis of effective decision-making in an organization. For instance, the department of financial services is responsible for using technology to deliver better value and more convenience as well as analyzing data. Support center is responsible for systems and processes related to customers` payment capability.

Costing systems used by Coles

The costing system of Coles is mainly determined by products and services being produced. As it is a chain of supermarkets, it offers a wide variety of products: frozen and fresh food, liquids, products for children, gift cards etc. One can also find mobile phones and tablets there. Here are some types of costing used by this organization:

Process costing

Process costing is generally used to deal with mass production of similar products that cannot be differentiated from each other. It is typical for Coles, as it supplies consignment of the same type to every department of its supermarkets. Thus, costs are accumulated over a certain period of time, summarized and then are allocated to all the units produced on a permanent basis.

Of course, delivery of products depends primarily on consumer and season. Thus, it can sometimes be regulated or changed.

Job costing

Although Coles provides its supermarkets with products of mass production, they make up the contents of a particular product department. In other words, it is being manufactured on an individual basis. Job costing is used for accumulating costs and assign them to products.

Hybrid costing

It is a type of costing that incudes features of job costing and process costing. It deals with both similar and diverse products. It is also known as an operation costing system.

Reports produced

In order to sum up all the activities that have been conducted during a year, Coles provides annual reports. The reports consist of many parts, each of which is devoted to a particular topic. In general, the report lays out general information about the organization and informs about all the changes made during a year. For example, 2014 Annual Report lays out some stories of how the company`s team members have contributed to greater value to the company`s costumers. The company`s goals are clearly indicated in the report and followed by a detailed description of the results. It also gives a clear indication of how many team members have contributed to the business, and the company`s ‘national heroes’ are distinguished. ‘National heroes’ are those team members who provided their personal time and knowledge to help their communities. It lays out some stories about those members, their social activity and can be accessed by all customers.

Key aspects of Coles’ internal environment:

Financial aspect is crucial to success of any organization whether it is income or owners´ funding. Both of these factors are equally important to Coles. To our mind, the success of Coles mainly depends on its employees. It doesn´t matter what position a certain person occupies. The main thing is that every worker is a part of one mechanism. To put it simply, every employee is an important element of the whole system without which the quality of work may deteriorate.

Without doubt, any incident, whether pleasant or not, affects the internal environment of the organization. For example, when a customer isn´t satisfied with a product or service, it affects those responsible for the execution of a particular function. Such problem as misunderstanding between the employees also affects the overall situation.

In the company`s 2014 annual report we have noticed one noteworthy tradition. It was presented to commemorate the company`s 100 year anniversary. The innovation consists in recognizing 2000 employees of the company, who have distinguished themselves in their work and efforts to improve the quality of services and products provided by the company. ´The community heroes´-as they are called- support over 1000 diverse community groups across Australia and internationally. Their stories are currently available for customers and the rest of the team members. The creators of this program have created an excellent opportunity for the team members to learn more about each other and become inspired to support the aspirations of their colleagues. National winners were selected by judges, including Coles directors and guest judges from different charitable groups.

The issue of wages is also considered to be a very important aspect of the company’s  wellbeing. The delay in the payment of salaries is a negative factor that influences the general atmosphere within a company. On the other hand, even small encouragements and rewards have a positive impact on work of the whole team.

The structure of a supermarket plays an important role in the whole working process. First of all, it should be spacious enough in order to not to become overcrowded and provide costumers with high-quality services. Of course, there is always a place for development, especially for such a successful chain of supermarkets as Coles. As it is commonly known, Coles is popular among the majority of Australian population. Thus, it has to support and justify its status of a prestigious organization.

External environment:

There are some conditions which can not be influenced by the organization, for example,  natural conditions. Environment influences the location of supermarkets, delivery of goods etc.

There is no doubt that economic conditions are tightly connected to the overall business situation. The condition of the state budget has a great influence on the welfare of the country in general. As a result, it affects wages, the number of workplaces and the level of life in general.

Nowadays, the competition between the supermarkets is increasing. Therefore, it is important for Coles to attract the customers by establishing some sort of discounts, raffle prizes and so on. We consider technology as part of external environment due to the following reasons. First of all, all organizations have to adapt to modern technology to keep pace with the times. This is due to the fact that development is an integral part of the history of mankind.

Politics also regulates many aspects that determine the state of affairs of the organization. To some extent, business reflects the political situation of the country. For example, laws determine the amount of tax. Taking into account all the arguments mentioned above, we can make a conclusion that politics and business have a direct impact on each other.

Social preferences are always changing, and supermarkets have to be constantly aware of all novelties and trends to meet the costumers’ requirements. It is clear that the mankind would not exist without resources. Obviously, this factor has strongest impact on the external environment of Coles.

Recommendations

Taking into account the internal and external environment mentioned above, we would like to make some suggestions that we think would be useful to this organization.

First, it would be quite useful to implement standard costing. It is the practice of substituting an expected cost for an actual cost in the accounting records. Although the majority of companies do not use standard costing in its original application, it continues to be useful for other applications.

Second, we would recommend the company to pay more attention to advertising. The market is becoming more competitive, as new organizations continue to appear almost every month.

Third, the annual financial analysis is preferred to take under control and analyze the company`s financial situation and prospects of its improvement.

Finally, the cities are becoming more densely populated as well as new regions and districts are built. For that reason, we think an expansion of the supermarket chain would be a logical step on the road to its future success.

We believe that these suggestions would be quite helpful to the organization. Thus, the usage of the following recommendations  can be the key factor in achievement and realization of the company`s objectives.

Coles is considered to be one of the best supermarket chains in Australia due to its ability to satisfy the customers. Like every successful organization, Coles has had its ups and downs. As mentioned above, it has been accused several times of mistreating its suppliers. However, nothing has been proven. Nevertheless, Coles continues proving that it deserves to be considered one of the best. Millions of satisfied customers are an example of this.