Reference no: EM133933464

Management Accounting

Case - A wave of product recalls has affected major Australian retailers

Core Questions and Conclusion

1. Reference recent news articles (published after January 2022) to identify the reasons behind the increasing frequency of product recalls in the Australian retail sector. Summarise how these recalls are affecting retail businesses in terms of financial performance, operational disruption, and reputational risk.

Choose an Australian retail company (real or hypothetical) that has experienced a product recall. Clearly discuss its financial situation, operational constraints, and the likely implications of a recall on its cost structure and revenue.

Discuss the strategic approaches the selected retail enterprise can adopt to manage product recall risks and reduce associated costs. Your response should consider both conventional cost control methods (e.g. implementing stricter supplier contracts and any other methods) and newer practices (e.g. investing in sustainability-related cost drivers and any other practices)

2. Suggest a suitable cost management system to track and analyse the costs associated with the product recall. Briefly explain why this system is appropriate in the context of recall-related activities. Illustrate its application with relevant calculations.
(Hint: Refer to specific costing systems discussed in the workshops.)

3. Using the budgeting process, create an annual budget (on a quarterly basis) for a retail enterprise that includes expected revenue and expense categories, incorporating the potential impact of a product recall. Show how the business plans to allocate resources and manage operating costs while maintaining financial stability.

Clearly identify the assumptions used in estimating revenue and expense items. Discuss how these financial estimates may fluctuate during the financial year and evaluate external factors-such as regulatory changes and any other factors-that could influence these changes.

Suppose there is a 25% increase in recall-related costs due to an unexpected expansion of the affected product range. What strategies would you recommend managing the overall budget and maintain profitability?

4. Conclude the report by providing a comprehensive summary of the key findings, highlighting the major implications for management accounting practices in the company, and outlining key takeaways for future improvement.

5. The CEO of the company will issue a key directive in Week 10 via the LMS announcement system. The group will need to address in an additional section within 200 words in the report itself.

Structure

Is there any structure of my assignment that I need to follow?
Answer: You are advised to follow a report format with the following sections and references
Introduction
Body of the report
Conclusion
Additional Core Question
Reference

It has four parts

Core Questions and Conclusion

Introduction:
Provide a brief overview of the Australian retail industry post-2022, highlighting key cost pressures and market trends. Summarise how these pressures are affecting retail businesses in Australia, with a focus on the increasing frequency of product recalls and their implications.
Provide a brief description of the chosen retail company. Discuss the challenges it faces, including its financial situation and operational constraints. Explain the implications of a product recall on its cost structure and revenue.

Body of the report:
Managing Costs in the Evolving Retail Industry Landscape: points to consider
What current cost pressures is the company facing in light of the product recall?

How can the company leverage innovative strategies to reduce costs and improve efficiency, including strategic approaches to manage product recall risks and reduce associated costs?

What cost management system would be most effective for the company to track and analyse costs? Briefly explain why it is appropriate. Illustrate its application with relevant calculations.

Budgeting process
Retail Budget and Strategic Planning
How does the quarterly retail budget reflect strategic goals and ensure financial stability?
How are revenues and expenses structured to guide resource allocation and cost management, especially in the context of a product recall.?
Revenue and Expense Assumptions
What assumptions support revenue and expense estimates, and how might they change during the year? How could external factors like economic or any other factors impact financial outcomes?
Managing a 25% Revenue Reduction
If recall-related costs increase by 25% due to an expanded affected product range, what strategies will address the shortfall? How will spending be adjusted or income diversified to maintain financial balance?

Conclusion:
Conclude the report by providing a comprehensive summary of the key findings.
Highlight the major implications for management accounting practices in the company.
Outline key takeaways for future improvement.

Additional Core Question

Include a 200-word section responding to the CEO's directive once it is released in Week 10 via the LMS.

References:
Please include 8 to 15 reliable and genuine references.