CONTENTS PAGE Abstract 2
1.0Introduction 3 2.0Analysis of the results 4 2.1 Allocation and Apportionment
2.2 Overhead Absorption Rates
2.3 Cost Determination
2.4 Pricing for Potential Orders
2.5 Profit Analysis
2.6 Sensitivity Analysis
2.6.1 Scenario 1: Increase/Decrease in Direct Material Costs 2.6.2 Scenario 2: Increase/Decrease in Direct Labour Costs 2.6.3 Scenario 3: Increase/Decrease in Profits
3.0Conclusions 8 3.1 Issues
Malaysian based glove manufacturer Super Glove Ltd faced problems with its costing systems and financial reporting. From the past 5 year’s financial results, 20% of its total glove production is exported to other Asian countries and mainly to the USA, and the UK. However, there has been an occurrence of unsystematic approaches toward its costing methods. This lead to inaccurate cost allocation which questions the integrity of its financial statements for decision making purposes. This report provides the review of the costing system computed using the excel spreadsheet using the Overhead Absorption Costing Method. Recommendations are to increase profits so that there will be a greater profit margin for the business.
As an active player in the industrial sector, Super Glove Ltd should incur different types of indirect costs. Therefore it is crucial to allocate the costs correctly to...