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Management accounting for business decisions Trailer Construct plc
Finance & Accounting
Pages 6 (1506 words)
The Trailer Construct PLC is a small family business which is in the process of expansion into a higher level of operations. The enterprise is involved in the construction and repair of trailers custom made according to the specifications of the client…
The Trailer Construct PLC is a small family business which is in the process of expansion into a higher level of operations. The enterprise is involved in the construction and repair of trailers custom made according to the specifications of the client. The demand for construction of new trailers has been consistently rising through the five years to 2011, although demand for repair remained consistent throughout the same period. As a result, the company decided to raise its production level, however its policies and practices remained the same.Trailor Construct’s problem is comprised of a mismatch between its increased scale of operations, and its policies regarding inventory management, cash management, cost tracing and determination, price setting, and its human resources management. The firm is comprised of three divisions, namely Administration, Repair and Construction. The aforementioned policies involved practices undertaken in all three, and therefore are resolved using a systemic approach. This report recommends that the economic order quantity be applied to the inventory management practices of the company, instead of the present long lead time, large inventory storage employed by the company which unnecessarily inflates carrying costs. Production should be enhanced to make better use of expanded capacity and increase production efficiency, to reduce the level of fixed costs distributed to each unit of production. Cash management should be managed better by speeding up collection of receivables. ...
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