70.2K

Verified Solution

Link Copied!

Assume you are the management accountant for the Foleo Group. After her meetings with the various business units, Tracey Chen has identified a number of opportunities for the organisation to improve its sustainability performance. One such opportunity is Robyn Smiths suggestion for moving the manufacturing operations of Foleo Fones and Accessories off-shore to address the local residents concerns. Robyn had done some research and has supplied Tracey with the below data relating to the relocation of Foleos manufacturing plants offshore (specifically to Guangzhou in southern China).

	Australian Plants	Guangzhou Plant
Annual Direct Labour Costs	$1,953,315	$1,074,323
Annual Direct Materials Costs	$2,976,480	$1,785,888
Annual operational expenses (Variable Manufacturing Overheads)	$343,440	$120,204
Annual waste produced from operations requiring disposal	710 tonnes p.a	825 tonnes p.a
Cost of waste disposal per kg	$120 per tonne	$110 per tonne
Annual fixed manufacturing overheads	$625,000	$375,000
Average / estimated delivery time for SliFones and Accessories	5 working days	35 working days
Estimated CO2 emissions produced by operations per hour of operation	260 grams per hour	430 grams per hour
Number of employees required by manufacturing operations	1,450	1,250
Number of working weeks per year per employee	40 weeks	50 weeks

Tracey has asked you to put together a brief report for the Robyn and Allan, explaining the three (3) ways that the existing Balanced Scorecards for Foleo Fones and Foleo Accessories can be adapted to include the sustainability objectives she has formulated (see Chapter 12 for these objectives).

Robyn has advised Tracey that the expected relocation costs to Guangzhou would amount to $1,500,000 but that some of these costs could be offset with the sale of Foleos current manufacturing assets and the sublease of the plants (the amount of which, she has estimated as an inflow of $950,000 at the time of the relocation).

As mentioned above, the relocation of Foleos manufacturing operations will mean the closure of the Australian plants, which will result in all factory workers currently employed at the various Foleo plants being laid off. More than half of these workers have been with Foleo for at least 10 years and many of them have not claimed their accrued long service and annual leave. Tracey has calculated that these workers entitlements, which must be paid on their termination, will amount to $6,400,000. Whilst the cost savings look good on paper, Tracey has some concerns about the merit of this proposal in terms of its alignment with the Foleo Groups overarching objectives and the newly formulated sustainability objectives. She is also concerned about relinquishing control over the manufacturing process and how this will impact the quality of the products being produced and ultimately customer satisfaction.

Tracey has asked you to analyse this data and report back to her with a recommendation that she can take to a meeting with Robyn Smith and Allan Raymond for further discussion.

Answer & Explanation Solved by verified expert

See Answer