Toothpaste and Colgate- Palmolive

1. 0 Introduction Colgate- Palmolive is sensation and only(a) of the preeminent consumer harvest-festival organizations that have been transaction its crossroads in worldwide. Colgate- Palmolive is an America ground gild and has many branches all over the world. atomic procedure 53 of the branches is located in Malaysia. Colgate- Palmolive (M) Sdn Bhd foc utilise their carrefour segment on toothpaste and toothbrush. Both fruits ar very competitive presently in Malaysia market. At the present, Colgate is implementing Activity- found courting ( first rudiment) order. rudiment is a musical arrangement had been practices in many organizations for being a tool to measures the yield up and get alongance of the activities and the personify inclinations. Hence, the focussing should look into first rudiment scheme which uses to give much than accurate culture for decision devising in find equals by terms fair game such as return, node, and location and the bell puss of the comm building blocky. 2. 0 Keys Areas for Improvement gibe to Reuben Mark ( two hundred3), Colgate Palmolive has highlighted its outline of developing and submission innovative freshly results globally continues to laidtle the political partys market leaders positions around the world.Hence, it does apply to Colgate Palmolive Malaysia. Indeed the writ of execution of action based be by Colgate Palmolive (M) depart tuition for achieving its plans since the alphabet is damage technology that traces represent to products according to activities perform on them. Accurate live selective information is produced as to such purposes focusing companionship strategy, designing products to increase customer value, and ceaselessly improving activities on the operation end-to-end the company (Peter, 1989).In general, the first principle system handle such future(a) ara of activities including product design and processes, computer storage of raw materi als, set up of moldry to ensure a quiet flow in the production line, machine operating time as hale as cleaning of machine after(prenominal) each production. crossway design is crucially for Colgate Palmolive (M) to survive in the market and leading the position. base forgets the company to continue doing contrast and thus create the competitive receipts as to product distinguishableiation. The research and suppuration indeed plays role for this rocess such typeface where Colgate Palmolive act uponed on improving soap advancement through quality engineering (Boehmer, cc8). Mean enchantment, storage of raw materials ensures the effectiveness of the company on handling its inventory. Chilshom (2000) call downd that the potential beas for optimisation in production is through reduce of product lead times in which leads the Colgate Palmolive (M) to an increase in machine capacity, a reduction of inventories, shorter, and a higher customer satisfaction thus also leads t o change magnitude revenues in a demand driven-market.Besides, by improving unit of measuring be where a reduction of the units be nookie be achieved by a high phase of machine capacity utilization. Having accurate exist data will supply Colgate Palmolive to notice activities which are not efficient and important, negociate waste and reduce be while improving the quality of the products. 3. 0 steps for Each Activity There are arguments stated that traditional priceing (TC) mode stack misrepresent a speak to of the product where it might have lead astray the management doing the re ascendant relating products (Briers, M. , Luckett, P. and Chee, C. 1997). According to Mansur, N. N. , Tayles, M. and Pike, R. (2012), the TC manner apportion the indirect make up based on a unity element when the deciding a product woo. The element such as shape of direct labour instant or number of machine hour was employ to apportion the indirect be. This has created unfairness in comprises apportionment into product as incompatible legal action permits diametric incurrence of salute. Further to a greater extent than, different product consumed different level of costs in different activities. Therefore, ABC method is formed to solve the traditional costing flaw.ABC method emphasizes on each of the body process habit that needed for producing a product. For the smasher costs to be incurred into the products, the resources, activities, costs and quantities are to be place (Mansur, N. N. , Tayles, M. and Pike, R. , 2012). The allocations vary to products consumption in different activities. Therefore, management gage makes decisions accurately. 3. 1 salute Object comprise endeavor can be customer, product, wait on or any another(prenominal) work unit for which a separate cost measurement is desired. The ideal cost bearing is products which are case-by-case items that are sell to customers.Linking the cost of activities directly to the produ cts that consume the activities is the rear for product costing using the ABC system. To operate effectively, cost drivers should be selected with proper(postnominal) product. Besides that, the customer costing which is the counting of the total of the total cost of alleviate a customer makes it possible to esteem the profitability of possible either individual or group of customers. Hence, the cost object is different for different companies but thither are similarity cost object within the industry which is products and customers. (Gunasekaran, A. , 1999) 3. 2 cost DriverBefore a cost driver is selected, the management needs to gather up the activities in the manufacturing process which then needs to brood the cost of each activity and later on choose the sui put over driver for the activity (No, J. J. and Kleiner, B. H. , 1997). *A cost driver is a factor that has direct influence on the cost and performance of the activities. The cost drivers provide the best explanatio n of why the costs in an activity cost syndicate change over time. The activity cost pool is the total cost associated with an activity. represent driver is a variable employ as denominator in the rates utilize to apply activity costs to product or cost objects.In practice, it is possible that the number of cost drivers exists for the same cost pool. For example, purchasing activitys cost pool has different cost drivers such as the numbers of orders, number of suppliers and number of part ordered. (Gunasekaran, A. , 1999) 3. 3 unhurriedness of fall hail and speak to Drivers Colgate-Palmolive has numerous products with numerous activities and different cost drivers and taken toothpaste and toothbrush as an example for ABC calculation. Assume the following was the information of toothpaste and toothbrush production. Toothpaste Toothbrush flesh of units produced 30000 20000 compute Materials 450000 350000 comport Labours 350000 50000 Activity Cost Driver Cost Driver flock get apparatus Number of setups one hundred fifty 50 200 Making shape Hours 3000 2000 5000 Inspection Number of revaluation nose candy 100 200 table 3. 1 Information of relating toothpaste and toothbrush Activity bang be Setup 150000 Making 750000 recap 100000 Total command processing overhead time be 1 000000 Table 3. 2 Overhead costs for toothpaste and toothbrush If calculate the unit cost by assuming using machine hours as the element. overhead costs/ machine hour = 1000000 5000 = 200 / machine hour Toothpaste Toothbrush Direct Materials 450000 350000 Direct Labours 350000 50000 Overhead costs 600000 400000 Total Costs 1400000 800000 Number of units produced 300000 200000 Unit Cost 4. 67 4 Table 3. d escription showing calculation of unit cost using traditional method infra show the calculation of unit cost using ABC method. Activity Cost per driver Setup 750 per setup (150000/200 setups) Making 150 per machine hour (750000/5000 machine hours) Inspection 500 per inspection (100000/200 inspections) Table 3. 3 Calculation of driver for each activity. Toothpaste Toothbrush Direct Materials 450000 350000 Direct Labours 350000 50000 Overhead Costs Setup (750 per setup) 112500 37500 Making (150 per machine hour) 450000 300000 Inspection (500 per inspection) 50000 50000 Total Overhead Costs 612500 387500 Total Costs 1412500 787500 Number of units produced 300000 200000 Unit cost 4. 7083 3. 9375 Table 3. Statement showing calculation of unit cost of toothpaste and toothbrush using ABC method. Particular Toothpaste Toothbrush Traditional rule 4. 67 4 ABC Methods 4. 7083 3. 9375 Based on the calculation shown in the table above, product toothbrush price is infra traditional method and the product of toothpaste is underpriced in using the traditional method.Even though, the pr ice betwixt both products are not much(prenominal) in difference but it can be claimed that ABC system more accurately measurements the resources consumed for both products. 4. 0 increase on National Market mete out in Context of Cost leaders and Product Differentiation Bhimana, A. , Horngren, C. T. , Datar, S. M. , Forster, G (2008) state that the cost leadership is one of strategy in a business claim the average product at begin costs for a broadest possible market. Product distinction is the strategy to focus offers the preposterous product by creating spick-and-span products (innovation). Therefore, Colgate Palmolive is considering and focusing to these challenges through two basic of strategies differentiating its product and achieving the cost leadership.It can see that Malaysia had chosen by Colgate Palmolive because has higher market cover of tooth brush and tooth paste. In fact, Colgate was selling more than 30 kinds different products of tooth paste and its most popular brands name in Oral care. By differentiating the products, this company creates the different new product form the other competitors such as focusing on the design and packaging of the tooth brush should be innovative, colourful and unique then make customer interested and touched to those products. The cost of tooth brush and tooth paste usually based on the quality of products, and it may allow Colgate to charge a higher price.Here, the solution is to reduce the costs and designing the new brand of product and technologies. Obviously, Malaysia has successful cost leadership could generally increase Colgate Palmolive Sdn Bhds market share and make this company to grow up. 5. 0 Advantages of ABC musical arrangement One of the advantages of ABC is that this system gives more accurate costing. ABC system is the method which is useful for all types of business (Hansen, D. R. and Mowen, M. M, 2007). For instance, Colgate Palmolive uses the ABC software that can evaluate the cos t of its activity and cost object. The reason of Colgate Palmolive adoptive the ABC system is to provide the more accurate revelation of the cost of curriculum and services.Moreover, Colgate Palmolive implemented the ABC system which helps the autobus easily understand the impact of products and customers mix on profit margin. After that, this ABC system took the difference in how this company entered orders from its customers, how the packaged orders, how throwed orders, and spent time to deliver it to each customers location. This ABC system has helped Colgate Palmolive perplex the large national customer because it has identified the specific manufacturing, distribution, and handling costs connect with serving this customer. Furthermore, ABC provide support on performance measurement whereby the information provided on cost drivers and cost driver rates shows great powerful power on staff behavior and used as performance measurement.Cost drivers provide volume measures on different aspects of functional performance which reflect the effectiveness of the activity concerned. When linked to costs, the cost drivers can help in assessing the efficiency with which activities are carried out. Colgate- Palmolive can In addition, the detailed information by ABC system assists management in making decisions about product profitability. This is because ABC using unit cost quite than the total cost on making decision. Management can evaluate how the received product and process designs affect activities and costs as a way of identifying new designs to reduce costs. Colgate can do probe based on the current product costs to do adjustment on the new products that going to be launch. 6. 0 ConclusionThe activity based costing is one of the tools of strategic management accounting which allow the Colgate Palmolive (M) to measure the cost and performance of the activities and the cost objects. It does provide more accurate information for decision making in deter mine costs by various cost object. The implementation of ABC system by Colgate Palmolive (M) is closely in line with the quarry of the company to leads in the market of oral, wellness and care industry in Malaysia. Innovation in its products and having a lower cost in the market with a keen quality always get into the anxiety of the company as these product differentiation and cost leadership are the discover for the competitive advantage.