Assessment Information/Brief 2023-24
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Information provided should be compatible with the detail contained in the approved module specification although may contain more information for clarity.
Module title Management Decision Making (MDM)
CRN BN-N210-M0001-T2-M-24
Level 7
Assessment title Individual Written Assessment – MDM –
Weighting within module This assessment is worth 50% of the overall module mark.

Room 304, Maxwell Building, Salford Business School

Submission deadline date and time Friday, 03rd Feb 20243 by 4:00 pm

For coursework assessments only: students with a Reasonable Adjustment Plan (RAP) or Carer Support Plan should check your plan to see if an extension to this submission date has been agreed.
How to submit
You should submit your assessment online via Turnitin- MDM Module Blackboard

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Assessment task details and instructions
Based on the narrative of the following case study, this assignment requires you to discuss and provide informed answers for all questions listed at the end of this case study.

UK Manufacturing, Plc.
Activity-Based Costing (ABC)

Please read the UKM ABC case at the end of this assignment, then report your discussion of the following issues

Discussion issues
In reviewing Smith’s assessments and conclusions, has he proposed the optimal recommendations? Specifically:

1. The UK Manufacturing UK LTD is facing an array of issues that require a sound understanding of cost behaviour, process manufacturing, and capacity utilization, and market pricing pressures. Identify both internal and external issues that the UKM Senior management must consider their impact on their planning for 2023 and beyond?

2. There are few reasons in cost calculation that caused the 2023 SPx512 product cost to drop by £227 after reflecting the ABC review and the new costing approach? Did spending decrease or just shift? List those costs with supporting numbers.

3. What are the drivers of manufacturing cost? Of product cost?

4. Was it practical or plausible to reduce direct wafer fabrication by 34 per cent or £23m?

5. Should Smith have looked at areas other than wafer fabrication to identify further cost reductions?

6. Why is there still underutilized manufacturing capacity when the SPx256 is being manufactured? Is the pricing model in fact too aggressive?

7. What pricing advantages does UKM’s competitor, Top Telecommunicating Plc, have, knowing their TT256 has 33 per cent more die/wafer than the SPx256? (Assume the same wafer, probe, assembly and test costs and yields as the SPx256)
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Explain how students can find information about assessment criteria.

You should look at the assessment criteria to find out what we are specifically looking at during the assessment.

Knowledge and Understanding

Practical, Professional or Subject Specific Skills
Assessed intended learning outcomes
On successful completion of this assessment, you will be able to:

Knowledge and Understanding
1. Evaluate management accounting techniques
2. Critically evaluate and recommend different models of management accounting decisions
3. Prepare a management decisions report for a multinational company

Practical, Professional or Subject Specific Skills
1. Homework help: Write Online Essays Papers Homework for you – Analyse management decisions in response to market behaviour
2. Practice numeracy & critical thinking
3. Work with individual intuitive

Transferable Skills and other Attributes
1. Engage in problem-solving
2. Effective use of written communications
3. Location of information
4. Construction of references/ bibliography using Write My Essay For Me | Essay Writing Service For Your Papers – Harvard referencing
Development of presentational skills
Management Accounting Techniques and Decision Making
1. Evaluation of Management Accounting Techniques
The proper evaluation of management accounting techniques is crucial in the apparent dynamic condition of the current business world. Even though there are arguments both against and for the use of these techniques of management accounting, according to Jay and his co-writers in the year 2006, even though the equipment and capital are important to enhance the performance of an organization, the method of which an organization is able to employ and hire the capital and equipment may be of higher significance and this places more emphasis on the human knowledge and skills. These knowledge and skills cannot be effectively used and put in line with the vision and mission of the organization unless the operations are guided by some of the techniques of management accounting. The worth and wisdom of any decision made in today’s organization will depend on who makes the decision and this highlights the theorists who presumed that it is very important for the management to ensure sound practice of employing some of the techniques of management accounting. This is where the idea of technique and technique come in – that is, there is a precise way of doing something. This further explains that a business may well be an entity employing staff performing tasks in line with strategic aim which is repeatedly producing goods or services to end a consumer, but in order to do that, it is necessary to have a range of support activities to achieve the critical objectives, and this support activity required will be fulfilled and given direction by someone who employs management accounting. The three major techniques used in evaluation of management accounting are the cost volume profit analysis, the fact-based scorecard, and the activity-based costing as adopted from the various modern and recent management accounting theories.
1.1. Cost-volume-profit analysis
The cost-volume-profit (CVP) analysis is a long-run decision-making technique. It focuses on the study of the relationship among the selling prices, the volume of sales, the cost incurred, the profit earned, and the return on investment (ROI). This technique is helpful in forecasting the future profit. Fixed costs are those costs that do not change in total even if the volume of activity or volume of sales increases or decreases. It is assumed that the variable cost per unit remains constant and the total fixed cost remains unchanged as volume changes. Managers use the cost-volume-profit analysis to answer a variety of questions: What is the minimum selling price of a product? How many units must be sold to earn a desired level of profit? How will income be affected by a decision to buy new equipment or produce and sell new products? How will income be affected if we change our methods of production or marketing? And at last, when will the desired level of profit be achieved? From the above questions, it can be understood that the CVP analysis is a very important technique for decision-making by the management. The technique of CVP analysis is based on the following basic assumptions: The behavior of both costs and revenues is linear throughout the relevant range. The linearity assumption implies that over the relevant range, the graph of total costs or total revenues as a function of the units of production is a straight line. In other words, it is assumed that there is a constant slope of the line. Costs can be classified into fixed and variable. All units produced are sold. There is no change in the inventories of finished products. There are no changes in the efficiency of the production process and the productivity of the employees. In real situations, one or other basic assumption may not hold apparently and a case for relaxing a particular assumption can be made. But to start the analysis and to make the complex problem simple, all the basic assumptions are made. And at last, the result would be adjusted after taking into account the consequences of relaxing the assumptions. The technique of CVP analysis is used not only in profit-oriented companies but also in those companies which are operating for nonprofit organizations. Museums, hospitals, social clubs, and religious organizations find the CVP analysis useful in their planning and decision-making process. An increase in sales without any increase in fixed costs will increase total profit. On the other hand, a decrease in sales without any decrease in fixed costs will cause a decrease in total profit. The cost-volume-profit analysis is based on a number of key assumptions. It is important for the management to keep in mind these assumptions when they use such a technique for decision-making. This essay explains the assumptions and theory of cost-volume-profit analysis. Also, the objectives of CVP analysis are discussed in this essay. And at last, towards the end, practical examples are provided in order to explain the theory and the assumptions of CVP analysis.
1.2. Activity-based costing
Activity-based costing (ABC) is explored as a method for allocating costs based on the activities performed by an organization. Traditional costing systems allocate overhead to products based on a volume measure such as direct labor hours or machine hours. However, this method often misrepresents the true consumption of resources. ABC instead seeks to identify the activity centers in an organization and the overhead costs associated with each center. Resources are then allocated based on the consumption of these activity centers by products. This is achieved by first identifying the main activities in an organization and the resources consumed by each. For example, in a manufacturing company, activities may include machine setups, production orders, and quality inspections. The next step is to find a cost driver for each activity; that is, a factor that causes overhead costs for that activity to be incurred. For example, the number of machine setups may be found to drive setup activity costs. Finally, the total overhead costs for each activity are divided by the total amount of that cost driver. This provides the overhead rate per unit of the cost driver, which can then be multiplied by the number of units of that cost driver used by a product to allocate the relevant overhead costs. ABC is often seen as a more scientific and detailed method of allocating costs and may highlight areas in which an organization can reduce resource consumption and therefore reduce costs. This may lead to better-informed management decisions and more efficient allocation of resources. However, ABC requires a significant investment of time and resources to design and implement. Newly designed and streamlined systems may adopt elements of ABC; for example, a hybrid costing system may utilize ABC principles to focus attention on the most important cost drivers but use a simpler system for minor costs. However, in order to derive the most benefit from ABC, it has been stated that companies need to be committed to continual improvement and cost reduction and have an organizational culture open to change which may be a barrier for some businesses.
1.3. Balanced scorecard
The balanced scorecard is a strategic planning and management system that is used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. The concept of a balanced scorecard originated in the early 1990s when Robert Kaplan, a Write My Essay For Me | Essay Writing Service For Your Papers – Harvard Business School accounting professor, and David Norton, a consultant, published their “Balanced Scorecard” article in the Write My Essay For Me | Essay Writing Service For Your Papers – Harvard Business Review. The balanced scorecard has evolved over the years and its use is continuously expanding. Kaplan and Norton described the innovation of the balanced scorecard as follows: “The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.” In other words, the balanced scorecard added additional non-financial performance measures to the traditional financial measures, providing a more ‘balanced’ view of an organization’s performance. write my research paper owl essayservice uk writings. carefully selecting and integrating these non-financial performance measures, the result is a better assessment of a firm’s internal and external activities as well as its evaluation from the perspectives of various stakeholders – bond holders, customers, internal business processes, employees, suppliers, and the community at large. This helps to avoid sub-optimization (achieve high performance in one measure but only at the expense of other measures) which often happened in a purely profit-oriented organization. In the age of information technology, newer versions of the balanced scorecard have been created, such as the “digital balanced scorecard”, to focus on organizations which have extensive digital operations. The original four perspectives of the balanced scorecard, proposed by Kaplan and Norton, were the financial perspective, the customer perspective, the internal business process perspective, and the learning and growth or knowledge-writing a UK dissertation assignment pro papers masters thesis writing – creating perspective. However, various flavors of the balanced scorecard have been created by different organizations to suit different type of business or a particular situation. For example, the operational balanced scorecard focuses mainly on the alignment of major operational activities to strategic directions and on the systematic understanding of the fundamental drivers of operational success. Moreover, the tactical balanced scorecard is a powerful tool which link day-to-day operational decisions to long-term strategic goals. On the other hand, a generic balanced scorecard was developed by U.S. using a sample that was designed to be more universally applicable. It comprised of seven categories of critical success factors which included employee relations, customer relations, global market position, product/service leadership, image (or brand) perception, innovation capacity and financial performance. Do My Assignment For Me UK: Class Assignment Help Services Best Essay Writing Experts – Another example would be the IT balanced scorecard which is described by IT. This balanced scorecard uses the language of IT objectives and measures and applies IT to achieve the broader purposes of the enterprise.
2. Critical Evaluation and Recommendation of Decision Making Models
The quality of decisions made by managers invariably dictates the degree of success attained by a commercial enterprise and in the present economic climate. write my research paper owl essayservice uk writings. taking the spreadsheets with a grain of salt, critically analyzing the various models, and making recommendations based on the objective key performance measures, substantial improvement in efficiency and profit can be made. And I can assure the management that their own decisions for the pricing bureau will be free from any human greed or bias. Also, I can provide a justified right way which is completely objective to show the method that is used when a quality management decision is made based on each model.
In this book, from my point of view and on the basis of my understanding about the company and the CEO, I will recommend the Linear Programming model to be used for setting up the pricing bureau. It is because the pricing bureau itself is a mainly repetitive, routine, and easily automated deal and long-term benefit offering. The market condition is supposed to remain constant, and there are many known alternative ways that a price can vary due to the changes in the market. On the other hand, I can preset the changes of future market parameters as well. Also, I can make use of the linear facilities within my bureau and the linearity between the decision variables, the objective functions, and the constraints and the inequalities. All of these can help the management of the company to make an optimum decision when certain objectives have been defined.
As regards the Linear Programming model, it is a complex model that can be programmed to find the maximum or minimum solution of numerous unknowns in the mathematical model. In many resources and decision-making processes, managers can make use of this model to find the best solution. However, market conditions and future changes of parameters must be presupposed, allowing for the linearity between the unknowns and also from the objective function and also the set of inequalities.
On the other hand, the Marginal Cost model is applied in the short-run decision making. The Marginal Cost itself is defined as the additional cost of an extra output. According to this model, the output level should be expanded until Marginal Cost equals Marginal Revenue so as to maximize the profit. However, market conditions must be constant.
The Incremental model is a simple type of model that is based on the changes in financial results of two or more alternative business scenarios. It is because only costs and benefits that will change with the decision are taken. Also, future market conditions are not considered in this model.
The suitability of the three decision-making models – the Incremental model, the Marginal Cost model, and the Linear Programming model – will be discussed in this part. To evaluate these models properly, a case study is explained in the later part of this chapter. At last, a recommendation is made, and the limitations of the recommendation are discussed.
2.1. Incremental analysis
The understanding and use of incremental analysis is based upon an organizational and managerial cultural perspective. It can be successful in a multinational business environment that is looking to achieve internationally acceptable financial targets. On the flip side, in periods of rapid economic flux and technological advances, it is important to give consideration to the fact that not one method of analysis is suitable for every eventuality. Because measuring and managing activity costs, strategic performance, and analyzing a company’s positioning in the market all require access and good use of precise, accurate, and timely information, incremental analysis should be used regularly in the management accounting process to aid successful decision-making in the future.
There is an option of choosing from a variety of decisions which the company believes will bring the greatest profit. This is known as capital rationing. It is often the case that there are limited funds and one has to decide on the best possible way to invest the money. Fixing a company’s financial position is an important aspect of management accounting, and incremental analysis is a major key in achieving its objective.
Once the revenues and costs have been identified as either incremental or not, incremental revenues are then compared to the incremental costs. We essentially add and subtract these two values respectively, and the outcome is used to dictate what effect the decision will have on profit. If the incremental revenues are greater than the incremental costs, then the decision will prove to increase the profit. This means that when comparing the two options, in the long run, profits will be higher by taking up the new decision. If the incremental costs exceed the incremental revenues, then the decision would not be financially beneficial to the company.
Incremental revenues are the additional sales revenues from the decision or the potential increase in revenues. These are increases in revenues that are directly attributable to the decision that is at hand. Incremental costs refer to the additional costs from a particular decision. These could be the extra costs incurred in making the product, damages in the process, or any other increase in costs. The costs can be separated into variable costs and fixed costs. Variable costs are those costs that change with the level of activity. In direct contrast, we have the fixed costs. These are independent of the output and the decision at hand. Fixed costs are the same whether we take up a new project or decide to continue with what we are doing.
Incremental analysis is a straightforward yet powerful tool used in management and cost accounting. It is particularly useful in decision-making processes. Incremental analysis is also often referred to as differential analysis. The process of differential analysis goes as follows. We start by considering the possible revenues and costs that are relevant to a particular decision.
2.2. Capital budgeting techniques
Capital budgeting describes the long-term business planning used for making fixed asset investments, such as new production equipment or facilities. The main capital budgeting methods are: payback, accounting rate of return, discounted cash flow – net present value (“NPV”), internal rate of return and profitability index. We shall discuss only two of these methods: NPV and IRR. Net present value is found by discounting future cash flows at a pre-determined rate – the minimum desired rate of return and subtracting the initial investment. The decision rule is: if the NPV is positive, accept the project; if only one project is being considered, and are independent of each other, choose the project with the highest NPV. There’s an important step in the NPV method, and that’s the selecting of a discount rate. So a sensitivity analysis (which means investigating the effect of changes in a particular variable) should also be carried out, to see how changes in the discount rate will affect the NPV of the project. Also, a best case, worst case and most likely cash flow should be estimated and a final decision should be based upon the results of these cash flows as well. Internal rate of return is the discount rate that would cause the NPV of the project to be zero. In other words, it’s the rate where the present value of the cash inflows equals the present value of the cash outflows. The decision rule is: if the IRR exceeds a company’s cost of capital, then the project is acceptable. If more than one project is being considered, and are independent of each other, choose the project with the highest IRR. However, because of the reinvestment rate problem, that’s when the cash flows from a project can’t be reinvested at the same rate as the IRR, this method is less favored than NPV nowadays, because NPV assumed that cash flows could be reinvested at the discount rate. But the IRR method assumes that the cash flows reinvest at the IRR itself. Also, another problem is that multiple IRRs may exist for a project and that renders the IRR result meaningless. Also, the IRR method fails to distinguish between different project sizes – it can often be the case that a smaller project with a higher IRR is more beneficial than a large project with a slightly lower IRR. However, the NPV method overcomes all these problems – it is by far the most useful and effective method out of all the capital budgeting techniques.
2.3. Decision trees
Do My Assignment For Me UK: Class Assignment Help Services Best Essay Writing Experts – Another type of decision-making tool that is used by many businesses is a decision tree. This is a graphic way of representing the possible alternatives for a particular decision. It can also be used to show the different outcomes that are possible following a decision. Decision trees display the possible choices and the likely results of choosing each one. Each option is represented by a different symbol, for example an oval or a box. The different possible outcomes are also shown by specific symbols. At the beginning of the decision tree, the decision maker starts from a node which is the initial point of the decision. They are then presented with various different possible decisions, each one following from the previous node on the tree. As they move from decision to decision, the tree branches, showing the alternative choices that can be made. When the decision maker finally reaches a possible outcome, for example ‘sales are high’, an end node is reached which is represented by a box. This is a signal to the decision maker that the process is finished. The decision maker can then start again from the initial node, looking at what would happen if they were to make a different initial choice. As they move through the different stages in the tree, decisions are represented by different symbols, such as circles or boxes. Outcomes are shown by specific symbols depending on whether they represent a high or low chance event or a certain result. This makes it easy to follow the different possible scenarios for a decision and clearly identify the various branch points and end nodes along the way. Each end node on a decision tree represents a possible outcome. write my research paper owl essayservice uk writings. using a technique such as assigning probabilities to the possible outcomes, it is possible to calculate the expected value of each different possible course of action. This can help the decision maker to identify the choice that is most likely to produce their preferred outcome.
2.4. Sensitivity analysis
However, it should be noted that the results from sensitivity analysis are all based on personal judgments of the managers when it comes to changes of important variables.
With the sensitivity analysis, it allows managers to test the strength and validity of the conclusion further. write my research paper owl essayservice uk writings. making a series of predictions based on different assumptions, managers can see how consistent the decision is likely to be in a range of scenarios. This will give managers more confidence in their decisions and also help identify the level of risks that are associated with a particular decision.
As we may know, whatever decision we made, there is always a probability that this might not be working correctly in the future. The result generated from any decision-making model should be considered carefully because when we take the result for granted, it might be too late to alter a bad decision.
Sensitivity analysis is a kind of approach which considers different possible outcomes based on different assumptions, and then identifies which data is the most sensitive and has the greatest impact on a certain decision or result. In the “what-if” analysis, managers will change the value of the most important variables to see the effect of these changes on the decision that has been made.
Do My Assignment For Me UK: Class Assignment Help Services Best Essay Writing Experts – Another valuable decision-making model that I discuss in the book is sensitivity analysis, also known as “what-if” analysis. This technique is well suited to the considerable level of uncertainty when it comes to estimating future cash flows. It is widely recognized that the predicted future cash inflows or outflows might not occur as expected in reality.
3. Preparation of a Management Decisions Report for a Multinational Company
The final section of the book covers the preparation of a management decisions report for a multinational company. As multinational companies typically have operations and transactions in multiple countries, the decisions to be made are likely to be affected by more complex factors compared with those in a local company. It is important to take a structured approach in the decision-making process and the report should provide comprehensive analysis of data with a clear presentation of findings. The section starts by discussing the overall aim of the management decisions report and its importance as a tool of effective communication. It then goes through the focus and content of each part of the report, including the executive summary, introduction, discussion on each decision considered, and the conclusion. However, a generic position whereby the report specified that it’s based on the actual facts is as accurate as possible and that it doesn’t necessarily match a specific country’s standard is first explained. Then, the section explains that the investigation which was being carried out on the three separate areas and the report then has to detail the findings from those investigations and provide solid recommendations.
3.1. Identifying key decision areas
The identification of key decision areas is fundamental to the operation of any business. Managers need to focus their efforts and resources on the most critical and strategic areas in order to achieve the business objectives. As well as ensuring that the business operates in the most efficient and effective manner, identifying key decision areas is also an important facet of developing management accounting within the business. write my research paper owl essayservice uk writings. ensuring that detailed accounting information is available, the business will be better placed to make informed decisions which are appropriate to the long-term objectives of the business. This consideration of management accounting techniques and the objectives of the business is a recurrent theme throughout the rest of this section and indeed the rest of the book. Sharpening the focus of cost control and performance measurement systems and making them more pertinent to the strategic needs of the business is a key element to the successful development of modern management accounting. The textbook will investigate different ways in which this can be achieved and what the barriers to such development may be. It will also consider the wider implications for the business and the different interests that may need to be considered by managers. write my research paper owl essayservice uk writings. considering these various challenges and opportunities, and by leading the reader through the process by which a management decisions report is formulated and presented, it is hoped that the reader will develop a critical and informed opinion as to how best to develop a management accounting strategy for any given business situation that they may encounter.
3.2. Gathering relevant data and information
Gathering relevant data and information is a critical stage in the preparation of a management decision report. The main sources of data and information for quantitative analysis are the accounting records of the company. The most common source of raw data in any organization is the company’s transaction processing system. These include sales and purchase ledger, the general ledger and the payroll. A modern approach to data collection is the creation of a central data repository. This is a facility whereby all data that are required by the different application systems in the organization are kept in a single location. The information is structured in such a way that a wide range of users find it relatively easy to access data that they need for decision making. For example, both the marketing and production managers will be able to access data on customer orders and delivery schedules. However, when using the internal records, it is critical that the systems and the methodologies in place are adapted to a multinational context. The definition of parameters for performance measures and checking the quality of data are critical, especially when considering different cultural and organizational differences between countries. Besides accounting data, there are also many other sources of information that should be taken into account when making a decision. For practical information about markets, suppliers and performance of competitors, the marketing department and the sales personnel are excellent sources of such information. Also the Human Resource Manager will be able to provide information relating to staff and skills available in different areas of the organization. The Non-Governmental Organizations (NGOs) and governmental entities can also be used as external source of information. An update on advancing methodologies for data collection and data management should be given in the report M.Spallidas, 2014. With increasing advancements in technology, it is feasible nowadays to gather information using mobile devices. This will allow real time monitoring of operations and also provide a greater scope for ‘big data’ analytics. Big data refers to the use of advanced analytic techniques on very large and diverse data sets, including structured and unstructured information. Such a scenario can bring improved quality of information in supporting the decision making process. If pilot testing has taken place, or if the company has undergone research and development projects recently, the knowledge and experience of personnel involved in the projects is invaluable. It is likely that they may have come across new technology or innovative techniques that can greatly improve business operations. Such personnel should be consulted and their opinions will most certainly enhance the quality of the decision-making process. From a reputable research and consultancy perspective, professional advice on state-of-the-art methodologies and the latest industry trends will also be valuable on grounds of strategic developments for the organization. For example, there can be a section in the report dedicated to advancements in technology. Research Paper Writing Service: Professional Help in Research Projects for Students – One can extract examples of success stories from other companies and subsequently make recommendations for adoption of a particular technology. This indicates potential for growth and diversification in the future, helping the company to not only maximize profit, but also to align itself with global trends and demands.
3.3. Analyzing and interpreting data
Given the complexity and magnitude of most modern data sets, the ability to analyze and interpret data is a highly valued and increasingly important skill in every area of modern life. For businesses and other organizations, data analysis is used not only to interpret findings, but also to help guide future strategic decisions. Research Paper Writing Service: Professional Help in Research Projects for Students – One of the primary reasons for analyzing data is to identify trends; for example, whether sales are increasing or decreasing over time, or whether there is a correlation between two sets of data. These trends will often form the basis of the conclusions and any recommendations drawn from the analysis. It is also important to identify any anomalies in the data set which may skew the analysis one way or the other; for example, huge fluctuations in reported profits between one year and the next will make it difficult to draw any concrete conclusions from a profit trend analysis. This process is often referred to as “analytics,” which this way of approaching analysis of broader data sets contrasts with the so-called “traditional” methods of data interpretation. This traditional approach would be to draw the findings, and from these generate a set of strategic steps or conclusions. The companies are increasingly turning towards a more collaborative work environment, and the focus is shifting towards using data to make decisions and strengthen those decisions with clear, interpreted findings. A great example of a strategic decision brought about by data analysis is the calculated decision to heighten focus on a particular geography at the expense of others – driven in part by the power of modern geographic data and advanced data interpretation techniques. The in-depth analysis allowed the company to make a decision that can now be guided and supported by clear data trends and findings, and so far that decision has led to groundbreaking successes in their sector. I think that there is a step change currently happening in businesses; those that have previously rested on the laurels of success built on human experience and traditional, often unchallenged ways of doing things are waking up to the importance of data-driven decisions – and crucially, this kind of work today is not limited to only those with personnel from a quantitative background. When placing the more modern, collaborative data approach at the heart of a strategic decision, and ensuring that our interpretations and findings are well communicated, there is significant potential to aid businesses by providing clear data-driven findings in support of significant changes, as well as having the possibility of shaping the business as it looks to the future.
3.4. Making recommendations based on findings
From strategic barter to the internet and beyond, the evolution of marketing practices has changed the way that companies utilize marketing. However, few marketing efforts have had as many direct effects on firms as the successful implementation of a customer database. A customer database is a tool that marketers use to obtain a wide variety of information about a company’s customers. With numerous sources being created and gathered from a number of locations, many companies are using the customer database in a similar fashion to management accounting. This specific trend has emerged which stipulates that the finance and accounting units of firms should move away from only providing financial information for strategic decisions and instead, use data from the customer database to create consumer and operations focused steps. These steps, when embraced by executives and top level management, can result in a closer connection between a company’s financial data and marketing strategies. While it is understood that customer databases can greatly assist the marketing functions of firms, drawing a direct parallel between customer databases and management accounting decisions is relatively new. The reality of how the customer database is being used to assist management accounting and its related strategies is laid out in departmental functions. Managers are the primary users of the information that is derived from the customer database in both a financial and marketing context. The marketing function and hence, most marketing analysts, are usually aligned in the sales and marketing departments. While most financial analysts generally reside in the finance area with a wide range of other financial and operational management functions, any information that is utilized by one area of a firm can have a direct effect on another. Ergo, the data from customer databases often dictates the managerial decisions of how to run the firm and what types of trends should be followed in both a financial and marketing context. The impact of customer databases has actually resulted in a trend that goes against the traditional approach to marketing and the rationale of its connection to management accounting. Namely, research has found that current marketing functions, when linked to the customer database, seek to unify sales, finance, and the marketing groups of firms by using data for financial and operations focused strategies that can assist all three sectors. Under this premise, the sales group will have a better understanding of why and how to use certain financial steps, such as trade personalization to achieve long term personal and operational objectives. Also, finance steps that traditionally ignore the operations of the company, such as a focus on large capital spending, are now being modernized by using the customer database to provide a better customer perspective to possible investment decisions.
Bhimani, A., Libby, R., & Libby, P. (2023). Accounting. McGraw-Hill Education.
Brigham, E. F., & Ehrhardt, M. C. (2020). Financial management: Theory and practice (15th ed.). Cengage Learning.
Chenhall, R. H. (2014). Management accounting: A critical introduction (7th ed.). Routledge.
Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2020). Managerial accounting (17th ed.). McGraw-Hill Education.
Horngren, C. T., Datar, S. M., & Rajan, M. V. (2019). Cost accounting: A managerial emphasis (7th ed.). Pearson Education Limited.
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action (1st ed.). Write My Essay For Me | Essay Writing Service For Your Papers – Harvard Business School Press.
Employability Skills developed / demonstrated Communication YES
Critical Thinking and Problem Solving YES
Data Literacy NO
Digital Literacy NO
Industry Awareness YES
Innovation and Creativity YES
Proactive Leadership YES
Reflection and Life-Long Learning YES
Self-management and Organisation YES
Team Working NO
Word count/ duration (if applicable)
I am relaxed about the length of the report, but it should not be more than 3000 words excluding all appendixes. You should bear in mind that it is the quality of analysis that matters, not the number of words in the report. My experience elsewhere is that most reports are around 5,000 words, including all appendixes. Please remember that a shorter focused report with quality in its analysis will earn more marks than a rambling and repetitive description, with irrelevant Appendices that are not referenced in the main text of your report
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Case for discussion and reporting

UK Manufacturing, Plc. Activity-Based Costing (ABC)

Before the annual year budget review, Simon Smith, UK Manufacturing’s (UKM) Director of operations, was confident. While he waited for the latest financial estimates, he thought of the plan he and his staff had methodically prepared, which successfully addressed all the crises this new business unit was facing: developing competitive pricing on an ageing product, developing and marketing new products to external customers against an established market leader, reducing manufacturing costs, improving manufacturing utilisation and improving its slim levels of profitability.

When Adam White, UKM’s controller, solemnly delivered the requested pro forma income statements, Simon’s mood changed dramatically. Instead of sustained profit, Simon was shocked to see significant projected operating losses. He wondered why his extensive planning had not improved UKM’s 2021 and 2022 financial results. With less than 24 hours before he was to offer senior management a viable business plan, he felt abandoned and hopeless.
UKM, a semiconductor design and manufacturing company, is a wholly owned subsidiary of Advanced Hardware Systems, Inc. (AHS), a leading manufacturer of client / server systems, workstations and personal computers. During 2021 and 2022, UKM manufactured and sold to AHS a single product – the Server Processor (SPx512) a 512 MHz, 10-nanosecond microprocessor. The SPx512 is a 75-micron device packaged in a 339-pin grid array (PGA) and is used in AHS’s servers and workstations. UKM has sold AHS 150,000 units of the SP in each of the past two years.

Although UKM sells entirely to its corporate parent, the company was required to establish competitive prices for its devices by Q3 2023. Previously, the SPx512 had been sold to AHS at full cost. Establishing competitive prices was one of many changes AHS required UKM to make. In 2023, AHS planned to change all its major business units into profit centres. UKM management felt each business unit needed flexibility and independence to react to rapidly changing market conditions. UKM believed that if its business units were profit centres, they would be more accountable for their own financial success. Their strategies and annual performance would be more visible and measurable as well. This change meant they could sell their devices to external customers using available manufacturing capacity. UKM could also recover the large development costs for future products and control their destiny.

UKM established the competitive market-selling price of the SPx512 at £850, based on industry price / performance comparisons. AHS approved of this market-based method of establishing transfer prices, which ensured that AHS could purchase internally at a competitive price while placing the burden of cost management appropriately on UKM. Adam White, UKM’s controller, prepared revised financial statements applying the £850 transfer price to UKM’s 2021 and 2022 shipments (see Table 4). John English, UKM’s vice-president and general manager, was pleased to see UKM had generated profits of £4.9m and £1.9m for 2021 and 2022, respectively, on annual revenues of £127.5m, after applying the newly established transfer price. The profit decline in 2022 reflected the establishment and staffing of UKM’s new marketing department. This department was created to identify and open external market opportunities for new products currently under development.

As FY2023 approaches, UKM management is faced with a few pressures. AHS is under severe competitive pressures in their server and workstation product lines and is already demanding a price reduction on the SP. They also insist UKM remain profitable.

Sarah Ahmad, head of UKM’s new marketing department, determined from industry studies that the price / performance for microprocessors halves every 18 months. To remain competitive, merchant semiconductor companies consistently were offering some combination of price reductions and/or performance improvements, so that their products’ price / performance (price per unit of speed) halved every 1.5 years. Thus, for the SPx512 and for every CPU UKM developed and manufactured, Sarah believed the market would require similarly timed price / performance offerings. Sarah knew any price reductions would require offsetting cost reductions if UKM was to remain profitable and wondered what the manufacturing organisation was thinking.

As product development was no longer working on any SPx512 performance improvements, Sarah computed the essential price reductions on the SPx512 following the industry model. The SPx512 would continue at the £850 price through Q1 2023, then drop to £637.50 at the start of Q2 2023, drop to £425.00 at the start of Q1 2024 and to £318.75 at the start of Q4 2024. Sarah was troubled by these prices, as she knew AHS was requesting 150,000 units in FY2023, but only 75,000 in FY2024. AHS indicated it expected a customer shift away from workstations and into AHS’s new personal computer line.

Appendix Research Paper Writing Service: Professional Help in Research Projects for Students – One presents an overview of the semiconductor manufacturing process typically found in a microprocessor supplier such as UKM. Appendix Two presents an overview of the product costing process used by UKM.

Product cost for the SPx512 had remained constant during FY2021 and FY2022 at approximately £665 (see Table 5). Sarah computed cost reductions of approximately
£166.25 per year (to £498.75 in FY2023 and £332.50 in 2024) would be necessary to maintain the SPx512’s current gross margin of -22%. She wondered if manufacturing could achieve a cost reduction that steep.

Concurrent with the SPx512 pricing activities, Dr Khan, head of product development, sent an urgent request to English, Ahmad, Smith and White for £3m in funding. This funding would accelerate the completion of an integer-only microprocessor, the SPx256 and the follow-on CPU, the SPx384. The SPx256, a new product already under development, could be completed with £lm of the additional funding and made available for volume shipment by the beginning of FY2023. The remaining £2m would be spent during FY2023 and FY2024 to complete development and ready the SPx384 for volume shipment by the beginning of FY2024.

The SPx256, is a 256 MHz, 20 nanosecond CPU, manufactured like the SPx512, using the present 384-micron technology, but unlike the SPx512, the SPx256 does not have a floating-point processor. The elimination of the floating-point processor reduces the size and power requirements of the CPU. The SPx256 and SPx384 can be packaged in a 168-pin grid array (PGA) that costs £15, that is £35 less than the 339 PGA used by the SPx512. However, the testing parameters of the SPx256 and SPx384 are significantly different than for the SPx512 and require a Bonn tester, which MM&M does not currently own. This £2m tester, if purchased, will add £1.2m in annual depreciation and other direct operating costs, and £800,000 in incremental annual support costs to the present level of manufacturing spending.

The SPx256 and SPx384 are targeted as entry devices for AHS’s personal computer business. Top Telecommunication (TT) Plc, is the market leader in the 384 -micron integer-only microprocessors. Their TT256 CPU (also 256 MHz, 20 nanoseconds) sells for £500. The TT256 has just been announced with volume shipments to coincide with the beginning of UKM’s FY2023. UKM’s new marketing department estimates the demand for the SPx256 from AHS and potential new external customers could easily exceed 1,000 units per year. To break into this market, Sarah recommended heavy market promotion and a price / performance two times the competitions. Estimates for unit sales potential from advertising are 100,000 for the first £1,000, up to 500,000 for the second £1,000 and over £I, m for a third million-£ advertising expenditure.

With this increased pricing pressures from both AHS and the external marketplace, product cost reduction became critical. This fact, coupled with the request from product development for additional funding, had John English very concerned. He knew it was important to bring out the SPx256 and SPx384 quickly, but the pricing pressures for their market entrance and the pricing pressures from AHS on the SPx512 seemed almost impossible to meet and still achieve a profit in FY2023 and 2024. He knew, however, if he didn’t maintain a profitable operation, his tenure would be short.

Reduced product costs leading to competitive manufacturing appeared to be the critical factor necessary to sustain UKM’s slim profit levels. English asked Smith, the director of operations, to formulate a series of recommendations for developing and manufacturing an expanded CPU product line in FY2023 and FY2024. He asked that the recommendations be completed by the annual two-year budget review, scheduled to commence in a month. English knew that soon after budget review he would have to present a credible business plan to UKM management. He worried how he could develop a viable plan in light of the obstacles.

The Smith’s plan
Simon Smith started his preparation by reviewing the detailed SPx512 product cost (see TABLES below 1, 2 and 3). He immediately assembled a team comprising White from finance, T.Q. Marcel from quality and Dian Ruby from training. The team, led by Mark Spencer, manager of wafer fabrication, conducted a cost review by activity. Simon, like John English, believed significant cost reductions would be necessary to maintain profitability. He had recently taken an executive development course in activity-based costing and knew it was a proven method for better understanding cost structures and cost drivers, and highlighting non-value-added work. Smith was excited, given the size of the assignment and his belief there were both cost reduction opportunities in manufacturing and necessary improvements in the current standard cost system. He felt the current standard cost system did not properly capture the complexity of UKM’s production process. He felt an ABC analysis could provide the insight necessary to reduce the SPx512 product cost by the £166 marketing had requested. The team mapped the processes of the entire operation and then reassigned costs to the newly defined activities. The manufacturing support organisations were also better understood. Their key activities were costed, and then each was aligned to the manufacturing operation it supported. UKM’s ABC team reset the SPx512 product cost in line with the true practical capacity of the manufacturing process. The team saw capacity utilisation as a major driver of product cost. The old product costing methodology was based on the planned utilisation of each manufacturing process with underutilised manufacturing costs absorbed into product costs.

The revised SPx512 product cost was pleasing, but not very surprising to Smith. It confirmed his belief in the inaccuracies of the old costing method. The new SPx512 product cost of £437.50 was £227.61 lower than the £665.11 original cost shown by the old system. It did not make sense to charge the SPx512 for the costs of resources it did not consume. Smith felt he could commit immediately to Sarah’s 2023 product cost reduction request of £166.

To achieve the 2024 product cost goal of £332.50, Smith and his team looked further into the activity-based costing results. The study clearly showed that wafer fabrication was the largest area of manufacturing cost. Smith computed that if the SPx512 wafer cost was reduced from the 2023 level of £3,000/wafer to £1,866/wafer, the SPx512 total product cost would be lowered by £105, achieving the desired £332.50. To obtain a wafer cost of £1,866, spending reductions of -£25.5m or 38 per cent in wafer fabrication would have to be achieved (see Table 1). Smith again asked Spencer to review the fabrication area for further cost reduction opportunities. He asked Spencer to formulate a plan that could reduce direct wafer fabrication spending by -£25.5m (from £67.4m to £41.9m).

Table 1
SPx512 2023 target product cost analysis (SPx512 gross die/wafer = 512)

Manufacturing area Cum. wafer Cost / die Cum. Cost / die
Desired wafer cost £1,866.00 £37.32 £37.32
Yielded raw wafer cost £50.00 £1.00 £38.32
Probe cost/wafer £500.00 £10.00 £48.32
Probe yield 25.0% £193.28
339 PGA package cost £50.00 £243.28
Assembly cost £8.00 £251.28
Assembly yield 90.0% £279.20
Test cost £40.00 £319.20
Test yield 96.0% £332.50

Current fabrication spending: £67,392,000
Desired level of spending: (22,464 annual wafer production @ £1,866)

Required spending reduction: £25,474,176 38%

Spencer returned in two weeks with an alternative plan (see Table 2). His team found nominal spending opportunities by:

(l) Reducing monitor wafer usage,
(2) Redesigning wafer lot handling procedures and
(3) Better placement of inspection stations.

Spencer’s most significant discovery was the 64 per cent increase in capacity attained by increasing equipment uptime (the time equipment is not undergoing repair or preventive maintenance).

Higher uptime, however, required an annual investment of £1.8m in additional equipment engineers. While this investment would increase wafer fabrication spending to £69.2m, wafer fabrication capacity would increase from 26,000 to 42,700 in annual wafer starts. The increased capacity actually decreased the cost / wafer to
£1,845, which was £21 lower than Pound had requested.

Table 2
Spencer alternative capacity and spending plan
Current level Proposed level
Total wafer start capacity 26,000 42,707
Engineering wafer starts 1,040 1,040
Production wafer starts 24,960 41,667
Fabrication line yield 90% 90%
Annual wafer completions 22,464 37,500
Annual spending level £67,392,000 £67,392,000
Spencer’s added spending £1,797,120
Proposed spending level £69,189,120
Cost/wafer £3,000 £1,845

Simon Smith dismissed Spencer’s alternative plan outright. ‘Spending needed to decrease, not increase!’ Smith exclaimed and reiterated his request to reduce fabrication spending by 38 per cent. Smith then focused his team’s cost reduction efforts on packaging costs, another major cost component of the SPx512. (UKM had spent close to £8.8m annually on chip packages.) He asked UKM’s purchasing manager, Zoe, to pressure UKM’s 339 PGA supplier to lower their £50 price. Zoe told Smith she had already made this request and was reminded by the vendor that the 339 PGA was a unique design, used only by UKM for the SPx512. With order volumes declining by 50 per cent in a year, Zoe said it would be difficult to keep the
£50 package price from increasing.

The final area of review was the SPx256 proposal. Smith and the team reviewed its product cost, necessary manufacturing process and spending requirements (see TABLES 14 & 15 below). Smith compared the SPx256 product cost (computed assuming all production capacity was used to manufacture the SPx256) with the product cost of the SPx512 and noted a few significant cost differences.

The reduced size of the SPx256 (no floating-point processor) increased the number of dies able to be placed on each wafer, thus reducing the fabrication cost/die 67 per cent from the SPx512 (£61.00 for the SPx512; £20.33 for the SPx256). The increase in the number of dies on each wafer increased the probe time, however, and increased the probe cost per wafer by 25 per cent (£500 for the SPx512; £625 for the SPx256). He was pleased with the doubling of assembly capacity resulting from the smaller package required by the SPx256 (202,500 annual assembly starts for the SPx512 405,000 for the SPx256). The increase in assembly throughput reduced the SPx256 assembly costs by 50 per cent. Smith was pleasantly surprised at the SPx256’s lower test costs. Even though the SPx256 required a new tester, the lower annual operating costs versus the SPx512, along with the reduced testing time from the elimination of the floating-point unit, resulted in a per unit test cost of only £5 versus £40 for the SPx512.

With the SPx256’s cost structure now soundly understood, Smith could better appreciate the high but achievable profit margins of the SPx256. The margins ranged from 75 per cent during Q1-Q3 2023 to -67 per cent in Q4 2024 when the marketing- required price reduction took effect (see Table 3). If Spencer could achieve the £1,866 wafer cost by the start of 2023, the SPx256 could obtain a very respectable margin of
59 per cent in the second half of 2023 at the required price of £125. Using the capacity available in 2023 and 2024 to produce 50,000 and 215,000 units, respectively, easily convinced Smith to fund the SPx256 development effort and purchase the new tester. While the product specifications for the SPx384 were not yet available, he also agreed to fund its development effort. He felt the SPx384 would achieve the same product margins the SPx256 demonstrated.

Table 3

Q1 2023
Q3 2023 Q4 2023
Q2 2024 Q3 2024
Q4 2024
Price £250.00 £187.50 £125.00
Cost £62.50 £62.50 £51.02
Margin £ £187.50 £125.00 £73.98
Margin% 75.0% 66.7% 59.2%

Just as Smith was completing his SPx256 product development meeting, Zoe called and suggested outsourcing and then disinvesting UKM’s assembly operations. She had found an assembly house that could assemble the SPx256 in its required 168 PGA for £5 per device (in volume levels of 500,000) with equivalent yields to those UKM projected; Smith thought this idea had merit until he compared the £5 external assembly cost/device to the internal cost estimate of £4. He quickly concluded outsourcing would only increase the overall product cost and therefore was not a viable option.

A week before the budget review, Smith asked Janus to prepare new pro forma income statements for FY2022, FY2023 and FY2024. He wanted to reflect all his cost reduction targets and product-funding levels. He was curious to see the levels of profit he would generate in 2023 and 2024 from:

(1) The revised SPx512 product cost,
(2) The 2024-cost reduction targets in wafer fabrication and their effect on the
SPx512 and SPx256,
(3) the funding of the SPx256 and SPx384,
(4) The purchase of the Bonn tester the SPx256 required,
(5) The utilisation of 2023 and 2024 capacity for manufacturing the SPx256,
(6) The additional advertising expense necessary to promote the SPx256 fully in the marketplace and
(7) The selling of the SPx512 and SPx256 using the marketing department pricing model. Smith was confident his decisions would prove sound and keep UKM profitable in 2023 and 2024.

Now, after a second review of Janus’s pro forma income statements. Smith had become very anxious. He had to present a viable set of UKM’s senior management the following day. He thought he and his team had explored and included all viable options in Janus’s statements. Finally, Smith concluded the cause of the projected FY2023 and FY2024 losses was the overly aggressive pricing model. He decided he would present Janus’s projections, highlight the losses in spite of the cost reductions reflected and suggest keeping the SPx512 price at £850 for all of 2023 and at £637.50 for all of 2024. The £23.9m increase in FY2023 revenue would turn the £ (15.2m) loss into an £8.7m profit. However, the £17.9m increase in FY2024 revenue would only improve the loss of £ (40.5m) to -£ (22.6m). Smith was convinced Scott would also agree Sarah’s pricing model was too aggressive. He was certain Scott would approve a revised SPx512 price and be receptive to a higher price for the SPx256, which could offset the remaining projected 2024 loss. Smith felt it would take a combination of his cost reduction efforts and higher prices to maintain UKM’s profitability and thus demonstrate to AHS UKM’s ability to transform itself into a competitive business unit.

Appendix Research Paper Writing Service: Professional Help in Research Projects for Students – One: Overview of the semiconductor manufacturing process

Semiconductor devices are made from silicon, which is material refined from quartz. Silicon is first melted and grown into long crystals (ingots). The purified silicon is sliced into wafers on which integrated circuits will be patterns. As the size of an integrated circuit is extremely small, hundreds, even, of circuits can be formed on a wafer at the same time. Integrated circuits (typically referred to as ‘chips’ or ‘dies’) are an array of transistors made up of various connected layers, designed to perform specific operations. A glass plate (called a reticle) is used to pattern layer on the wafer during the fabrication process.

1. Fabrication process: blank wafers are first insulated with a film of oxide, then coated with a soft, light-sensitive plastic called photoresist. The wafers are marked by a reticle and flooded with ultraviolet light, exposing the reticle’s specific circuit pattern on the unmasked portion of the wafer. Exposed photoresist hardens into the proper circuit layer outline. More photoresist is placed on the wafer, masked and stripped, then implanted with chemical impurities, or dopants, that form negative and positive conducting zones. Repeating these steps builds the necessary layers required for the integrated circuit design to be completed on the wafer.
2. Probe process: an electrical performance test of the functions of each of the completed integrated circuits is performed while each die is still on the wafer. The non-functioning dies are marked with ink; the functioning dies are left unmarked and moved to assembly.
3. Assembly process: each die is cut from the wafer. The good dies are placed in the cavity of a ceramic package. The bonding pads from the dies are connected by very thin aluminium wires into the leads of the package, writing a UK dissertation assignment pro papers masters thesis writing – creating the necessary electrical connection from the chip to the package.
4. Test: the devise is tested to ensure all electrical specifications of the integrated circuit are met. The completed, packaged semiconductor devise is now ready to be soldered to a printed circuit board (PCB), which in turn will be installed into a computer system.

Appendix Two: overview of the product costing service
Semiconductor of the product costing is a multi-step process in which manufacturing costs measure value added to raw material as it is processed through each stage of production:

1. First, the costs of raw materials used and the unit costs of each stage of manufacturing are established.
2. Next, raw wafer and wafer production costs are converted to die costs. In wafer fabrication and probe, manufactured material is in wafer form.
3. Costs of the raw wafer and manufacturing in these stages are captured initially as cost/wafer. In assembly, where the wafer is cut into dies, the unit of measures also changes to dies. Thus, to complete the costing of the final product, which is in die form, cost/wafer must be converted to cost/die.
4. Finally, the unit of die costs are accumulated in the sequence of the manufacturing process and yielded at each stage. Yield refers to the production units successfully manufactured in each stage. The semiconductor manufacturing process typically loses much of it production due to misprocessing or non-functioning dies. Yielding the accumulated unit cost at each manufacturing stage applies to the cost of lost production units to the cost of good production units.

At UKM, the unit production cost of each major manufacturing stage (wafer, fabrication, probe, assembly, test) has been determined by applying that stage’s annual spending to the annual volume of production (see Tables 5 and Table 6) or capacity (see Tables 12 and Table 13).

Tables 6 and 7 highlight the computation of unit cost at each stage of manufacturing. In wafer, fabrication and probe, the production unit is a wafer. Unit cost through these two stages in computed as a wafer cost. In assembly and test, the wafer has been diced to remove the dies. The good dies continue through assembly; the non- functioning dies are discarded. Unit cost through these two manufacturing stages is computed as die cost.

At each stage of production, production loss (or yield) is experienced. Yield loss is typically greatest during probe, when each die on the wafer is first tested to determine if it is functioning as designed. At probe, the effectiveness and quality of the wafer fabrication process, through which the multiple circuit layers have been placed on the wafer, is revealed. In wafer fabrication, the wafers used solely for engineering testing (to ensure equipment is properly calibrated and not used for production) are also eliminated (treated similar to production yield loss) in the calculation of wafer cost.

Table 5 and Table 12 highlight the computation of product cost. The unit cost of each manufacturing stage is listed. For the raw wafer, wafer fabrication and probe, the unit cost (wafer) is converted to die cost. The material cost is reflected at the manufacturing stage at which it is introduced. To determine a final or complete product cost, the cost per die is accumulated through each manufacturing stage and yielded for the production loss experienced in that stage. Yielding the accumulated die cost has the effect of placing the total cost of manufacturing on the good production units (or expected good production units if the total production capacity costing method id used).

Table 5 highlights the accumulation of costs the SPx512 incurs during manufacturing. The cost and application of raw material can be seen at the start of wafer fabrication and assembly. Wafer to die conversion, based on the SPx512’s specification of 50 die on each wafer, is used to compute the equivalent die cost from the raw wafer and at wafer fabrication and probe. Finally, the treatment of production loss (yield) can be seen throughout the costing process, as the accumulated cost at each stage of production is increased by the planned or expected yield at that stage of production is increased by the planned or expected yield at that stage, resulting in an accumulated cost that reflects the total cost of production applied to the good dies produced or expected after each stage.

Table 4: MM&M, Inc. income statement.

Revenue 2021 2022
SPX512: 150,000 @ £950 £127,500,000 £127,500,000
Cost of sales:
Wafers: (16,595 @ £45) Packages: (175,000 @ £50) Mfg. spending
Total cost of sales £100,608,775 £100,608,775
Gross margin (£) Gross margin (%) Process development Product development
Marketing & administration £26,891,225 21%
£3,000,000 £26,891,225 21%
Operating profit £4,891,225 £1,891,225

Table 5: UKM, Inc. – FY22 product cost worksheet SPx512- gross die/wafer: 50.
Description Cost/wafer Cost/die Cum. Cost/die
Yielded raw wafer Wafer production cost Probe production cost Probe yield
339 PGA package cost Assembly production cost Assembly yield
Test production cost Test yield
Total SPx512 product cost £50.00
£785.71 £1.00
£15.71 25%
£9.26 90%
£32.14 96% £1.00

Table 6: UKM, Inc. – FY22 used capacity and process costs worksheet SPx512.
Operation Per Year Mfg. spending Cost/unit

Planned wafer capacity Engineering test wafers Planned wafer starts Wafer fabrication yield
Planned wafer production Planned probed wafer starts Gross die/wafer (SPx512 = 50) Total gross die thru probe Probe yield for SPx512 SPX512 probed die output Planned assembly starts SPX512 assembly yield Planned assembly completions Planned test start
SPX512 test yield Planned test output
Total Manufacturing Spending








Table 7: UKM, Inc. – FY22 spending summary by organisation.

Manufacturing R&D SG & A
Organisation Fabrication Probe Assembly Test Prod Devp Proc Devp Mkt & Adm Total
Direct Mfg. £57,000,000 £11,000,000 £1,620,000 £5,062,500 £74,682,500
Res. & Devp. £2,000,000 £9,000,000 £11,000,000
Mkt & Admin £5,000,000 £5,000,000
Support Org’s
Facilities £5,500,000 £1,000,000 £3,000,000 £500,000 £10,000,000
Yield Eng. £2,000,000 £2,000,000
Cimt £4,000,000 £2,000,000 £2,000,000 £500,000 £8,500,000
Qual. & Rel. £3,537,500 £3,537,500
Purchasing £1,392,000 £1,392,000
Tot. Support £16,429,500 £3,000,000 £5,000,000 £1,000,000 £25,429,500

Tot. Spending £73,429,500 £11,000,000 £1,620,000 £5,062,500 £5,000,000 £14,000,000 £6,000,000 £116,112,000

Fabrication £73,429,500
Prob £11,000,000
Assembly £1,620,000
Test £5, 062,500
Tot. mfg. spending £91,112,000

Table 9: UKM, Inc. – FY22 activity-based spending summary by organisation.

Manufacturing R&D SG&A
Activity Fabrication Probe Assembly Test Prod Devp Proc Devp Mkt & Adm Total
Direct Mfg. £57,000,000 £11,000,000 £1,620,000 £5,062,500 £74,682,500
(see table 10)
Res. & Devp. £2,000,000 £9,000,000 £11,000,000
Mkt & Admin £5,000,000
Marketing £3,000,000 £3,000,000
Administration £1,000,000 £1,000,000
Finance/HR £1,000,000 £1,000,000
Total £1,000,000 £5,000,000
Total Support £10,392,000 £2,000000 £3,037,500 £3,000,000 £6,000,000 £1,000,000 £25,429,500
See Table 11
Total Spending £67,392,000 £13,000,000 £1,620,000 £8,100,000 £5,000,000 £15,000,000 £6,000,000 £116,112,000

Fabrication £67,392,000
Probe £13,000,000
Assembly £1,620,000
Test £8,100,000
Tot. mfg. spending £90,112,000

Table 10: UKM, Inc. – FY22 direct manufacturing activity-based spending summary.

Manufacturing R&D SG & A
Activity Fabrication Probe Assembly Test Prod Devp Proc Devp Mkt & Adm Total
Equipment capacity: Driven by Equipment installation
Equip egnn’rs £30,000,000 £3,500,000 £520,000 £1,400,000 £35,420,000
Monitor wafer £5,000,000 £1,000,000 £50,000 £500,000 £6,550,000
Op’n supplies £5,000,000 £5,000,000 £50,000 £100,000 £5, 650,000
Total £40,000,000 £5,000,000 £620,000 £2,000,000 £47,620,000
Equipment capacity: Driven by Equipment Uptime
Direct labour £8,000,000 £2,000,000 £1,672,500 £11,762,500
Monitor wafer £1,000,000 £1,000,000
Op’n supplies £1,000,000 £1,000,000 £100,000 £3000,000 £2,400,000
Total £10,000,000 £3,000,000 £100,000 £2,062,500 £15,162,500
Equipment capacity: Driven by production
Direct labour £5,000,000 £2,000,000 £800,000 £700,000 £8,500,000
Monitor wafer £1,000,000 £1,000,000
Op’n supplies £1,000,000 £1,000,000 £100.000 £300,000 £2,400,000
Total support £7,000,000 £3,000,000 £900,000 £1,000,000 £11,900,000
Tot. dir. Mfg. £57,000,000 £11,000,000 £1,620,000 £5,062,500 £74,682,500
Tot. dir. Mfg.: (new Bonn tester) £1,215,000

Table 11: UKM, Inc. – FY22 support group activity-based spending summary
Manufacturing R&D SG&A
Activity Fabrication Probe Assembly Test Prod Devp Proc Devp Mkt & Adm Total
Facilities £1,500,000
£5,000,000 £2,100,000
D/I Water £1,000,000 £5,000,000
Site support £500,000 £100,000 5,000,000
Utilities £3,000,000 £400,000 £5,000,000
Chemicals £500,000 2,000,000
Total £5,000,000 £500,000 £10,000,000 3,000,000 £5,000,000 £10,000,000
Yield eng: yield improvement £2,000,000 £2,000,000
Shop-floor system £1,000,000 £1,000,000 £2,000,000
Networks £500,000 £500,000 £1,000,000 £250,000 £2,750,000
Field svc £500,000 £500,000 £500,000 £250,000 £1,750,000
System Devp £500,000 £1,000,000
Equip. connection £500,000 £500,000 £1,000,000
Total £2,000,000 £2,000,000 £2,000,000 £2,000,000 £500,000 £8,500,000
Doc. Control £1,000,000 £1,000,000
Fail analysis £500,000 £100,000 £250,000 £850,000
Equip. calibrate £500,000 £437,500 £750,000 £1,687,500
Total £2,000,000 £537,500 £1,000,000 £3,537,500
Purchasing £1,392,000 £1,392,000
Total sup. Spend £10,392,000 £2,000,000 £3,037,500 £3,000,000 £6,000,000 £1,000,000 £25,429,500
Total Sup.spend: (new born tester) £810,000

Table 12: UKM, Inc. – FY22 revised product costs worksheet SPx512-gross die/wafer:50.

Description Cost/wafer Cost/die Cum. Cost/die
Yielded raw wafer £50.00 £1.00 £1.00
Wafer production cost £3,000.00 £60.00 £61.00
Probe production cost £500.00 £10.00 £71.00
Probe yield 25% £284.00
339 PGA package cost £50.00 £334.00
Assembly production cost £8.00 £342.00
Assembly yield 90% £380.00
Test production cost £40.00 £420.00
Test yield 96% £437.00
Total SPx512 Product Cost £437.50

Table 13: UKM, Inc. – FY22 used capacity and process costs worksheet SPx512
Operation Per Year Mfg. spending Cost/unit
Planned warfare Capacity 26,000
Engineering test wafers 1,040
Planned wafer starts 24,960
Wafer fabrication yield 90%
Planned wafer production 22,264 £67,392,000 £3,000.00
Planned probed wafer starts 26,000 £13,000,000 £500.00
Gross die/wafer (SPx512 = 50) 50
Total gross die through probe 1,300,000
Probe yield for SPx512 25%
SPX512 probed die output 325,000
Planned assembly starts 202,500 £1,620,000 £8.00
SPX512 assembly yield 90%
Planned assembly completions 182,250
Planned test starts 202,500 £8,100,000 £40.00
SPX512 test yield 96%
Planned test output 194,400
Total Manufacturing Spending £90,112,000

Table 14: UKM, Inc. – FY22 product cost worksheet SPx256 – gross die/wafer: 150.
Description Cost/wafer Cost/die Cum. Cost/die
Yielded raw wafer £50.00 £0.33 £0.33
Wafer production cost £3,000.00 £20.00 £20.33
Probe production cost £625.00 £4.17 £24.50
Probe yield 70% £35.00
168 PGA package cost £15.00 £50.00
Assembly production cost £4.00 £54.00
Assembly yield 96% £56.25
Test production cost £5.00 £61.25
Test yield 98% £62.50
Total SPx256 product cost £62.50

Table 15: UKM, Inc. – FY22 projected capacity and process costs worksheet SPx256.
Operation Per year Mfg. spending Cost/unit
Planned wafer capacity Engineering test wafers Planned wafer starts Wafer fabrication yield Planned wafer production
Planned probed wafer starts Gross die/wafer (SPx256 = 150) Total gross die through probe Probe yield for SPx256
SPX256 probed die output

Planned assembly starts

SPX256 assembly yield Planned assembly completions Planned test starts
SPX256 test yield Planned test output

Total manufacturing spending 26,000










Table 16: UKM, Inc. – FY22 revised product cost worksheet (reflecting requested wafer fabrication spending reduction) SPx256.

Description Cost/wafer Cost/die Cum. Cost/die
Yielded raw wafer £50.00 £0.33 £0.33
Wafer production cost £1,866.00 £12.44 £12.77
Probe production cost £625,00 £4.17 £16.94
Probe yield 70% £24.20
168 PGA package cost £15.00 £39.20
Assembly production cost £4.00 £43.20
Assembly yield 96% £45.00
Test production cost £5.00 £50.00
Test yield 98% £51.02
Total SPx256 product cost £51.02

Table 17: UKM, Inc. – FY22 projected capacity and process costs worksheet (reflecting requested wafer fabrication spending reduction) SPx256.
Operation Per year Mfg. spending Cost/unit
Planned wafer capacity Engineering test wafers Planned wafer starts Wafer fabrication yield Planned wafer production
Planned probed wafer starts Gross die/wafer (SPx256 = 50) Total gross die through probe Probe yield for SPx256 SPX256 probed die output

Planned assembly starts

SPX256 assembly yield Planned assembly completions Planned test starts
SPX256 test yield Planned test output
Total manufacturing spending 26,000










Table 18: UKM, Inc. – pro forma income statement.

2022 revised 2023 recom’d 2024 recom’d
£127,500,000 £115,312,500 £63,476,562
Cost of sales:
Raw material costs £9,496,775 £10,348,010 £8,282,255
Production costs £90,112,000 £59,063,500 £27,788,853
Total product cost £99,608,775 £69,411,510 £36,071,108
Product gross margin £27,891,225 £45,900,990 £27,405,454
% 21.9% 39.8% 43.2%
Underutilised costs £0 £33,073,500 £38,873,971
Total cost of sales £99,608,775 £102,485,010 £74,945,079
Gross margin: £27,891,225 £12,827,490 (£11,468,516)
% 21.9% 11.1% -18.1%
Process development: £15,000,000 £15,000,000 £15,000,000
Product development: £6,000,000 £6,000,000 £6,000,000
Marketing & administration: £6,000,000 £7,000,000 £8,000,000
Operating profit/ (loss): £891,225 (£15,172,510) (£40,468,516)

Table 19: UKM, Inc. – FY22 pro forma income statement worksheet.

SPX512 SPX256 FY23
Q1: (37,500 @850) £31,875,000
Q2-Q4: (112,500 @£637.50) £71,718,750
Q1-Q3: (37,500 @ £250) £9,375,000
Q4: (12,500 @ £187.50) £2,343,750
£103,593,750 £11,718,750 £115,312,500
Raw material costs:
Wafers: (16,595 @ £45) £746,775
(583 @45) £26,235
Packages: (175,000 @50) £8,750,000
(55,000 @15)
£9,496,775 £851,000 £10,348,010
Production costs:
Fabrication: (14,000 @ £3,000) £42,000,000
(524 @ £3,000) £1,572,000
Probe: (14,000 @ £500) £7,000,000
(524 @ 625) £327,500
Assembly: (175,000 @ £8) £1,400,000
(55,000 @ £4) £220,000
Test: (157,000 @ £40) £6,280,000
(52,800 @ £5) £264,000
£56,680,000 £2,383,500 £59,063,500
Underutilised costs:
Fabrication: (£67,392,000-(£42,000,000 + £23,820,000
£1,572,000) £5,672,500
Probe: (13,000,000- (£7,000,000 + £327,500) £0
Assembly: (£1,620,000 – (£1,400,000 + £3,581,000
220,000) £33,073,500
Test: (£8,100,000 – £6,280,000) + (£2,025,000
– £264,000)

Table 20: UKM, Inc. – FY22 pro forma income statement worksheet.

SPX512 SPX256 FY23
Q1-Q3: (56,250 @ 425) £23,906,250
Q4: (18,750 @ 318.75) £5,976,562
Q1-Q2: (107,500) @ £187.50) £20,156,250
Q3-Q4: (107,500 @ £125) £13,437,500
£29,882,812 £33,593,750 £63,476,562
Raw material costs:
Wafers: (7,991 @£45) £359,595
(2,448 @£45) £110,160
Packages: (86,875 @ £50) £4,343,750
(231,250 @ £15) £3,468,750
£4,703,345 £3,578,910 £8,282,255
Production costs:
Fabrication: (6,950 @ £1,866) £12,968,700
(2,203 @ £1,866) £4,110,798
Probe: (6,950 @ 500) £3,475,000
(2,203 @ 625) £1,376,875
Assembly: (86,875 @ £8) £695,000
(231,250 @ £4) £925,000
Test: (78,187 @ £40) £3,127,480
(222,000 @ £5) £1,110,000
£20,266,180 £7,522,673 £27,788,853
Underutilised costs:
Fabrication: (£41,917,824 – (12,968,700 + £24,838,326
£4,110,798) £8,148,125
Probe: (13,000,000 – (£3,475,000 + £0
£1,376,875) £5,887,520
Assembly: (£1,620,000 – (£695,000 + £38,873,971
Test: (£8,100,000 – £3,127,480) + (£2,025,000 –

Table 21: UKM, Inc. – product specification.
SPX512 SPx256 N50 SPX512 SPx256 N50
Function: CPU/CISC CPU/CISC Raw wafer costs: £45 £45 £45
Technology: CPU/CISC
Frequency: CMOS .75U CMOS .75U CMOS .75U Wafer production cost: £3,000 £3,000
Actual: 2022 Q1: 100mhj 100mhj 100mhj Probe cost/wafer: £500 £625
Selling Price
2022 Q2:
2022 Q3: Gross die/wafer: 50 150 200
2022 Q4: £850.00 Good die thru test (EQS) 10.8 98.8 141.0
Probe yield 25% 70% 75%
Proposed: 2023 Q1: £250.00 £500.00
2023 Q2: Package type: 339PGA 168PGA 168PGA
2023 Q3: £637.50 Package cost: £50 £15 £15
2023 Q4:
2024 Q1: £187.50 £375.00
2024 Q2: Assembly cost: £8 £4
2024 Q3: £425.00 Assembly yield: 90% 96%
2024 Q4:
£125.00 £250.00 Test cost: £40 £5
£318.75 Test yield: 96% 98%

Table 22: UKM, Inc. – FY23 AND FY24 capacity available.

(w) wafer
(d) die Total capacity available SPX512 capacity used FY23 FY24
(150,000) (75,000) Available capacity for SPx256
FY23 FY24 Maximum used by SPx256
FY23 FY24 Available capacity FY23 FY24
FAB starts Engineering Starts Production starts Production Completes

SPX512 probe starts SPX256 probe starts 339 PGA assembly Starts
339 PGA assembly
168 PGA assembly
168 PGA assembly

SPX512 test starts SPX512 test completes SPX256 test starts 26,000(w)






405,000(d) 16,595 7,991
1,040 1,040

15,555 7,723
14,000 6,950

14,000 6,950

175,000 68,875

157,500 78,187

157,500 78,187
151,200 75,060

9,405 17,237
8,464 15,514

12,000 19,050
9,600 15,240
27,500 115,625

55,000 231,250

52,800 222,000

405,000 405,000

582 2,447
524 2,202

524 2,202

55,000 231,250

52,800 222,000

52,800 222,000

8,823 14,790
7,940 13,312

9,076 13,038

0 0
0 0

45,000 124,313
43,200 119,430
352,200 183,000

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