ADMS 2320 Chapter 13: ADMS 2320 Chapter 13 Notes

Budget Cutting Time in a Public Middle School

You are the principal for a rural middle school located in the northwest. You are directly responsible for ensuring the education of 800 students and supervising 45 teachers and 15 support staff. You thought you had an operating budget of $2,200,000, but budget cutbacks have reduced your funding by $200,000. It is mid June, and you know you will not be able to get any more money for the upcoming school year. In addition, student enrollments have been increasing steadily over the past few years and are currently at record levels. The teachers, support staff, and school board all know about the budget cutbacks, and state law forbids public schools from carrying over any debt into the next school year.

Dwayne Jones has been at the school for ten years and recently was voted to be president of the teachers' union. You have always gotten along well with Dwayne, but have had several disagreements about the administration's ability to assess a teacher's impact in the classroom. You feel that teaching is no different than any other profession, and a teacher's ability to make classes interesting and convey knowledge can be assessed through observations made by the administration staff and national testing scores. Dwayne believes it is impossible to adequately assess the impact teachers have on students, and as a result feels all salary, promotion, and termination decisions should be made on the basis of seniority, not merit. You have observed all of the teachers in your school several times over the past year, and you feel six of them are incompetent. In addition, these six teachers have more complaints from students and parents combined than the all of the remaining teachers at the school. However, these six teachers have been at the school an average of eight years and were staunch supporters of Dwayne during the election for union president. Dwayne had promised his constituents he would work hard to ensure all personnel decisions involving teachers would be solely based on seniority. The union contract allows you to terminate ineffective teachers, and you would save $180,000 through this personnel decision (each of these teachers makes about $30,000). However, the contract also specifies both you and the union president must agree before this termination decision can become official. When you tell Dwayne your ideas about eliminating the ineffective teachers, he stated he would not go along with the idea and suggested you eliminate the eight most junior teachers at the school instead. All eight of these teachers are young, have less than two years of teaching experience, and have proven to be enthusiastic and effective teachers. Because each of these less experienced teachers make approximately $20,000 per year, you could save the school $160,000 by choosing this option.

The school has three full time physical education teachers and supports 12 male and female athletic teams. You are good friends with all three physical education instructors, and two of the members of the school board have children on at least one of the athletic teams. Because all three physical education teachers have been at the school a number years, eliminating physical education from the school's curriculum would save $120,000 in teachers' salaries and $70,000 in athletic team support.

The school has 15 non-union support staff who do jobs ranging from administrative support, custodial and maintenance work, library management, and food services support. You have always felt the support people were the glue that held the school together, and many of them attended the school as teenagers and all will go the extra mile to ensure the school runs well. The support personnel tend to be fairly senior, as the most junior has six years of experience and the most senior has over 30 years of experience. Cutting out the school hot lunch program would eliminate four food services positions ($50,000) and the school's funding obligation in support of the program ($80,000). Eliminating two of the five administrative staff positions would save $35,000, one of the two library positions $17,000, and two of the four custodial positions would save $28,000.

The school has special math, science, and English programs for talented and gifted students. Elaine Simpson teaches these programs, and she has been very successful at getting her students to do well in local and state math, science, and English competitions. You will save approximately $25,000 by eliminating a teaching position and $3,000 in support funds if you cut this program from the school curriculum.

The school board would like to see your plan for dealing with the budget crisis, and they want to meet with you in two weeks. What are your recommendations?

Background

Clothing sales have risen dramatically in recent years, thanks to several trends that appear likely to continue. It was reported that the global demand for clothing looks set to increase significantly over the coming decade as millions of people in developing countries enter the middle class and spend more on apparel. It also seems the demand for fast fashion will only continue to grow (Remy et al. 2016). This is further supported by a new research from Kurt Salmon, part of Accenture Strategy, one in eight younger consumers (18 to 24 year olds) shopping every week and buying a fashion item at least once a fortnight (Accenture 2017). Clothing production doubled from 2000 to 2014, and the number of garments purchased each year by the average consumer increased by 60 percent. Fast fashion has been a particularly hot segment and a source of enviable growth for some clothing companies (Remy et al. 2016). The process of making a piece of clothing involves multiple suppliers across the supply chain in the following processes including: farmers who grow the raw materials; ginners receive cotton from multiple growers and sell to the global market through traders; spinners use cotton from a variety of origins to produce yarn and fabric mills produce cloth. The manufacturing process begins which involves cutting, sewing, trimming, embroidery, orienting, and washing. Next, the manufacturers ship the garments wholesale to the brand that placed the orders who distributes garments globally to retail and online stores (Human Rights Watch 2017). At the end of its life, the apparel/garments may either be recycled or discarded and go to landfill. The manufacturing usually involves multiple suppliers in a very complex supply chain, which reduces transparency and visibility along the complex value chain. Brands therefore are not aware of what happen at their suppliers’ business along the supply chain. Brands also do not typically deal directly with all those suppliers, and many do not bother to dig deep into their supply chains (Gunther 2016). On the other hand, consumers are, attracted by the low cost and constantly update product ranges with new styles and designs. Consumers are buying these clothes much more often and in greater quantities, but often wearing them only a handful of times before discarding them. This fast-fashion industry and ecosystem consumes large amounts of natural resources in the production, which ultimately accelerating carbon emissions and global warming. The industry has also been linked to a number of cases of worker abuses in countries producing the garments. The workers were underpaid and exposed to unsafe and poor workplace conditions, particularly when handling materials like cotton and leather that require extensive processing (Remy et al. 2016). One example is the disaster at Rana Plaza, which is one of the deadliest accidents in the fashion industry happened on 24th April 2013. (The Economist 4th May 2013). Over 1,130 people were killed and 2,500 more were injured when the Rana Plaza factory complex collapsed in Dhaka, Bangladesh. It was reported that people crushed under those eight floors were working for dozens of familiar multinational brands and retailers. It is ‘one of the many negligent accidents that plague the garment industry’ (Fashion Revolution CIC 2015, p.4).

Assignment Tasks

Assume you are a newly appointed accountant in a local fashion company -RTXM Clothing Company (RTXM) - based in Melbourne, Australia. This is a private family business with 20 shareholders. Currently, the company has seven different departments, include Accounting and Finance, R&D (product design and development), Salesand Marketing, Human Resources, Information Technology, Distribution and Logistics, and Merchandising, with a total of 130 employees. Managers in each department are given the authority regarding operational decisions and their performance is measured based on the company’s profit, and all the other employees receive the fixed salary package. The company pays taxes to Australia Taxation Office (ATO) on a regular basis. Originally, the business offered only t-shirts and jeans. As the business was trying to join the growing fast fashion industry, it expanded its product lines to include dress, trousers, shorts, hoodies & sweats, socks, shoes, and bags. The objective was to provide a wide selection of product lines in order to reach more fashion conscious consumers. A characteristic of them market is consumers are mainly attracted by low price, and frequent new styles and designs, so the company also seeks to find the suppliers with low prices. The business has retail stores in the major city across Australia and online store. Since the company expanded its product line, managers from different departments found the number of complaints received from customers have tripled. Most complaints are related to the product quality (products are either defective or damaged), items consistently out of stock, online shopping experience (delivery of wrong items and long response time to emails), and in-store experience (lack of attention from sales representatives), and some customers have posted complaints on RTXM social media. In order to enhance the overall performance, the company is considering using a range of key performance indicators in managing its performance. This is to ensure that the company keeps track of its performance and to achieve the objectives they set for the identified issues. In addition, the CEO and senior management decide to find new suppliers to improve the product quality, however, they encountered a dilemma. On the one hand, they found a supplier in Bangladesh, Super Cheap who can provide a large range of products to fit in their business expansion plan with a competitive price and all products can be supplied in a short time frame. However, after a careful investigation into this company’s background, they found this supplier has a major issue with labor conditions throughout their supply chains, including the use of child labor, low wages, and health and safety hazards, and long working hours. In terms of the environmental aspect, Super Cheap consumes a few thousand litres of water to produce a cotton t-shirt and over ten-thousand litres to produce a pair of jeans, and wastewater discharge into the local river, and it did not take any action to solve this issue. The polluted water is no longer fit for drinking or laundry, fishes no longer exist in this river, and local residences complain that their homes are flooded by dirty water. On the other hand, RTXM has another potential supplier, called Green Fashion, who only provides limited product range with a higher price, and products can be supplied in a reasonable time frame. However, Green Fashion takes account of sustainability and makes it as part of their business, and their sustainability agenda has been presented on its website, including fashion designs that is kind to the environment, they also ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met. The CEO and management of RTXM learnt that Green Fashion has very similar values and sustainability agenda. RTXM considers sustainability as part of the business. It is reported on their websites that the company wants to rethink fashion designs so that they are kind to the environment, to ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met.

Required:

1. As an accountant of the company, you would like to have a better understanding of how the sustainability of the company will impact on the stakeholders. You believe the most efficient way is to identify important stakeholders. Refer to the case and identify five relevant stakeholder groups and discuss how different accounts could be used to satisfy each group’s information requirements.

2. In order to enhance company’s performance, the CEO thinks it might be insufficient to use profit as the only performance indicator, and is considering using a range of key performance indicators to manage the business. You believe the Balanced Scorecard is a useful performance measure framework that can be used, as it gives management an overall picture of company’s performance. You have been asked to develop a Balanced Scorecard to assist RTXM in managing its overall company’s performance and demonstrate how it works to the management and staff in next company meeting. You need consider ONE of the most important metrics that could be used for each of the four perspectives of performance and explain the reason why it has been selected and how it can be used to improve company’s performance.

3. The CEO believes the company was attractive because of its previous low price strategy but has also noticed unprecedented awareness from customers on the company’s social responsibilities. The CEO approaches you to discuss the selection of supplier, which supplier is better for company’s strategic development. Provide an explanation to the CEO with reference to the potential costs and benefits of working with both Super Cheap and Green Fashion.

4. After your analysis above, the CEO starts realizing the importance of working with social and environmental friendly suppliers, however, still does not have a comprehensive understanding to the positive and negative impact his company’s products might have both socially and environmentally. You decide to use the Life Cycle Analysis (LCA) for a product that the company offers to enhance their understanding. Draw the LCA, and select one or two stages of the LCA, identifying a total of four possible social and environment impacts. If the impact is detrimental either socially or environmentally, give suggestions to minimize the impact. If the impact is positive, give suggestions as to maximize the benefit. You are required to undertake some research to answer this question.

5. Subsequently the company decides to contract with the Green Fashion. Some important shareholders attempted to block this proposal. Their belief, as the owners of this company, is that the company should aim to maximize the value of their shares, however, the new business plan could significantly increase the costs and therefore reduce the profit. You are required to identify an organisation, business or industry and explain whether and how it could potentially increase the value of its shares in the long term by being accountable to its major stakeholders. You are required to undertake some research to answer this question.

Background

Clothing sales have risen dramatically in recent years, thanks to several trends that appear likely to continue. It was reported that the global demand for clothing looks set to increase significantly over the coming decade as millions of people in developing countries enter the middle class and spend more on apparel. It also seems the demand for fast fashion will only continue to grow (Remy et al. 2016). This is further supported by a new research from Kurt Salmon, part of Accenture Strategy, one in eight younger consumers (18 to 24 year olds) shopping every week and buying a fashion item at least once a fortnight (Accenture 2017). Clothing production doubled from 2000 to 2014, and the number of garments purchased each year by the average consumer increased by 60 percent. Fast fashion has been a particularly hot segment and a source of enviable growth for some clothing companies (Remy et al. 2016).

The process of making a piece of clothing involves multiple suppliers across the supply chain in the following processes including: farmers who grow the raw materials; ginners receive cotton from multiple growers and sell to the global market through traders; spinners use cotton from a variety of origins to produce yarn and fabric mills produce cloth. The manufacturing process begins which involves cutting, sewing, trimming, embroidery, orienting, and washing. Next, the manufacturers ship the garments wholesale to the brand that placed the orders who distributes garments globally to retail and online stores (Human Rights Watch 2017). At the end of its life, the apparel/garments may either be recycled or discarded and go to landfill. The manufacturing usually involves multiple suppliers in a very complex supply chain, which reduces transparency and visibility along the complex value chain. Brands therefore are not aware of what happen at their suppliers’ business along the supply chain. Brands also do not typically deal directly with all those suppliers, and many do not bother to dig deep into their supply chains (Gunther 2016).

On the other hand, consumers are, attracted by the low cost and constantly update product ranges with new styles and designs. Consumers are buying these clothes much more often and in greater quantities, but often wearing them only a handful of times before discarding them. This fast-fashion industry and ecosystem consumes large amounts of natural resources in the production, which ultimately accelerating carbon emissions and global warming. The industry has also been linked to a number of cases of worker abuses in countries producing the garments. The workers were underpaid and exposed to unsafe and poor workplace conditions, particularly when handling materials like cotton and leather that require extensive processing (Remy et al. 2016). One example is the disaster at Rana Plaza, which is one of the deadliest accidents in the fashion industry happened on 24th April 2013. (The Economist 4th May 2013). Over 1,130 people were killed and 2,500 more were injured when the Rana Plaza factory complex collapsed in Dhaka, Bangladesh. It was reported that people crushed under those eight floors were working for dozens of familiar multinational brands and retailers. It is ‘one of the many negligent accidents that plague the garment industry’ (Fashion Revolution CIC 2015, p.4).

Assignment Tasks

Assume you are a newly appointed accountant in a local fashion company -RTXM Clothing Company (RTXM) - based in Melbourne, Australia. This is a private family business with 20 shareholders. Currently, the company has seven different departments, include Accounting and Finance, R&D (product design and development), Salesand Marketing, Human Resources, Information Technology, Distribution and Logistics, and Merchandising, with a total of 130 employees. Managers in each department are given the authority regarding operational decisions and their performance is measured based on the company’s profit, and all the other employees receive the fixed salary package. The company pays taxes to Australia Taxation Office (ATO) on a regular basis.

Originally, the business offered only t-shirts and jeans. As the business was trying to join the growing fast fashion industry, it expanded its product lines to include dress, trousers, shorts, hoodies & sweats, socks, shoes, and bags. The objective was to provide a wide selection of product lines in order to reach more fashion conscious consumers. A characteristic of them market is consumers are mainly attracted by low price, and frequent new styles and designs, so the company also seeks to find the suppliers with low prices. The business has retail stores in the major city across Australia and online store. Since the company expanded its product line, managers from different departments found the number of complaints received from customers have tripled. Most complaints are related to the product quality (products are either defective or damaged), items consistently out of stock, online shopping experience (delivery of wrong items and long response time to emails), and in-store experience (lack of attention from sales representatives), and some customers have posted complaints on RTXM social media.

In order to enhance the overall performance, the company is considering using a range of key performance indicators in managing its performance. This is to ensure that the company keeps track of its performance and to achieve the objectives they set for the identified issues.

In addition, the CEO and senior management decide to find new suppliers to improve the product quality, however, they encountered a dilemma. On the one hand, they found a supplier in Bangladesh, Super Cheap who can provide a large range of products to fit in their business expansion plan with a competitive price and all products can be supplied in a short time frame. However, after a careful investigation into this company’s background, they found this supplier has a major issue with labor conditions throughout their supply chains, including the use of child labor, low wages, and health and safety hazards, and long working hours. In terms of the environmental aspect, Super Cheap consumes a few thousand litres of water to produce a cotton t-shirt and over ten-thousand litres to produce a pair of jeans, and wastewater discharge into the local river, and it did not take any action to solve this issue. The polluted water is no longer fit for drinking or laundry, fishes no longer exist in this river, and local residences complain that their homes are flooded by dirty water.

On the other hand, RTXM has another potential supplier, called Green Fashion, who only provides limited product range with a higher price, and products can be supplied in a reasonable time frame. However, Green Fashion takes account of sustainability and makes it as part of their business, and their sustainability agenda has been presented on its website, including fashion designs that is kind to the environment, they also ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met. The CEO and management of RTXM learnt that Green Fashion has very similar values and sustainability agenda. RTXM considers sustainability as part of the business. It is reported on their websites that the company wants to rethink fashion designs so that they are kind to the environment, to ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met.

Required:

3.The CEO believes the company was attractive because of its previous low price strategy but has also noticed unprecedented awareness from customers on the company’s social responsibilities. The CEO approaches you to discuss the selection of supplier, which supplier is better for company’s strategic development. Provide an explanation to the CEO with reference to the potential costs and benefits of working with both Super Cheap and Green Fashion.

Write 300 words