Working Capital in Singer Sri Lanka

The Singer brand has been in Sri Lanka since 1877 with the introduction of sewing machines to the domestic market by the Singer Corporation.Singer Sri Lanka is one of the companies which categorized under four public companies such as Singer Sri Lanka PLC, Regnis Lanka PLC, Singer Industries Ceylon PLC and Singer Finance Lanka PLC.

Today, Singer (Sri Lanka) PLC is a large, diversified company with unmatched presence throughout Sri Lanka. It remains a member of the worldwide franchise of Singer.

According to working capital calculation, company has enough working capital to cover day to day expenses. Compared to 2009, company was able to increase its working capital by 72%. But compared selected year and previous year comparison working capital has decreased significantly up to year 2012. But again after 2013 onwards it has significant increased up to 87%.

Working capital amount increase compared to previous year highlighted, business has either increased current assets or has decreased current liabilities. According to the absolute amount analysis both current assets and liabilities has increase within the selected time period. Therefore,percentage increase of current assets and liabilities can be used to get an idea about the working capital. Compared to 2009 company has increased current asset percentage compared to current liability increase. Reason for the decrease in working capital in 2011 and 2012 is that company had unable to increase its current assets percentage with the same proportion of increasing the current liabilities. 

Barriers of Activity Based Costing Implementation in Sri Lanka

Activity-based Costing

Activity-based costing provides a more accurate view of product cost, but companies typically use it as a supplemental costing system. The allocation bases used in activity-based costing differ from those used in traditional costing. Activity-based costing determines every activity associated with producing an item and allocates a cost to the activity. The cost assigned to the activity is then assigned to products that require the activity for production.

The feature of ABC that is of particular relevance to the use of cost in pricing is its recognition that even though a cost does not vary with volume; it may vary with some other measure of activity.

·         Unit level activities - Some activities must be performed for each unit of a product manufactured. These activities are called unit-level activities.

Ex: product inspection and testing cost in a personal computer manufacturer that inspects and tests all units.

·         Batch level activities – This are performed for each batch of units. The cost of batch activities vary with the number of batches, not the number of units manufactured.

·         Product level activities – the cost must be performed for each product level activities.

Traditional vs. ABC

In traditional approach, there is lack of cause and effect relationship between the cost allocation bases and indirect cost pools because one or a few cost pools for each department or entire plant having little homogeneity are used. In ABC approach, many homogeneous indirect cost pools for various activity areas rather than a department or entire plant are used. There is a cause and effect relationship between the cost allocation bases and the indirect cost pools.

The traditional approach usually uses a few pools of indirect costs, so cost allocations are of intently based on broad averages. The costs of products thus, absorption may be either over-costed or under costed which may lead managers to make wrong pricing decisions resulting in loss of market share by fixing higher selling prices or selling prices for some products may be below the costs incurred to produce them. Activity based costing is a rational way of assigning indirect costs to various activities and pricing decisions taken by managers will be rational.

Impotence of Activity Based Costing

The activity based job costing method or is helpful in ascertaining areas where cost reductions are possible. Activity based costing can lead to improved decision making such as fixing selling price and pinpointing the area where cost reduction is possible because it provides more detailed information about various activities involved in a product or service. With ABC businesses are able to fully identify all the costs that are associated with producing a single unit of their product. Because of this new understanding, they are able to develop pricing strategies and marketing much more efficiently.

Activity based principles can be successfully applied to the art of budgeting. Activity based budgeting is an approach to budgeting that lays emphasis on budgeting the costs of activities necessary to produce and sell products and services. Activity based budgeting is especially useful in case of budgeting of indirect costs.

Barriers of Activity Based Costing

Many managers believe they do not need product costs because the market sets prices. Since one of the main reasons for having product cost information is to set prices, managers in firms whose prices are set by the market often feel the product cost are unnecessary.

ABC method of costs may not be best if the overhead waste is perceived to be relatively low. This is because it can be very costly to implement activity based costing into a business in Sri Lanka. Experts must be brought in for an extended period of time, and other measures may be necessary for the ABC to be effective. Managers often express a concern that ABC systems are too difficult to implement and use. There is certainly a cost associated with designing and implementing a new cost system that has a different architecture and different data requirements than conventional cost accounting systems.  

There is a long time period that is involved in using an activity based costing method in a business. All of the production processes, employee actions, and aspects of the business have to be examined for an extended period of time in order to gain a big view on what the issues truly are.

ABC requires many different departments and individuals to collect and input data. Even the smallest flaw in this information can damage the entire process and the outcome would be tainted. This is one of the biggest risks that are taken on when using this method.

Cost Reduction Strategies of Diesel & Motor Engineering PLC

Cost factor is crucial for determining the success or failure of any organization. If the particular organization follows a suitable approach in reducing the cost; it will definitely be able to get a Competitive Advantage in this highly competitive business environment.

Cost reduction could be resulted in significant product cost saving, manufacturing cost saving, and life cycle cost saving when companies are interested in cutting cost. When concerning about the cost factor of any organization; it can be categorized as Material Cost, Labour Cost and Overhead Cost. The basic objective of this assignment is to examine the cost reduction strategies followed or to be followed by a selected organization (i.e. Diesel & Motor Engineering PLC) under the above mentioned cost elements. Also it is expected to examine the degree of successfulness of each cost reduction strategy and its consequences.

The duration of year 2007- 2009 was considered regarding this particular study.  Interviews with relevant personnel and the Annual Report of the Company were used as the data collection method.

When conducting the study; it is identified that the resource personnel were not permitted to reveal certain sensitive information. So the researcher had to depend on the published information; basically the Annual Report of the Company

As a cost reduction strategy; the Company maintains an Environment Management System (EMS) in an efficient, effective manner. The environmental impacts of the business operations and the initiatives taken to safeguard and enhance the environment are regarded as vital for sustainable growth and development.

The Company’s EMS measures the impact of its operations on key environmental indicators thereby allowing them to initiate measures to minimise adverse effects. It also assists in integrating energy saving processes and technologies within the Company and the reduction of wastage. The EMS is guided by the Triple ‘R’ concept: Reduce, Re-use and Re-cycle. Dimo’s EMS has obtained ISO 14001 certification in 2005.
Within the scope of initiatives to nurture and safeguard the physical environment, the Company concentrates on six strategic areas of focus - Energy and Fuel management, Water management, Noise Emission control, Air Emission control, Waste management and Paper management. These initiatives are well documented and monitored.

·         Recycling

The Company espouses the concept of recycling, as a saving of valuable resources.
Company has a Buy Back scheme for tyres where they are used in the commercial venture of tyre re-retreading. During the year under review, it has re-built 5115 tyres in this manner. In another effort to mitigate environmental consequences from old tyres, they accept tyres sold by them after their economical use and pass them on to manufacturers who use the old tyres in their manufacturing process.

·         Energy & Fuel Management

The Company has also installed a new kerosene oil recycling mechanism in one of the workshops where kerosene used on a single occasion is recycled and reused. The departments were able to trim their kerosene usage by about 28.7% per month as a consequence of this measure. The used kerosene is disposed of in an environmentally friendly manner, through a sub-contracted service

·         Fresh Air Validation System

The Sri Lankan Environmental Authority evaluates and sets key parameters concerning Fresh Air Quality and effects on the environment bi-annually.

The Company’s results in respect of such environmental effect are always below the levels set by the Environmental Authorities. Dimo has taken extra precautions to minimise emissions. This year, the Company implemented a Fresh Air Validation System, in Units Repair section of Head Office which has enabled them to reduce the temperature level, CO2 level and Humidity level in the workshop area.

·         Managing Water

The Company’s policy on water management is driven by efforts to both reduce the use of water and to treat and re-use the resource wherever this is possible which finally result in reducing the cost of the Company. The National water supply system remains the Company’s main source of water, while ground water is used in significant quantities in the workshop at Siyambalape. The Table below depicts water consumption and reuse levels achieved during the year in review.

·         Emissions, Effluents and waste

Dimo follows a strict ethic which commits the Company to pursue reduction of ambient air emissions at every stage and in every aspect of its operations.

Installed exhaust extractors at all workshops ensure that emissions such as carbon dioxide and diesel fumes are captured and processed before release to the environment, within legally permissible limits. Ozone depleting emissions such as gas from air conditioning units are recycled in special machines to avoid any leakage into the atmosphere. All Company vehicles are subjected to regular and stringent emission tests to ensure they comply with emission regulations promulgated under the National Environment Act. The passenger car workshop in Colombo is equipped with exhaust gas and dust extractors to deal with gas emissions as well as harmful dust that emanates during cleaning of air filters and brake assemblies.
The Company’s paint booths are all equipped with filtration systems to prevent release of toxic fumes and particles into the atmosphere.
The Siyambalape workshop complex is also equipped with dust extractor filtration.