Please provide feedback on my student's executive summary. My concern is whether he uses various financial concepts correctly. Overall, is it good/bad?
Executive Summary
In response to CSL's request, this report provides a viability assessment of two accounting systems: traditional-based costing (TBC) and activity-based costing (ABC). It takes into consideration that CSL is not part of the labour intensive industry and cannot use direct labour as a cost driver to trace manufacturing overhead in its products. Therefore, by using official statistics to show how TBC caused an over allocation of Product G's manufacturing overhead and an understatement of Product W's, I argue that CSL's current TBC accounting system is insufficiently refined to measure profitability accurately. My analysis reveals that, for a variety of growth and price change conditions, ABC produces more accurate, broadly applicable information while also highlighting the costs of quality-related non-value-added activities. In other words, if CSL were to adopt ABC, it can more accurately measure the differences in overhead cost between products and improve the allocation of resources to its highest valued projects. In addition, based on a profitability analysis of three CSL products, I offer four strategies to help the company improve cost leadership and product differentiation: (1) resettle retail prices, (2) outsource production, (3) reduce costs from suppliers, and (4) address trade-offs associated with cost reduction and customer service.
It takes into consideration that CSL is not a part of the labour intensive industry and cannot use direct labour as a cost driver to trace manufacturing overhead in its products.
In addition, based on a profitability analysis of three CSL products, I offerpropose four strategies to help the company improve cost leadership and product differentiation: (1) resettle retail prices, (2) outsource production, (3) reduce costs from suppliers, and (4) address trade-offs associated with cost reduction and customer service.
