a) Specific aims and applications of Business Process Re-engineering

The functions of organization in the business environment are distributed according to the specialty and characteristics of the factors that are involved in the development of the business. These improvements are most likely to impact on the effective and efficient methods of allocation resources that are related with the organization. There must be specific application that could facilitate the business improvement and process that are used to select and develop to improve the strategies in the market. The better allocation of applications of business process re-engineering methodology in order to gain efficient and effective in the competitive advantage in the market. The basic purpose of BPR is to get the maximum output in minimum cost(Novikov, et al., 2016).

Business process tree in generate is used to get efficiency in the world that are related with the stakeholders and it is required to get understanding about the involvement of business in the matters of society. There are following steps that are necessary in the application of a business process reengineering.

·         Current objectives of the business process

·          analysis of the process that are not used in the method or alternative process

·         Analysis of the process that are not used in the method or alternative process

·         Getting opportunity to improve and validate the business

·         Designing future process that are incessantly in the business development

·         Implemented different strategies that are mindful and independent

Any organization that are working in the business process reengineering order basically operating complicated grounds and identified rights offer solution to use in solution of problems that are considered in Preorganization also verifies about the differentiation in the success of business process reengineering and significant number of companies is applicable. Business process reengineering applications could be consumed to re-engineer the methods in the business and these processes could be based on reengineering the organizational structure and they’re consuming the information technology in different departments. It could give a cross functional team with the eligibility members to come in front and improve the functions of the Department and build to new opportunities for the company (Nadeem & Ahmed., 2016).

b) Specific aims and applications of Lean Management

Lean Manufacturing is considered a group of a process that are gradually implemented around the world and gained competitiveness in the manufacturing firms. The basic purpose of clean management is to gain high compatibility and quality in the market and all these processes are forward by just in time to do quality management and six Sigma successful organizationsworking for the objectives of lean manufacturing.

·         To get quality in the production.

·          to reduce the wastage of time effort and resources

·         To reduce the wastage of time, effort and resources

·         To ensure the delivery of order within the time and according to the standards

·         To make sure our optimization utilization of the resources

·         Totally check the benefiting process

c) Appropriate performance management measures in the small-scale productions

Small scale businesses are using different methods to attain development and to sustain in the economy and environment of the business.They put their maximum efforts to contribute in sharing knowledge and getting operations that are helpful to improve the quality of a small scale business. For small scale business, the appropriate method of Operation Management is to adopt lean management system. As the resources of small business are not large and they are ambitious tomake higher cost and it business could not afford to large course. Therefore lean management is helpful to upgrade in the business work and there it is also helpful to gain the management without any wastage.

2 Concerns on limited resources:

a) Factors affecting limited resources in production management

In any manufacturing organization, there are different factors of production that are required to for a company to involve and utilize them to gain the profit. These factors of production are basically land, labor, capital and organization. The factors of productions are efforts as the resources that are utilized to build the business and people used to produce goods and services by consuming these factors. An efficient business always tries to utilize minimum resources in the production and get maximum benefits in the market. It could only be possible if all the resources of business must be utilized according to the proper allocation of resources methods. Any business could improve the efficiency of factor of production and the reason behind is that they want more quality product in the business. All the units in the manufacturing of bed sheets, cost must be minimized and resources should utilized properly. For example, rent of land is fixed so. These factors could be helpful to improve the production of management by improving its utilization and strategies to consume it in limited resources. Labor could also be improved and get better but from the minimum resources generally economic growth. It could be comes it with the better positioning or factor of production that is clearly imposed to get economy and Technology Revolution in the industry to get better results(Omidi & Khoshtinat., 2016).

b) Production budget yielding maximum profit

Muscat Traders

Budget preparation

For the period ending ---------

Muscat Traders

Budget preparation and income statement 

For the period ending ---------

All the values of the bed sheets are assumed that the cost in production of bed sheets but the selling price and number of units are given in the question that shows loss in the sale of bed sheets. Budget that is prepared with the help of a given information is based on the price that is 5 per unit for all the Bed sheets the cost of all the products are not same as the twin shows the 4.3 cost per unit and the Queen size bed sheet shows 7 per unit and the King size bed sheet shows 9.5 per unit cost. As the cost of all the units are different and increase with each other, so there should be proper allocation of cost, according to the unit size of the product (Dooley, et al., 2007).

c) Reasons for unequal production of bed sheets based from your production budget

The inequalities in production and budget of the bed Sheets are different according to the size and demand of the bed sheets in the market, the King and Queen Size bed sheets must be divided by the unit cost of these prices and cost distribution must be according to the market demand to retain in the market. The production manager wants to increase the production of bed sheets of all kinds therefore he put cost on all the variety available in the market and production unit. There are several reasons for unequal cost distribution in production of bed sheets such as market requirements, trends, and available resources as well as other factors that are required in the environment of better production. Queen size bed sheets are most likely to purchase by the customers in the market therefore it is needed to put into production and it takes higher cost. But mistake is here to sell them on low prices and even below the cost that is not favorable in the market. Similarly, the business environment is required that there must be different kinds of items in the business production that could secure the business in market to gain competitive advantage. For this purpose, king size bed sheets are also produced but fault is that all the units are sold on same price that are not affordable by business in any terms.  

d) Measures to maximize profit with limited resources

Organizations that are working in the market are working on ultimate purpose to get maximum profit in minimum cost. For this purpose, organizations have their own strength and capacity to make product differences. It adopts cost controlling factors that could maintain the market share of the organization and minimize the loss in the market. All these are the things that are basically owned by all the organization in the market, but there are some exceptional steps and figures that are must be taken into consideration to get higher profit. Followings are the measures that are helpful to maximize profit with limited resources:

·         All the department’s in his company is working was to be cost controlling and this is necessary for department to learn about the issued related to cost overruns in the manufacturing of bed sheets, cost must be minimized and resources.

·         Complete and proper cost must be implemented according to the principle of low-cost are implementation on the production of per unit. This strategy makes able to get maximum profit from the product.

·         Pricing strategy should be according to the cost of the production. It should not be too low that it could not fulfill the cost and it should not be too high that customer could not purchase due to higher prices.

·         There must be strong marketing for the production and the product available from the markets or that customer could be well aware about the use of product and attract to the purchase of product.

·         As company must take in consideration all the pricing strategies, there should be also cost strategies so that the cost implementation process could be properly implemented in the production system and there would be safety from the loss in the market.

3 Concerns on production costing:

a) Application of variable costing and absorption costing in manufacturing industries

Variable costing income statement is based on the variable expenses that are rare deducted from the revenue to get the contribution margin and all the fixed expense are not included in the net profit. Variable costing method is applicable when it is income statement is required to format with to determine the proportion of expenses that the changing in one period. Variable income statement is useful to learn about two different unit and different elements that are contributed in the production of product. It gives clear proportionate of income that is generated from different units. The main difference between a gross margin and contribution margin, that is lies between absorption, costing method and variable costing method or considered cost of goods sold at order calculated in different ways in both different methods. Under both variable costing method and normal income statement, the net profit or loss will be same as both are explaining.

Absorption costing method is a traditional costing method that is used to create income statement to base on the unit cost that is divided according to the product. It is based on the cost examination of per unit as if there is fluctuation in unit produced then it could be known about the marginal cost or marginal profit in the business. it could be helpful to learn about the fixed cost that is behind every unit produced in the market. Applications of absorption costing method income statement are explained below:

·          it is used to determine inventory values that are reported in international financial reporting standards

·         It is used to determine inventory values that are reported in international financial reporting standards. It is applicable to determine profitable selling price that is based on a cost making unit.

·         It recognizes each unit produced and cost that is used lies to own single unit, whether it is fixed or variable cost.

·         It recognizes the fact that lies behind the fixed overheads for that are essential for the production of unit.

·          it produced the profits that could fluctuate in a production and it would make sure that sales of units could not be

·         It produced the profits that could fluctuate in the production, and it would make sure that sales of units could not be fluctuating which is totally based on matching principle that make sure the revenue that for that expense are made the merge to beat it return in some form of profit.

b) Income statement using the variable and absorption costing.

Variable costing method is applicable when it is income statement is required to format with to determine the proportion of expenses that the changing in one period. Variable income statement is useful to learn about two different unit and different elements that are contributed in the production of product. It is explained in the following calculations:

Muscat Traders

Variable costing method

For the period ending ---------

Cost of Goods Sold = opening inventory + direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead - ending inventory

Unit cost = 2.1 (2000) = 4200+2200 =6400

The unit cost in variable method is based on direct material, labor and variable manufacturing overheads and there is no part that is based on fixed cost of the business.

Muscat Traders

Absorption costing method

For the period ending ---------

Absorption unit cost = Fixed manufacturing overheads/ unit produced

Absorption unit cost = 2200/2000= 11 + 2.1 = 13.1

Absorption costing method is based on the unit cost that is derived from total fixed overheads of the company and divided by total units produced in the given time period. It is calculated to determine inventory values that are reported in international financial reporting standards. It is applicable to determine profitable selling price that is based on a cost making unit in the given time period.

c) Income statement using both the costing methods if Ahmed Ali decides to reduce the selling price of the product to OMR 3

Further reduction in the selling price could decrease the profit of company that is not appropriate to overcome the selling price of the unit sale.

Muscat Traders

Variable costing method

For the period ending ---------

If company reduces sale price to 3 OMR the variable costing method will produce loss of 700 OMR.

Muscat Traders

Absorption costing method

For the period ending ---------

d) Whether the decision to reduce the selling price is favorable or unfavorable.

The major decision he made according to the implementation of cost according to various performance units is not appropriate therefore company is facing high loss in selling of units. The decision is not appropriate to reduce the sale price as it could create unfavorable circumstances for the company. When the unit cost is not reduced and company is selling the bed sheets on 3.950 then there is also loss for the company as it is not fulfilling the cost that are implemented on the unit produced then cost reduce to 3 OMR could never be acceptable as it is not according to the cost strategies as well as pricing strategies. So keeping in view that the cost is not fulfilling the requirements then it is not appropriate decision to sell the goods on low prices. As a result of all above discussion, it is clear that to reduce selling price is not a favorable step.

4 Recommendation of Production process and procedures

a) A summary report identifying the major decisions

The summary of project is based on the operation management of Muscat trader whose accounts and operations are not handling properly and all the projects and costing method of company not allocated properly. The managers of the company performing function of cost allocated to different departments are not reasonable and not to clarify the justification about allocation of excess cost. In such cases, business process reengineering applications could be consumed to re-engineer the methods in the business and these processes could be based on reengineering the organizational structure and they’re consuming the information technology in different departments. If company reduces sale price to 3 OMR the variable costing method will produce loss of 700 OMR, the situation could not be according to the business strategies and there may be heavy loss.

Both the methods are implemented to learn about the fair position of the company in market and documentation.The main difference between a gross margin and contribution margin, that is lies between absorption, costing method and variable costing method or considered cost of goods sold at order calculated in different ways in both different methods.The major decision he made according to the implementation of cost according to various performance units is not appropriate. Therefore company is facing high loss in selling of units. There should be proper implementation of business process reengineering and effective cost strategies should be adopted to supply of raw material and direct labor to gain the profitability in the market. When cost is allocated in the better with the company could find a way to get maximum profit from the production of units (Difs & Trygg., 2009).

b) Implications of the CEO’s actions on the performance of Ahmed Ali as production manager.

The CEO of Muscat Trader, is taking action against the decisions of production manager and it is appropriate to take action, accompany most preferred of the profitability and manager is not making a good performance, therefore you can take action against the production manager as he is head of all the department’s and have to instruct all the department’s to allocate cost and increase productivity and gain the profitability in the market. The decision of CEO could be appropriate in the terms of current situation of the company. Production and operation manager must be a man that could analyze the situation and could change the pricing and production strategies that are being implemented in the production process.

References of Production process and procedures

Difs, K. & Trygg., L., 2009. Pricing district heating by marginal cost.. Energy Policy,, 37(2), pp. 606-616.

Dooley, M. P., Folkerts-Landau, D. & Garber, P., 2007. Direct investment, rising real wages and the absorption of excess labor in the periphery. In G7 Current account imbalances: sustainability and adjustment University of Chicago Press, pp. 103-132.

Nadeem, M. & Ahmed., R., 2016. "Impact of Business Process Re-engineering on the Performance of Banks in Pakistan. Business and Economics Journal, 7(1), pp. 1-3.

Novikov, V. S. et al., 2016. "Re-engineering as the process of business adaptations.. International Journal of Economics and Financial Issues, Issue 6.

Omidi, A. & Khoshtinat., B., 2016. "Factors affecting the implementation of business process reengineering: taking into account the moderating role of organizational culture (Case Study: Iran Air).. Procedia Economics and Finance, 36(16), pp. 425-432.