The production process of the organization is one of the most important processes because through this process the business produces the products which meet the needs of the customers. The organization produces its products by keeping the demand of the customers in mind. Today there are many software and technologies available which help the corporation to estimate the demand and then produce the products accordingly. The organizations use an inventory management system to manage the inventory so that the production process won’t come to a halt.

a)      Specific goals and applications of Business Process Re-engineering (BPR)

The business process reengineering is performed when the existing business process or procedure is not providing the desired results to the corporation. The aim of business process reengineering to change the current business process so that the organization can achieve its desired goals. The organizations set goals which they want to achieve through their current business process. However due to some issues in the process the organization unable to achieve its goals. There are many steps that are involved in the business process reengineering. The first step is to understand the current processes of the corporation after that those processes are identified which need to be redesigned. In the third step-change levers are identified. Then in the 4^th phase, the new business process is implemented (Baker & English, 2011).

Ahmed Ali should consider the importance of business process reengineering so that it the home decoration department can create an equal number of bed sheets. Currently, the department is not creating an equal number of bed sheets. For this purpose, it is important that the current production process is changed so that the equal number of bed sheets can be manufactured. However, the management of the corporation will have to decide whether the organization is ready for the implementation of BPR or not. Currently, the business is not in the position to implement Business process reengineering because not only it is costly but also the business does not have resources for the implementation of BRP (Campbel, et al., 2011).

b)     Specific goals and applications of Lean Management

The lean manufacturing approach allows the organization to not only increase its efficiency but also to reduce its cost up to a lot of extents. With the help of lean manufacturing techniques, the business can utilize its resources more effectively and can reduce its waste. As the organization or business is not currently in the position to implement BRP the lean manufacturing approaches are a good way to reduce waste up to a lot of extents (Mulford & Comiskey, 2011).

As Ahmed Ali know that there are limited resources for production than the demand of the bedsheets should be met with the material available. With lean manufacturing, the organization can reduce its costs up to a lot of extents which will result in an increase in profit. When the performance and efficiency of the organization increase the profitability of the business also increases as a result (Mulford & Comiskey, 2011).

c)      Appropriate performance management measures for small-scale productions

There are many ways through which the organization can measure its performance. The organization can use lean manufacturing tools such as root cause analysis for identifying the issues that occur in the organization. The corporation can use the inventory management system for monitoring the inventory. If the organization is going to manage its inventory efficiently that the production process of the business will not get disturbed. If the production process is not going to be disturbed then it means that the business will be able to manage its sales efficiently. When the sales increase the profit of the business also increases as a result (Chandra, 2011). Some specific performance management measures for small scale productions are stated below:

1)      Use of balanced scorecard method to collect data regarding the performance of each department or unit in the production sector can help in identifying issues to be resolved for the improvement of performance.

2)      Use of feedback by colleagues and managerial staff (360 peer-group feedback) can also provide clear indicators for performance measurement.

3)      Benchmark technique is also useful to measure the performance of the production sector in a historical scenario.

4)      Employees performance appraisal forms are supportive to collect data about employee performance at production sector.

5)      Records of financial output and operational outcomes (such as increase or decrease in revenue and inventory level) can be used for performance measurement at small scale production sector.

2. Limited Resources of Production process and procedures of the organization

Limited resources can cause a serious problem in the production process. If the resources are limited than the corporation might unable to increase its production. Sometimes the demand for the products of the company increases up to a lot of extents and if that time the supply of the raw material is limited than the company will unable to meet the needs of the customers. That is why it is suggested to the corporation to use the resources efficiently. There are many ways through which the organization can manage its production within limited resources. The detail is mentioned as follows:

a)      Analyzing the factors affecting limited resources

There are many factors that affect the limited resources. If the resources are limited then it will become difficult for the production department to meet the demand. The resources get limited when the supply of material is limited. The suppliers are the one who supplies raw material to the corporation for production. If the supply of material is limited than the organization will get limited material. the business can meet the demand with limited resources (Warren, et al., 2016).

b)     Production budget that will yield maximum profit

See the following table for the production budget regarding be produced units in the specified time duration.  The following production budget is developed according to the market demand for these products. Market demand for each product is different therefore sales units for each product varies.  The ending inventory is added in the sales in units to get total units needed by the company during next year. The ending inventory represented in this production budget is the total number of units required to be kept in reserves for each product to be used in the next year. While from these calculated total number of units needed we will further subtract the beginning inventory (number of units). Here in this production budget, the beginning inventory represents total units left over in the last year after meeting the market demand for these products. After subtracting the total number of units as beginning inventory from the total units needed during the year we reached the volume of required units to be produced. The required units to be produced for each product is depended on the market demand for these products and previously available stock for these products. Conclusively, total units to be produced for twin, queen, and king size bedsheets are 250, 228, and 164 respectively. Somehow, units to be produced for the personalized mugs is 2728.  

In the above tables, the production budget and sales budget are presented. In order to create a production budget, it is important to estimate the number of sales first. Therefore the sales budgeted is created first for establishing the production budget. It is assumed that the ending inventory will be 40% of the sales. It can be seen from the production budget that bed sheets are going to be produced according to their demand. If the demand for the bed sheets is going to increase than the production of the bedsheets also going to increase as a result. It is evident from the scenario that the demand for different bed sheets are different which indicates that producing an equal number of all the bedsheets will not be a good idea if the business is going to create an equal number of bed sheets than the business might unable to meet the demand effectively (Warren, et al., 2016).

c)      Explaining the reasons for the unequal production of bed sheets.

The reason for unequal production is because of the demand for various bedsheets. The demand for twin and queen size bed sheets is higher than the demand for king size bed sheets. That is why the production of twin and queen size bed sheets is more than the king size. In order to produce the bedsheets, the business will have to focus on the demand of the bedsheets. If the production of all the bed sheets kept equal than the organization might unable to meet the demand because it is evident that some bedsheets have more demand than other bedsheets (Spender, 2014).

It is evident that the business should produce bed sheets by keeping the demand of the bedsheets in mind. Through this approach not only the business will be able to meet the demand but also the corporation will not have to keep excess inventory. The business can manage production with lean manufacturing approaches. The lean approaches allow the business to continuously improve their production process. It is suggested to the business to reduce its costs so that the profit of the business can increase (Campbel, et al., 2011).

d) Measures to maximize profit with limited resources.

Several measures can be used by the Muscat Trader to maximize their profit while using the limited resources available for production and manufacturing of products such as bedsheets and personalized mugs.

1)      Implementation of Lean Management and Waste control strategies: can reduce the cost of production thus overall profit margin for the company would be increased. Thus, a waste control strategy is an effective measure for maximizing profit in limited resources. 

2)      Performance Improvement: employees can support an organization in bad times by reducing cost and increase profit margin if they bring efficiency in their performance. Incentives and motivation programs can be introduced in the organization to maximize profit with limited resources.

The following table is projecting raw material usage summary for the production of bedsheets using the available fabric of 1000 metre.

The following table is representing material usage details for all products and related cost for these products.

There are many ways through which the organization can increase its profit. The first way is to utilize resources efficiently. When the business is going to utilize its resources efficiently than the profit of the business increases as a result. It is recommended to the corporation to reduce its expenses so that the profit of the business can increase. With the help of a lean manufacturing technique, the organization cannot only reduce its waste but also can produce goods in limited resources (Warren, et al., 2016).

Part:3

1)      Production costing of Production process and procedures of the organization

Production costing is important so that the organization can produce the goods effectively. The production cost not only allows to maintain production cost but also help the organization to produce goods that can meet the demand of the customers. Through production costing current issues in which the business is faxing can be resolved up to a lot of extents. The business should reduce its expenses which are increasing the overall cost of the business. Through this, the business can save its costs and its profit will increase up to a lot of extents (Campbel, et al., 2011).

a)      Application of variable costing and absorption costing

The income statement of the corporation is created using two techniques. The one is the variable costing and the other one is absorption costing. Both techniques are different from each other and the method of allocation is also different. Absorption costing is also known as full costing. In this method, the fixed overhead costs are allocated to all units produced in a specific period. In the absorption costing all costs are included which are associated with production. Variable costing, on the other hand, includes variable costs first. The variable coting makes allocation of costs difficult. The variable costing is complex than absorption costing (Warren, et al., 2016).

b)     Income statement using the variable and absorption costing.

According to the following presented table, cost of goods sold for each product is calculated after adding up all direct and indirect cost associated with the production or manufacturing process. For instance, labour wages and materials (such as fabric) are the direct costs allocated for the production of each product unit. While variable overhead of OMR 200 is representing indirect cost associated with the production of mugs and required bedsheets units in the production sector. The cost of goods sold for twin, queen, king, and personalized mugs is cumulatively around OMR 6400 including all direct materials, director labor, variable overhead, and fixed manufacturing cost for the production of all products. Furthermore, gross profit is calculated by subtracting the cost of goods sold from sales revenue for each product. Somehow fixed manufacturing cost for bedsheets is relatively lower than the fixed manufacturing cost of personalized mugs in the houseware department. The total amount of fixed cost is subtracted from the gross profit to reach net income. Negative net income values represent a loss in business.

The following income statement is developed based on the variable costing method. In this income statement, all variable costs are calculated and used to determine the cost of goods sold.

The above presented two tables are developed to represent cost associated with the production budget and sales related information for the Muscat Traders company. These tables are based on two different methods of developing an income statement for the company (named as  Variable costing and absorption costing). In the case study, it is clearly projected that queen and twin size bedsheets have relatively higher market demand as compared to the king-size bed sheets. Market demand for twin, queen, and king size bedsheets stated in the case study.

In accordance with the following table, sales in units for twin, queen, king, and mugs are 200, 220, 180, and 2000. However, budgeted selling price taken from the case study is limited to OMR 5 for first three products including twin, queen, and king bed sheets. While selling price set for the personalized mugs is around OMR 3.95 for each unit. Considering these selling prices and production units, the total expected sales in amount for twin, queen, king, and mugs in one year duration is OMR7900. 

In the above table, the income statements are present. For creating the income statement the sales budget, production budget, and cost of goods sold budget is created. Both absorption income statements and variable income statements are presented above in the tables. It is recommended to the corporation to reduce its expenses so that the profit of the business can increase. With the help of a lean manufacturing technique, the organization cannot only reduce its waste but also can produce goods in limited resources. The organization should implement a lean manufacturing approach (Mulford & Comiskey, 2011).

c)      The decision to reduce the selling price

The decision to reduce the selling price will not be favourable because if the organization is going to reduce its price than it might unable to cover its expenses. If the corporation is going to decrease its price than the overall revenue which the corporation generates also decreases which will ultimately decrease the profit of the corporation. If the corporation wants to reduce the price of the products then it will have to reduce its expenses up to a lot of extents. Only then the corporation can reduce its price. However, it has been seen that the number of customers increases when the price of the products decreases (Campbel, et al., 2011).

d) The decision to reduce the selling price is favourable or unfavourable

In the above-presented income statement tables, (absorption costing based income statement and variable costing based income statement)  net profit is already negative which indicate insufficient revenue to cover up all cost and expense linked with the business operations including production and marketing related cost. Therefore, if the Company plans to decrease their selling price for all products (including twin bedsheets, queen bedsheets, king bedsheets, and personalized mugs) then total sales revenue amount will be decreased. Decreasing revenue amount will increase net loss for the company unless the company implement some cost control strategies to minimize cost and expenses.

Part: 4

a)      Summary Report of Production process and procedures of the organization:

Decision: 1

Ahmed Ali presented the idea to implement lean management in the production sector instead of implementing BPR. His decision was right as the company was not ready for BPR implementation, therefore, implementing lean management system in all procedures and production sector could benefit the company in reducing cost.

Decision: 2

Ahmed Ali took this decision because of the limitation of raw materials available to produce bedsheets and market demand for these various bedsheet sizes. His decision was valid because the company could not produce an equal number of bedsheets if demand for these bedsheets is different. Higher demand needs a higher supply of bedsheets.

Decision: 3

Ahmed Ali decision was wrong to reduce selling prices as it can lead to net loss.

b)     Recommendations of Production process and procedures of the organization

It is recommended to the corporation to reduce its expenses so that the profit of the business can increase. With the help of a lean manufacturing technique, the organization cannot only reduce its waste but also can produce goods in limited resources. The organization should implement a lean manufacturing approach. Along with this, the corporation can take the help of the latest software and technologies available that assist the production process. It is important for the businesses to maintain high efficiency so that company can achieve the goals which it wants to achieve (Warren, et al., 2016).

Conclusion of Production process and procedures of the organization

If the all above discussion is summarized than it is evident that the business should produce bed sheets by keeping the demand of the bedsheets in mind. Through this approach not only the business will be able to meet the demand but also the corporation will not have to keep excess inventory. The business can manage production with lean manufacturing approaches. The lean approaches allow the business to continuously improve their production process. It is suggested to the business to reduce its costs so that the profit of the business can increase. It can be seen from the production budget that bed sheets are going to be produced according to their demand. If the demand for the bed sheets is going to increase than the production of the bedsheets also going to increase as a result. It is evident from the scenario that the demand for different bed sheets are different which indicates that producing the equal number of all the bedsheets will not be a good idea if the business is going to create the equal number of bed sheets than the business might unable to meet the demand effectively. 

References of Production process and procedures of the organization

Baker, H. K. & English, P. eds., 2011. Capital Budgeting Valuation: Financial Analysis for Today's Investment Projects. illustrated ed. s.l.: John Wiley & Sons.

Campbel, D., Edgar, D. & Stonehouse, G., 2011. Business Strategy: An Introduction. s.l. Macmillan International Higher Education.

Chandra, P., 2011. Financial Management. s.l. Tata McGraw-Hill Education.

Kourdi, J., 2015. The Economist: Business Strategy 3rd edition: A guide to effective decision-making. s.l.: Profile Books.

Mulford, C. W. & Comiskey, E. E., 2011. The Financial Numbers Game: Detecting Creative Accounting Practices. s.l.: John Wiley & Sons.

Spender, J.-C., 2014. Business Strategy: Managing Uncertainty, Opportunity, and Enterprise. s.l. OUP Oxford.

Warren, C., Reeve, J. M. & Duchac, J., 2016. Financial & Managerial Accounting. s.l.: Cengage Learning.