Sub system significance

TrailLite has a good cost sub system to run their business efficiently. Their cost
information is used for Sean, Jenny and Carolyn (management) to ensure accurate
quotes are made in the future this gives then feed forward and information for the
budgeting of jobs and profit. Owners and Managers also use it to see where their profits
are being made as profits are constantly checked upon completion of the motor homes.
The Financial Manager Carolyn needs information to construct the cash budget and can
see if costs need to be adjusted. If costs exceed what is expected she does this by
reviewing all budgets over 8 weekly figures. Sean the Production Manager needs
feedback from the subsystem to see if the factory is working well and giving positive
feedback to the workers that can earn a bonus from him. The customers get a quote
ensuring the cost and reliability of the job. All this systems work together in TrailLite to
make it run efficiently and to the best it can.

Recovery Rate and indirect discussion

At TrailLight they know exactly how many motorhomes they are going to make 15 months
in advance so they know exactly how much they make each year. Their recovery rate is
the total overheads over the motor homes. Since TrialLight knows what their recovery rate
is going to be each year it is easy for TrailLight to budget every 8 weeks. It is also easy
for TrailLight to budget because they do the same labour, materials and overheads,
customers see this as being treated fairly so if TrailLight staff worked over the hours to
work on a motorhome the customer will not be charged for more labour. TrailLight try to
stick to the quote hours for each job so they don’t lose money on the job. For example
TrailLight did not budget right on labour cost as it was $3000 under budgeted this could
have been because the factory employees took to long making the motor home.

TrailLight use total overheads to calculate their recovery rate such as production, training,
cleaning etc which for example is indirect costs, indirect costs are costs that cannot be
traced to a motorhome and they contribute to making a product or service. They use this
as the recovery rate so they allow for it in the quote to the customer for every
motorhome . We cannot trace overheads to a specific motorhome for example as a
formula is worked out such as occupancy cost to charge to each motorhome made.

Occupancy costs eg (rates, Insurance, electricity) at TrailLight is 60: 20 :20, this is the
formula they use to work out the amount to charge out for each department eg
production would be 60%, sales 20%, repairs 20% of all costs. They put this amount
onto each motorhome to cover for the occupancy costs of each motor home to make
sure they make back the costs and can make a profit for each motorhome. If they do not
cover indirect costs and overheads it could effect the sustainability of the business. This
matters to TrailLight as they know 15 months in advance how many overheads they are
going to make and how much they need to recover. If they did not recover it will cost
taillight.

Over head recovery rate example: indirect labour - $ 320000, indirect materials - $
288000, other indirect costs - $160000 = $768000 divide by motorhomes 72 = $ 10,666 is
your overhead revery rate

Issue of materials

At TrailLight every motor home is charged with the materials to complete the motorhome
eg steering wheel, battery etc.

As they make each new motorhome they will need the stock, they will go to the
warehouse Manger and order the parts the Warehouse Manger will then log the part in the
system SAP as taken and get the part from the warehouse to use for the motorhome .
Sean will investigate the stock taken from the warehouse by doing a stocktake to check
that all the parts taken for each motorhome are correct he does this by using the system
SAP to make sure the employee and the manager have put the correct figures in the
system. The Warehouse manager is there for security so no-one can take materials out
as they please.

Internal control

Physical

Labour and materials are recorded in the system SAP so employees in the factory have
the jobs ready and the time allowed for each job to complete this stops employees
messing around and Sean can oversee jobs are getting completed.

No one can get goods out from the warehouse as there is a Manager and systems in
place to take out stock to prevent theft and errors and lost stock. The warehouse
environment is open so that every employee is in the line of sight so Sean can see
everyone is doing their job.

Non Physical

TrialLight does a spot check and a stock take every two weeks to check there is no lost
stock.

The stocktake is when TrialLight counts all stock and checks against SAP the computer
system that both figures match, this is to ensure to pick up any errors and who took out
what materials for which job.

Job summary sheet

Trail light keeps tracks of costs for each job for example for job 34 is recorded in SAP
under invoice of job 34. This helps Sean see all labour and materials and see the job
summary. For example in job 34 the materials estimated cost was $288000 and the
material actual costs was $ 289500 this means the materials cost more than Sean
expected but he was able to see this by looking at the job summary sheet. A reason why
the materials might have been more because of the exchange rate.

Recording labour / materials

At TrailLite they record their labour by which each worker they will log in the computer
system their details, what time they start finish and what Job they are on this also will
record their down time such as leadership, lunch, training and cleaning. Since its all in the
computer system SAP it can be easily accessible to Sean anytime to see employees are
working correctly as he does spot checks . The Labour charge rate is charged against
each job for example job 34/18 actual labour cost was $73000.

They record their materials by every job charged core materials as they are issued from the
warehouse, they also record the materials and compare them to the system Able as the
Warehouse Manager can put it against the job eg job 34. No workers can get the
materials from the warehouse, TrailLight does this for more efficient and safer process.

Understanding of pre sold homes

Customers who want a motorhome have a 15 month lead time and are not told the final
fixed price and given a quote until after the 15 months . This quote will not change
through out the process of the build. TrailLight does this as its fair to the customers as if
errors happen in the build they are not charged extra costs but charged to TrailLight. Its
good for TrailLight as they know they have covered their cost for the year and they have
preorders in motorhomes. The client pays a deposit for each stage of the motorhome
build 10k deposit, 30k for chassis upon commence of build, full payment upon
completion.

Extra

Trail light has happy staff and good work environment, by having booked out motor
homes of 15 months in advance they have a good reputation from customers. Trail light
use a subsystem called SAP prepared by oxygen to meet all there needs. The Subsystem
reports everything from the warehouse to the vehicles.

Jordyn clarkson