Main Menu

My Account
Online Free Samples
   Free sample   Management accounting assignment issue with existing budgeting process of amcor

Management Accounting Assignment: Issue With Existing Budgeting Process Of AMCOR


Task: Amcor is a global leader in responsible global packaging solutions supplying a broad range of rigid & flexible packaging products. It is a large company, with revenues of US$9.5 billion, 27 200 employees, 66 000 shareholders and 180+ sites in 43 countries. Amcor's history dates back to the 1860s when Samuel Ramsden arrived in Australia to seek his fortune in a new land. He established Victoria's first paper mill on the banks of the Yarra River in Melbourne. For most of its life this operation was known as Australian Paper Manufacturers. In the 1970s and 1980s the company added a range of diverse packaging interests to its traditional papermaking activities and in 1986 changed its name to Amcor Ltd. Amcor now serves markets around the globe by pursuing profitable organic growth, strategic acquisitions and divestments and the provision of packaging solutions in Australia, Europe, Latin America, Switzerland and the United States of America.

Amcor’s is world’s largest producer of Polyethylene terephthalate (PET) bottles (such as those used by Coca and many other household and industrial products). Other packaging products produced include materials for industrial applications such as aerospace, agriculture, automotive, energy and insulation. Amcor also manufactures flexible and rigid packaging for food, household items, personal and homecare products, tobacco products, beverages, hospital sterilisation units, medical devices, and pharmaceuticals. They also provide services in packaging design, materials, testing and recycling. Amcor is currently structured into three business groups namely, Flexible Packaging, Rigid Plastics and Tobacco and Specialty Packaging.

Amcor’s main competitors are Ball Corp, Mondi PLC, Sealed Air Corp, UPM Kymmene OYJ and Weyerhaeuser Co. Amcor is committed to light weight packaging innovations which save thousands of tonnes of the earth’s resources and reduce CO2 emissions through lower raw materials usage and reduced fuel consumption for the transport of its products. Efficient use of raw materials reduces the volume of material that needs to be managed through recycling programs and reduces the quantity of packaging material sent to landfill. Amcor works strategically with partners throughout their entire value chain, and is thus able to unlock powerful social, environmental and economic opportunities throughout a product’s entire life cycle. For example,

Amcor’s rigid plastic bottle value chain starts with packaging planning and design, raw material (plastic resins) purchase, manufacture and transport, conversion of raw materials into rigid plastic packaging, establishing targets to reduce waste to landfill, greenhouse gas emissions and municipal water use, and delivery to customers’ manufacturing sites for use in packaging their products. The packaged products are then transported through an often-complicated supply chain for ultimate display and sale by retailers around the world. At the end of the product life cycle packaging can still add value, as a result of sophisticated re-cycling and energy recovery processes.

Issues: Budgetary control systems dilemma
Sue was learning more about the organisation every day. Her immediate boss was the Chief Financial Officer, Nick Rafter, who organised a meeting with her. As Sue had a background in Management Accounting, the CFO felt it was in her best interest to learn the budgetary process within the organisation. He was one among the many CFOs across Amcor’s global manufacturing plants. He was the CFO of the Australian business and had the following to say:

“In Australia, we operate over 50 packaging and recycling sites in all States and Territories and are a leading manufacturer of fibre, metal, flexible plastic and glass packaging with annual sales of around A $1.9 billion. Amcor Paper is a leading producer of recycled paper, brown liners and fluting grades for the Australian and Asian markets. With the commissioning of a new Paper Machine at our Botany site (NSW), Amcor Paper will increase efficacy and capacity to suit Amcor’s internal and external requirements. As a leading packaging supplier to food, beverage and industrial manufacturers in Australia and New Zealand, Amcor Corrugated Packaging offers a full service, from design and testing through to automation and supply chain integration. Amcor Carton board supplies carton board from its Petrie Mill in Queensland, the only carton board mill in Australia, to packaging manufacturers across Australia and New Zealand. With eight plants across Australia and New Zealand, Amcor Folding Cartons has the widest geographical coverage of any carton manufacturer in the region.”

He paused and then said to Sue,
“I can carry on about the Australian operations, but my immediate problem is the annual budget process. It is a daunting task to bring together the budget for the 50 packaging and recycling sites across Australia.”

He continued
“We have to identify responsibility centres and it is often confusing to separate out cost centres, revenue centres, profit centres and investment centres. What we would like to do is to have operating budgets across the 50 sites and have a consolidated set of financial budgets for the whole Australian operation.”

At this point Sue interrupted Nick and asked him about the current budgeting process; Nick explained how each site prepares its own operating budget which is coordinated at the head office.

Nick said:“Each manager prepares the budget for his responsibility centre within each site, but they don’t seem to get it right. There seems to be a lot of toing and froing (moving back and forth) after preparing the initial estimates.

He closed by saying:
“Surely there must be a better way of doing this. What are your ideas about these issues”?

Examine and evaluate each of the following FOUR issues and write responses to each of them in your own words.

5 marks for each issue.
Issue 1 Explain to Nick how the budgeting process at AMCOR can be used to achieve financial accountability within a responsibility framework.

Issue 2 Explain to Nick how budgets can become more meaningful to the managers when they reflect the strategic plan of the organisation.
Issue 3 Describe to Nick, with examples, how participative budgeting can give employees the feeling that ‘this is my budget’, rather than the feeling that ‘this is the budget you can impose on me’.


The issue that is considered problematic by Nick (the CFO) with the existing budgeting process is that the managers are not being able to prepare precise budgets for their respective responsibility centres. For every responsibility centre created, the company appoints a manager and that manager prepares a budget for that particular responsibility centre. But the problem is that there are major deviations in while executing the respective budgets. Also, the company faces problem in separating the cost centres, profits centres, investment centres and revenue centres amongst the responsibility centres created. The budgeting process of AMCOR can be used in achieving financial accountability by keeping in mind the following points:

• The managers of their designated responsibility centres should be given due powers to control and implement the activities that have been laid down to accomplish a budget. By comparing the budgeted financial performance with the actual performance achieved, the managers can sustain in evaluating the financial performance of their responsibility centres. This shall create financial accountability in every responsibility centre. The results should be analysed and deviations from budgets should be discussed.

• Another manner of creating financial accountability is through the desired use of financial reporting. This means that financial reporting should be such that it depicts the utilisation of financial resources and also ensures that the resources are used only to the extent that they have been budgeted and allocated. For achieving this target, the accounting systems& financial tools can be used as a tool to monitor the actual financial results and compare them with the budgeted results. This can be done at every responsibility centre and the managers or the administrators can be held financially accountable in case the budgets are not met. This may also be termed as budgetary integration.

In big organizations, there are various departments which require funds for functioning. The company uses budgeting as a tool to decide and allocate funds to each department. Budgets are the financial plans that are prepared to allocate the resources to the requisite needs of an organisation. While preparing a plan in an organisation or while setting up financial goals, a budget is the primary step of the planning process. Hence of the budget is prepared strategically, it becomes helpful for the managers in various aspects like:

• The budget helps the managers to make better predictions about the future activities as once they are aware of the deviations that can occur from the actual results, it can help the managers in better forecasting the next time they prepare budgets.

• When there is a set budget, the managers and the other co-workers know what is expected to be achieved and hence there is a probable goal in mind. This helps them to stay focussed towards their goals.
• Properly planned budgets help the managers of different levels and different departments to communicate with each other as there is a defined goal and defined financial plan. Properly drafted budgets help in proper communication between the departments.
• The managers can keep track of the performance of the subordinates through monitoring the work done by the subordinates and checking whether or not they are in conjunction with the budgeted steps.

Issue- 3
Participative budgeting is when the lower level and the middle-level managers are also involved while preparing the budgets. The Company top level makes strategies and goals which are executed by the Middle level and low-Level departments. At times the Strategies and Goals can be too easy to achieve or unachievable and has to be reset as per Economic & Company surroundings& situations. The Managers are ones who take instructions from Top Level and get it done from the Lower staff. Managers are the voice between the Top & Lower Level. The managers and the employees should be part of Budgeting activity and should bring up issues and its solutions to the management. The employees get motivated if they are heard and this brings out their best productivity. The management should suitably reward every productive idea of the employees. When the budget meets the actual goals, the employees feel motivated as they were a part of the decision making process. Further, the employees being a part of the budget decision making process know the overall process and the ultimate goal of the budget, so it becomes easy for them to follow the overall process of budget to match the actual outcomes with the budget. Hence, there lies a lesser scope of miscommunication about the goals to be achieved.

For Example:We take an example of Manufacturing unit, In a factory, if a process is done in 60 minutes and requires designated funds and efforts as finalised and decided by the Top-level, due to participative efforts and dialogue among employees and management the company can reduce time and do cost-cutting by the cutting down the non-value-adding activities.

The company should first decide the funds required at each centre and its justification from the centre head. The company should then sit down and decide the budget requirements, challenges, availability and allocations. The company should then make every centre head given their budget allocations with the expectations and results desired. The company can set deviation levels of let say 2-3% in case a centre misses its allocations and utilisations targets. The company should compare the centre results and then bring out the results and suitably reward the centres having targets achieved and discuss the matter with centres who have missed the targets.

This way the company can get its targets achieved and the head office should have a close look at the operations at centres that miss their targets. The focus can be shifted to them to see the problems faced by non-performing centres. The budget allocations can always be adjusted as per the needs and situation arising. The company can discuss with centre heads who are the responsibility centres. The company will require the Budgeting to be error-free and yet flexible enough to accommodate slight changes if any. The current practice of centres setting their budgets is not correct as it is not discussed within the company. This creates wastages and increases Losses within the company. Hence we suggest that there should participative budgeting within the company where every employee can put up his views in front of company.

Tags: amcor acc5mcr

Related Samples

Question Bank

Looking for Your Assignment?

Search Assignment
Plagiarism free Assignment









9/1 Pacific Highway, North Sydney, NSW, 2060
1 Vista Montana, San Jose, CA, 95134