ACC/ACF2200 Introduction to Management Accounting 2017-S1 Assignment 1 Ocha Limited It is a typical...

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ACC/ACF2200 Introduction to Management Accounting 2017-S1 Assignment 1 Ocha Limited It is a typical winter’s day in Melbourne. In his river view office, Tomohiro Hasegawa, CEO of Ocha Ltd, is having a sip of his tea while reading the quarterly financial report of the company. As usual, Tomohiro enjoys the indulgence of his favourite drink. Indeed, the love of tea is the very reason that the fo
	
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2017- S1 Assignment

Ocha Limited

It is a typical winter’s day in Melbourne. In his river view office, Tomohiro Hasegawa, CEO 
of Ocha Ltd, is having a sip of his tea while reading the 
quarterly financial report of the company. As usual,  
Tomohiro enjoys the indulgence of his favourite drink.  
Indeed, the love of tea is the very reason that the former  
Professor of Marketing gave up his six-figure job to start his  
own business in 1995. 
 
With a humble beginning at the granny flat in the backyard of Tomohiro’s Wantirna South   
house,   Ocha Limited emerged   as   a   major manufacturer of tea-based drinks and desserts in 
Australia. Tomohiro’s vision is to establish the company as a premier brand in the Australian 
tea-based product market. The company produces and sells iced tea drinks, tea-flavoured ice 
cream and tea-flavoured confectioneries. 
 
The market faced by Ocha Limited is dynamic and highly competitive. Driven by growing 
interest in healthy ready-to-drink beverages and the increasing health consciousness among 
baby boomers and younger adults, Ocha Limited enjoyed a fourfold increase in sales between 
2011 and 2016. However, the company faces fierce competition from new local and 
international competitors for retail shelf space in supermarkets and other retail outlets. Ocha 
Limited’s competitors offer fast delivery from local production centres and/or lower prices in 
their bid for shelf space. Without sustaining its hardly earned share of shelf space in retail 
outlets, Ocha Limited cannot maintain its momentum. 
 
To tackle the challenges posed by its competitors, Ocha Limited places a strong emphasis 
on research and development. The company has a 15-person research team in its headquarters. 
The research team maintains close working relationships with CSIRO Food and Nutritional 
Sciences and the University of Melbourne and has a good track record in developing successful...

Robert · Accepted Answer

Running Head: OCHA LIMITED ANALYSIS 1
Assignment Title 
Student Name 
Course Name 
Instructor Name 
Date
OCHA LIMITED ANALYSIS 2 
Importance of Cost Classification 
Classification of costs is essential in any business as it forms the fundamentals of 
planning and budgeting for the future. It will indicate what the direct costs associated with each 
product and what are the costs that are indirectly associated with each of the product produced by 
Ocha Limited (Lodha, n.d.). Indirect costs that cannot be directly allocated to the product as they 
require appropriate cost drivers to determine them. Some costs are variable, semi-variable and 
fixed in nature and it is essential to identify them accurately so that Ocha can form strategies that 
can reduce the overall costs and improve profitability (Lodha, n.d.).  
It will indicate Ocha which product they should produce more and market more to 
improve the profitability. It will guide Ocha about those activities that are consuming more costs 
and forming strategies that will enable them in improving their bottom line (ICMAI, n.d.). It will 
provide a clear picture of the performance of the company and will provide an opportunity to 
improve their overall efficiency and forming a realistic and strategic budget (ICMAI, n.d.). It 
will result in Ocha to make a strategic decision about their future business expansion that will 
improve their financial performance.  
Costing Techniques 
Costs are classified as direct and indirect costs as the primary classification. Direct costs 
are attributed to the products directly, and they are easily identifiable, but indirect costs are not 
directly attributable to the products (In Epstein & In Lee, 2014). But every product has their 
indirect cost component in their total costs. For Ocha that has more products should make use of 
Activity Based Costing popularly known as ABC method. It is the proposed method.  
Using ABC method, Ocha will first determine all the indirect costs/ overhead costs of the 
business (In Epstein & In Lee, 2014). Secondly, Ocha will determine the cost drivers for 
OCHA LIMITED ANALYSIS 3 
respective costs and finally, the measures based on which costs are allocated. Following table 
indicates how various indirect costs are allocated to the Ocha’s product.
 Iced Tea Drinks Tea-Flavored Ice 
cream 
Tea-flavored 
confectioneries.

ACC/ACF2200 Introduction to Management Accounting 2017-S1 Assignment 1 Ocha Limited It is a typical winter’s day in Melbourne. In his river view office, Tomohiro Hasegawa, CEO of Ocha Ltd, is having a...

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