Pembinaan Kekal Mewah Report

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BM6023 : MANAGERIAL ACCOUNTING & FINANCE

GROUP-BASED CASE STUDY: PEMBINAAN KEKAL MEWAH SDN. BHD.

PART I        EXECUTIVE SUMMARY

Pembinaan Kekal Mewah Sdn. Bhd. is company which offers a variety of services (including its subsidiaries) ranging from infrastructure construction (buildings, facilities, and roads) and production works (sandstone and granite, asphaltic and ready mix concrete). Aside the stated service, this company also involved in in research and development in regards to biochemical fields and tourism development. Our team has decided to conduct an interview with a representative of the company and we found that Pembinaan Kekal Mewah Sdn. Bhd. has been practicing several management accounting practices which are budgeting technique, job order costing, and performance measurement. Our findings include that Pembinaan Kekal Mewah Sdn Bhd (Kekal Mewah) prepares a budget plan that worked as         their main reference to acquire and handle resources for a specified time period, in order to drive their business to the right direction. Pembinaan Kekal Mewah Sdn. Bhd. also used job order costing to calculate the cost for each maintenance work scope. This technique helps to calculate the cost for materials,         labor and overhead for a specific job, in particularly road maintenance work. Furthermore, Pembinaan Kekal Mewah Sdn. Bhd. applies the performance measurement to calculate the discrepancies between the budgeted plans versus the actual results of surveillance work, routine maintenance and periodic maintenance. All these management accounting techniques practiced by Pembinaan Kekal Mewah Sdn. Bhd. are helping the company to manage their profits and costs properly and at the         same time to minimize deviances.

PART II        PEMBINAAN KEKAL MEWAH SDN. BHD.

        PART II (a)        INTRODUCTION

        Pembinaan Kekal Mewah Sdn. Bhd. was established in 1986 and it has been involved in         business activities including infrastructure and production works. This company is         located at the Sedco Industrial Estate (Off Jalan Lintas) in Kota Kinabalu, Sabah.

        So far, Pembinaan Kekal Mewah Sdn. Bhd. has been directly involved majorly in road         maintenance works. Other activities such as housing development and building         construction are conducted by the company’s subsidiaries. Among the projects are the         construction and completion of SMK Agama in Kota Belud, Sabah; the construction and         completion of RC Superstructure and Architect Works to Universiti Malaysia Sabah         (UMS) Mosque, Sabah; the construction and completion of 300 units of teacher’s         quarters with related facilities at Bukit Padang, Sabah; the upgrading and         maintenance         of municipal and district council for non-qualified and qualified road in the state of         Sabah; and so on.

        In 2005, the company has expanded its business into hotel industries as well as         agricultural palm oil (Dumpas Palm Oil Mill) through its subsidiaries. In addition to that,         the company also invested in research and development in regards to biochemical fields         and tourism development. Besides these, Pembinaan Kekal Mewah Sdn. Bhd. also         involved in several other activities such as Engineering Survey; Production of sandstone         and granite, asphaltic, and ready mix         concrete; Quality Assurance Service; and Support         Activities which include Fleet Management, Information Technology, and Training for         in-house staff as well as external trainees.

        Datuk Robert Tan is the CEO of Pembinaan Kekal Mewah Sdn. Bhd. and he is in the         Board of Directors as well alongside Mr. William Tan. Datuk Robert Tan was a Head of         Road Maintenance Unit for the State of Sabah before he resigned to focus more on the         private sector and he is also the principal owner of Pembinaan Kekal Mewah Sdn. Bhd.         Mr. William Tan has joined this company as a director since 1999.

        At the moment, Pembinaan Kekal Mewah Sdn. Bhd. is employing approximately 350         employees at the moment in various departments. The organizational chart of this         company is shown in the Appendix part of this report.

        PART II (b)        MANAGEMENT ACCOUNTING PRACTICES

        GENERAL INTRODUCTION OF THE 3 TECHNIQUES

        TECHNIQUE 1: BUDGETING

        Budgeting is the process of preparing a detailed statement of financial results that are         expected for a given time period in the future. Budgeting is usually prepared for short,         mid-range, longer-term time periods. A common set of time periods for budgeting might         be a month, a quarter, and a year. It should develop sets of reasonable and attainable         goals using data that need control such as sales data. Budgeting tells the employees of the         firms what their jobs are and how they are expected to perform them. Budgeting is a         necessary exercise in a business firm that should be performed in order to plan for the         present and the future.

        There are three most important types of budgeting that a business firm should practice         which is capital budgeting, operating budgeting, and cash flow budgeting. Capital         budgeting is budgeting for the large expenses in a business firm. Capital budgeting is         budgeting for the fixed assets that the firm needs to work such as plant and equipment. It         is the process of budgeting for, obtaining, expanding, and replacing fixed assets. Doing a         good job budgeting for fixed assets like buildings, equipment, tools, and other fixed         assets that last more than one year is important simply because they last a long time.