Insel case report

Topics: Strategy map, Management, Cost accounting Pages: 9 (2942 words) Published: February 9, 2014

ACC 3511
DECISION MAKING & CONTROL

CASE STUDY
INSEL INC.

SECTION: 2
INSTRUCTOR: DR. ZAMZULAILA

GROUP: 4
NO
NAME
MATRIC NO
1
FATIN ZATALINI ZULKURNAIN
1018900
2
HAJAR FARHANA AB RAHMAN
1010798
3
SITI NORTHAHIRAH MOHD PAUZI
1018094
4
SITI AISHAH ZAKARIA
0820084
5
NURUL AIN AHAMED MARZUKI
0917794

INSEL INC.

SUMMARY

Insel Inc. is one of few Malaysian manufacturing companies that marketed a wide range of electronic product from highly sophisticated integrated circuit to consumer electronic products. In 2007, it was headquartered in the Butterworth Industrial Zone, Penang with sales achievement of over RM 5.5 billion, employed over 99,000 people, and spent RM411 in research and development. In 2004, RM 2.2 billion or 39% of Insel’s net sales were from the Semiconductor Products Sector (SPS) which was headquartered in Kulim, Kedah. Semiconductor products were subject to rapid changes in technology. The Semiconductor Product Sector produced a large line of both discrete semiconductor components and integrated circuit. Because of integrated circuit provided saving space and reducing power consumption, the sales of this line reached RM 20.2 billion. Among integrated circuit manufacturers, Insel was widely known for design and process expertise and became a leader in the semicustom integrated circuit, which was increasingly popular. In, 2007, to exploit fully the growing demand for semicustom integrated circuit, Insel organized the Motorised Integrated Circuit (MIC) Division as part of SPS and it occupied Insel’s Gurun facility. There are seven departments in MIC Division, which are Product Engineering, Production Planning, Marketing, New Product Development, Quality Assurance, Manufacturing, and Financial Controller. This division used standard and variance costing system, and there were 29 cost centres in its factory design.

QUESTION 1
List four (4) major problems that Insel Inc.’s MIC Division is currently facing. Based on these problems, describe the major issue in the case. Be as explicit as possible.

The major problems that Insel’s Inc.’s MIC Division is currently facing are extensive recordkeeping, surplus of stock, obsolescence of standard costing, and lack in timeliness of report. Based on these major problems, the major issue in this case is what kind of management control system would complement and guide changes taking place in the division’s operation to replace the current manufacturing and accounting system. All the problems occurred were caused by the manufacturing and accounting system they used. The first major problem that MIC Division is currently facing is the extensive recordkeeping caused by the design of factory floor. In the factory floor, machines and labours were organized along functional lines, where each machine was controlled as a part of functional group and was in close physical proximity with other machines that performed a similar function. It caused an extensive recordkeeping since the entry was made for every time the product was moved from one cost centre to another. So, a frequent physical audit was required to track and verify product amounts.

Next, the second major problem is surplus of stock which is also caused by functional design of factory. The functional design resulted in large inventories and large batch size. The large batch size resulted in work-in-process (WIP) inventories between functional stations and resulted in large finished goods inventories that were effectively produced but perhaps unwanted by the customer.

Thirdly, the major problem that can be found in Insel’s MIC Division is the obsolescence of standard costing used in factory accounting system. Because of the dynamic environment in this industry, the standard was very difficult to be determined. Besides, the steep learning curves of this dynamic environment also contributed to the rapid obsolesce of standards. Hence, the standards were...
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