ACCT618 Managerial Accounting
You are to choose one management accounting topic from the list below for this assignment
Select one topic only:
- Activity-based costing (ABC)
- Standard Costing
Select two research-based journal articles relating to your selected topic in (1). The journal articles need to study a real-life organisation (in any country), and its use of the management accounting tool related to your topic.
You are required to prepare a report about your findings from the literature research, and discuss how it has helped your understanding of your chosen topic.
Managerial costing is an accounting process that considers the aspects of cost of a business. It also reflects the way it is used by the businesses in decision making process. These processes are undertaken by the management which helps them to make decisions to undertake many vast related decisions in management. The accounting process is closely related to cost accounting process(Akinyomi ,2014). Its main functions is to measure, classify , analyse and communicate information to the business managers. These processes are undertaken by the management so that appropriate decisions can be taken for the organisation. This report will concentrate on the method of activity based costing . This can be implemented as a costing method to a business for the purposed of reporting information that is vital to any organisation. The first part would provide a basic idea of the activity based costing . Then it needs to be applied for the same in a business organisation(Tsai et al., 2014).
The assessment will also be analysing two articles which are related to activity based costing practices in an establishment. These journals will shed light on the application of activity based costing in an organisation. It will also illustrate how the same can be useful in a business practice. Apart from this, a section of the report will portray similarities and differences . These similarities and differences will focus on the two journal papers which have been taken as per the requirements of the assignment. The assessment will conclude after showing the benefits that can be achieved if the management team achieves activity based costing.
Introduction to activity based costing
Activity based costing is a procedure by which an organisation can assign costs in relation to different activities of a business.It is a new and modern method of costing that categorises the actions of an organisation. After such claasification has been done, it then assigns the cost of each activity with respect to all the products and services that fit the pattern of consumptionin relation to each activity. This costing method apportions more indirect cost into direct costs when compared with that of conventional costing. It is essentially a method of accounting which identifies the activities that a firm executes. After such identification, it then allocates indirect costs to cost objects(Monroy, Nasiri & Peláez,2014).
If a company undertakes activity based costing , it can thoroughly evaluate the cost elements of entire products, activities and services. Thiis will provide a great decision making tool to help inform a company’s decisions to either:
- Classify and exclude unprofitable products and services
- Identify and eliminate ineffective production or service proceses .Next assign processing perceptions that lead a better yield on the same product.
In a business organisations, the ABC costing allocates the resource costs of an organisation. It allocates these costs through product activities and services that are delivered to the customers. It is a decision making tool that best understands profitability ,product cost and customer cost on the basis of performing processes. ABC has been mainly used to support decisions of a strategic nature. These strategic decisions relate to pricing, outsourcing and the measurement of initiatives that involve improvement of process initiatives. (Siguenza-Guzman et al., 2014).