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ACC702 Managerial Accounting Oz Assignment Help
After the clear analysis of the business environment, it can be clearly stated that the manufacturing business are getting diversified and also they are becoming vigorous in relation to the challenges faced by the organizations[ CITATION Whi09 \l 1033 ]. The increasing public demands and the need for new products and services have created a forced the banks to provide the best product and service so that the market communication requirements can be fulfilled. The banks are trying to improvise new technological methods in their managerial accounting system so that they can earn money by analyzing the population. These technological systems will not only help them to improve their skills but also they will help them to work in a much more efficient manner. The allocation of overhead cost is one of the most important functions of the managers of an organization [ CITATION Sea12 \l 1033 ]. If the overhead costs are determined only by the help of machine hours, then they will not be accurate in nature. The activity-based costing system uses various cost drivers and pools that are assigned to different activities for the ascertainment of the real cost of the product. It also helps the management of an organization to find the reasons behind the increase or decline in the cost of products. The traditional method that was used by the organizations was a little complex because of the less information provided by it [ CITATION Nwa \l 1033 ].
Activity-based costing method
This method is one of the most important costing methods that can be used as a replacement of the traditional accounting model for a precise and accurate determination of the costs of the different product. This method not only uses the machine hours to determine the cost of a particular product but it also determines various other sources of a cost that are needed to be added for determination of the actual cost of the product. Hence, the result of the cost of a particular product is more precise if calculated by using this method because various organizational activities are analyzed in order to find the actual cost of the product and the real consumption made by each activity [ CITATION Nor15 \l 1033 ]. Also, it should be clearly understood that the principle of the activity-based costing depends on assigning different rivers of costs to every product and service in order to find out its real cost value. Also, it is clearly stated that each and every good and service can be valued show that the appropriate cost of the same can be found [ CITATION Men14 \l 1033 ]. The use of activity-based costing method not only helps the organization to control the resources, but it also helps in analyzing the final outcomes. Also, when compared to the traditional conventional costing method, it has been observed that ABC allocates many other overhead costs to the direct expenses which help in the proper evaluation of the cost [ CITATION Hor12 \l 1033 ].
A person should keep in mind 5 points while analyzing the cost using the activity-based costing method [ CITATION Eas10 \l 1033 ].
• Each and every resource of the organization should be investigated so that the expenses incurred can be determined.
• Different cost pool should be assigned to the overhead cost in relation to their nature and affairs. The basic resources that are consumed by the affairs are capital, material, and energy.
• Determination of various cost drivers should be made so that and influence can be made on the expenses that have been incurred on the products and service.
• Absorption rate should be computed in order to find out the relation of overhead to each cost pool determined by the management.
• Assigning a cost to different products and services so that the actual cost of the organization for producing the product or service can be determined.
One of the major points that should be kept in mind is that the manufacturing businesses should try and adopt ABC method of Costing but other businesses should try and avoid such tool in their framework (Datar, 2015). The main reason behind this is that non-manufacturing organizations are having many intangible costs that cannot be determined because of which the objective of this method will not be fulfilled. Hence such organizations should try and adopt traditional methods of accounting that will help them to keep their framework steady. Also, it should be kept in mind that the traditional methods of accounting for framed in order to find out the costs of the restricted kind of goods. It has been observed in today's world that the indirect expenses are very less in number but still, there are many causes that are not treated in an appropriate manner because of which the task of Costing is not performed correctly (Datar, 2016).
Nowadays, the organizations have been trying to producer manufacture different type of products and service in order to expand their business. Many different types of indirect costs are been incurred by them because of which they are needed to be separated from the direct costs. The company should also try and eradicate the problems result in the decision-making structure of the organization so that it can handle the competitive structure of the environment. There are some costs which are non-volume in nature and are generally required to track related costs which can only be carried by the implementation of activity-based costing method in the managerial framework of the organization.
Characteristics of the activity-based costing method
The major objective that is fulfilled by the activity-based costing is to help the management to determine the total cost component of the product [ CITATION Boy13 \l 1033 ]. There are many causes that can remain unidentified by the organization which will reduce the price of the product thus leading the firm to earn less profit. Hence, few features of the activity-based costing method should also be followed:
• The ABC method of Costing divides the total cost of the product into two categories termed as a direct cost and indirect cost. The location of each of these costs helps the management to determine the real cost that has been incurred by the organization while manufacturing that particular product.
• This is a logical method that can be used by management to allocate the overheads. The logical reasoning of the process also helps it to make appropriate and reliable for providing information to the users.
• While analyzing the costs using ABC method, each and every cost related to the particular time period and the product is to be identified so as to find out any kind of incremental cost present in the system.
• Another important component of this method is the cost or activity drivers. The Identification of these drivers is very important for the process of allocation in a given period of time. Some of the major activity drivers are consumption of power, production orders, machine setup, etc [ CITATION Ber09 \l 1033 ].
Because of the present conditions in the environment, it is very important for the industries to try and adopt new methods that can enhance the quality of the goods and service to the organization can maintain its position in the market and therefore address all the future liabilities with ease [ CITATION Atk12 \l 1033 ]. Hence, the need for the ABC method arises as it will help the corporate to maintain constant revenues with the help of different costing methods. It will also be helping the managers in the decision making the process for the eradication of an affair that is not primarily required. However, it should also be kept in mind that the major concern of the activity-based costing system is to determine the cost of the product and not to help in the decision making the process of the organization. Therefore it can be concluded that, if the proper concentration is being given to each and every activity, the task of segregating all non-value adding items can be carried out easily.
Allocation of overhead based on activity-based costing approach
It is a very important factor that the long-term variable expenses are not recognized in relation to the cost of the product while utilizing the various volume related drivers because of the complexity and variety present in the short term variable expenses which are needed to be recognized for the determination of the costs. Some of the short-term variables are the machine hours, direct material cost, direct labour hours, etc. It should also be kept in mind that the short term variable expenses are generally changed in volume and not in variety or complications. On the other hand, the long-term variable expenses are generally not variable if there is a change in volume variety.
Differences and similarities in the articles
Importance of the activity-based costing in competitive pricing decisions
It has already been discussed about the importance of the activity-based costing system in the competitive market. Also, this report helps to analyze the effectiveness of the ABC method of costing in relation to the price setting in the competitive environment. Harry Potter also helps to understand the modern theory of accounting and role it is playing in outperforming the ineffective and inefficient traditional costing systems that are not very suitable for the decision making the process at a whole [ CITATION Alv13 \l 1033 ]. Also, it can be clearly stated that activity-based costing is one of the most innovative and fresh tools for the enhancement of the corporate and the industries as a group.
Innovation action research
After the analysis of the report, it can be stated that the activity-based costing system requires a lot of innovation activities for the survival in the competitive environment. It can also be understood as the need for a fresh system by the management in order to adopt a new view of the task carried out by the organization. A clear analysis has also been discussed in relation to the establishment of a fresh Management Accounting theory with the help of the activity-based costing method. In order to fulfil this function, it is also needed for the researcher to establish new solutions in an explicit way so that transformation of the present practices can be made for the betterment of the future. Eradication of the restrictions present in the traditional accounting systems can only be carried out by the adoption of new a concept like the activity-based costing so that new and enhanced accounting theories can be applied in the managerial framework of an organization.
Differences in the articles
Value of the activity-based costing in competitive pricing decisions
It has been clearly stated above that the activity-based costing method will impact the design of the price setting and cost system of the organization because of the competitiveness present in the market. It has also been highlighted that the alternative costing processes of setting prices in the competitive market is also significantly beneficial for the organizations. However, after a clear analysis of the activity-based costing, it can be stated that the effective costing approach can help in conducting pricing decisions and profit performance of a lead and manage organization as a whole ((Broad & Crowther, 2001). It should be clearly noticed that research has been undertaken in order to find out the benefits of these costing methods in relation to the informative response on the part of markets. In short, it can be explained as the interior value of information that is being provided to the managers in response to the competitor can stop to modify the prices on the basis of activity-based costing or not. All, it has been observed that the performance many organizations have declined because of the uninformative response from the market and participants in relation to the application of activity-based costing over the traditional costing methods (Kim, 2008).
Innovative action research
A new innovation theory has been highlighted in the report which will help us to get familiar to the modern accounting theory is like activity-based costing. A proper analysis has also been depicted in the report which will help us to analyze if the market conditions will allow the target audience of scholars and practitioners to adopt the new accounting methods. It can also be stated that with the help of new and innovative action Research and performances of the organization the managerial framework of the organization can be improved thus helping the organization to improvise the revenue. Many loopholes can also be terminated with the help of these accounting Principles and methods.
Usefulness to the banks
One of the most important objectives of the bank nowadays has been to collect information and manage portfolios of different products and customers in the most cost-effective manner. The bank can only determine its profit after allocating all the costs accurately to the products and services that have been provided by it to the customers. Most of the banks and Financial Institutions have tried to implement new types of cost assignment methods which will help them to reduce the complexity of the activities carried out by them by using minimum resources.
The activity-based costing method not only helps to allocate different overhead expenses but it also helps to identify the labour costs of specific activities which will be very profitable for the organization to determine the cost in the most effective manner. One of the most important duties of the organization is to calculate all the overhead expenses and then determine the cost of the product so that the trade can be made successful for both the customer and the organization. The figures achieved using this method to calculate the cost helps in fulfilling the strategic objectives.
It has been observed that one of the largest banking institutions of the United States have implemented the use of activity-based costing in its managerial Framework so that improvement can be made in the collection of data. This method has not only helped the Bankers to conduct banking operations but it has also had them to experience a new aspect of the sector as well.
Many new banking institutions have entered the banking industry which has made it important for the sector to introduce new costing methods for that the level of competition can be achieved. the application of these new methods of Costing will not only help the organizations to improvise their managerial functions but will also help them to make successful decisions which will further be profitable to the shareholder's interest and the company at the same time. The use of this method also helps the organization to find the products which are attractive to customers. Therefore, the activity-based costing system will help the bank managers in order to understand the demand of customers and those improve the decision-making process for the profitability of the organization.
The application of the new accounting software in the banking institutions will also help to conduct small-scale businesses which will be known as Fresh books. It is already having more than 5 million users globally and is fulfilling the major objective of tracking and invoicing of various type of information. In the previous years, it has been observed that a lot of upgrades are being made in the accounting software’s but the old and classic features are still intact. Mobile applications have also been launched by the bankers in order to provide the customers with the best possible service. Direct payment facilities are also being provided by the banking institutions.
The article clearly determined the relation presents between the pricing decisions and the activity-based costing method in today's competitive market. Data have also been provided in order to reflect the inefficiency of the traditional and contemporary costing methods that are being used by the organizations in the current market conditions. Disclosures have also been made in relation to the situation where the application of activity-based costing method was not useful to the organizations. However, the application of this method will help to diagnose solutions for the organization and also it may help to determine the reasons for losses that are being faced by the organization in the previous years.
Also, it should be noted that the innovative action research helps to find the drawback of the traditional accounting methods and also how the ABC method has outperformed all these drawbacks. The new ideology that is to be practiced by the organizations has also been mentioned which will allow them to efficiently adapt the new costing methods in the organization. Overall it can be stated that the application of these new costing methods will not only help the firm to improve its managerial framework but also will help the company to improve the financial performance at a whole.
After the clear analysis of the above report, it can be clearly stated that the activity-based costing is one of the most appropriate and effective tools that can be utilized in this competitive environment to outperform the inefficiencies of the traditional costing methods. This method is not only useful in the allocation of overhead cost but also it helps the organization in conducting decision making processes. It should also be kept in mind that this method is only useful for manufacturing organizations as they are having tangible expenses which can be measured in monetary terms. Whereas other organization should stick to the traditional accounting because of the intangible expenses present in their day to day framework. Various deficiencies have also been presented by the Industrialists for the application of activity-based costing in the managerial framework. However, it will be of the best of concern for the organization if it will implement the use of activity-based costing in its framework.
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