Activity Based Costing: An Effective Management Accounting Technique, Essay.

a. An explanation of the selected management accounting topic. 
b. An explanation of the purpose of the two studies and what research question(s) they set out to explore about the topic. 
c. A discussion about the similarities and differences in the findings of the two studies. 
d. Provide four (4) specific outcomes or lessons learned from the two studies’ research findings that will be useful for management accountants in Australian companies to learn from, and justify your answer.

Benefits of Activity Based Costing

The overall report work has provided for the usefulness of the management accounting technique so s to enable the organization concern to grasp the varied sets of the benefits associated with the costing. Further provided, the report has highlighted on the significant factors that are related to the Activity Based Costing so that the resources can be used in the best manner. Further provided, the report projects the purpose of such technique along with the similarities and differences. The study that is conducted will assist to have better and effective command on the overall operations. Further provided, the report has elaborated on the various outcomes that is obtained from the findings so that they can be used by the manager in making suitable decisions for the forthcoming activities. The overall report provides for the suitable and effective recommendations and suggestions that can assist the authorities to deal with the variation that can lead to the better and suitable work patterns of the company.

When conducting the operations in the dynamic environment it is essential for the company to adopt and implement such techniques that can assist them in dealing with the varied set of the variations. This will assist them in managing with the work patterns in an effective manner. In this regard, one of the effective tools of the management accounting that can be used is Activity Based Costing (Askarany and Franklin-Smith, 2014). The technique majorly focuses on the proper and suitable allocation of the resources. This fact provides a great support to the company in having and elaborated focus on the factors of cost. The concerned method in addition focuses on the proper apportionment of the factors of cost so that the working patterns of the all the departments can be identified. Further the technique supports in the authorities of the company in understanding the attributes of the product in a better manner. Further provided, the techniques support in the ascertainment of the cost drivers in relation to the activities so that to enable the authorities to ascertain the total cost incurred while conducting the operations (Askarany and Franklin-Smith, 2014).

While adopting the technique of the Activity Based Costing it is to be considered that there re series of the steps involved that needs to be conducted in systematic manner so as to attain desired outcomes. In the first step, the activities which are of the similar patterns are pooled. Then the cost associated with each activity will be computed in a proper manner. This is because to allocate the cost to the concerned activity (Askarany and Franklin-Smith, 2014). After that the rate will be computed for the drivers of activity cost. This will ensure that the resources and the factors of cost are properly allocated (Angelone, 2015). All such computation will support the administration of the company in making effective reports that can assist the parties associated in making effective judgment in relation to the future activities (Askarany and Franklin-Smith, 2014).

Steps involved in Activity Based Costing

While implementing the concept of Activity Based Costing it is essential that all the aspects associated with it are properly considered (Riediansyaf, 2014). This will assist in the authorities to get solution to the various questions that hamper working of the business concern. Further provided, the use of this technique supports in the proper alignment of the cost incurred and the budget set. This will ensure that all the activities are performed and conducted as per the set standard. After the evaluation of the various aspects associated with the Activity Based Costing system the final decision is required to be taken by the business concern (Askarany and Franklin-Smith, 2014). This will provide a significant support to the organization to attain the objectives in an effective manner.

With the adoption and implementation of the Activity Based Costing system in the work operations, the company can get the series of the benefits. With the concerned technique, the company will be able to compute the factors of cost (Riediansyaf, 2014). This in addition will assist in the computation of the price thereby leading to the better decisions related to the price. Apart from this,  the computation of the cost to differentiate between the relevant and irrelevant activities such that to eliminate them in a proper manner. The company can have effective supervision and command on all the aspects that can ensure better focus of the company on the aspects related to the expansion and diversification (Riediansyaf, 2014). This will lead to better and effective position of the company in the global market arena.

However with the understanding of the benefits the negative points that are associated with the Activity Based Costing system must be considered (Hilton & Platt 2013). The implementation of the Activity Based Costing requires a large budget on the daily basis that hampers working activities (Askarany and Franklin-Smith, 2014). The reports that are provided by the concerned technique of the management accounting do not conform to the generally accepted reports. This lead to greater understanding that further delays the decision (Riediansyaf, 2014).

As such it is suggested to the management of the business concern must focus on the positive and negative consequences in a proper manner so that effective decision can be taken leading to better position in the competitive environment of the market (Askarany and Franklin-Smith, 2014).

The selection of the two articles has been done so as to gain the better understanding of the activity based costing. Both the selected articles talks about the distinct purposes so that their analysis can be made more easy and effective (Askarany and Franklin-Smith, 2014). The first article selected determined that way through which the activity based costing is applied in the hospitality based industry. This article is written by Bas Basuki. The application of activity based costing will help in analyzing that the proper and the accurate information is gathered which in turn is very essential for organizational growth. The research question which has been highlighted in this article is related to the identification of way through which the resources of the organization will be allocated so that the effectiveness as well as the productivity within the organization can be maintained. The either purpose of the organization is to gather the useful financial data which will enable the organization to evaluate the outcomes as well as the cost in effective and appropriate manner (Askarany and Franklin-Smith, 2014). The main motive of calculating the cost is that it is necessary for evaluating the cost of divisions and the rooms in hotels as it has been observed that 80% of the revenues or the targets are achieved these sources. Here, the technique of the activity based costing will be used by organization and then individually direct as well as the indirect cost will be indentified. Then the comparison of these will be made with that which is evaluated at the initial stage. There will be the identification that the rate of cost which is evaluated will be used in the computation of cost in effective and appropriate manner (Askarany and Franklin-Smith, 2014).

Considerations for Implementing Activity Based Costing

The next article which is selected depicts about the utilization of the activity based costing so that the cost benefit analysis can be made for the organic waste composition systems (Demerjian et. al., 2012). Under this article the main objective is to identify the drawbacks which have been remained in the system. The main area which has been highlighted is related to the fact that the activity based costing is adopted in the organization so as to determine the economic viability of the compositing systems. The cost objectives that are involved can be studied through this article and with this it will also determine the relation in which the cost objects are present in cost as well as the resources pools (Riediansyaf, 2014). The main research question which has been highlighted in this article is related to the identification of composite systems that are two in number and also the factors which affects the economic viability in relation to these systems. The significance of the activity based costing is determined in the identification of cost for these systems which are being used in the organization (Riediansyaf, 2014).

The both articles which has been discuss above have been discussing about the activity based costing and importance of their application within the organization so that the profits of the organization can be achieved through their use (Askarany and Franklin-Smith, 2014). It has also made it possible to understand the concept of activity based costing in effective and accurate manner in distinct sectors so that accordingly the actions can be taken for future success and growth.

While carrying the research of both the articles it has been evaluated that there are various findings which have been observed related to the similarities as well as the differences between them (Jones et. al., 2012). This has been highlighted so that the determination cam easily is done and the actual conclusion for same can be drawn.

The similarity which has been observed in both the articles is related to the adoption of activity based costing (Askarany and Franklin-Smith, 2014). With this there is also the similarity that both the organizations are using the traditional approach of costing in order to calculate the cost at the initial stage. The identification of the advantages as well as the limitations has also been seen in both the articles so that the shortcomings in the earlier approaches can be determined. The manner in which the activity based costing may help in eliminating it is also explained in the report. The new approach to carry out the processes is determined by both the articles so that the effectiveness in the systems can be maintained. The proper steps which are being followed by the organization are also determined so that the operations of the business can go in effective and efficient manner (Askarany and Franklin-Smith, 2014). The new system adopted by both the organization has enabled them to achieve more accurate and appropriate results than the earlier one which was used. With this there is also the consideration that there is no such factor that has not been considered or ignored during the evaluation of cost under various costing processes (Riediansyaf, 2014).

Negative Consequences of Activity Based Costing

With the similarities both the articles also had some of the dissimilarities between them. In the first article the determination has been done by taking the hospitality sector while in another the determination has been done in accordance with that of the compositing systems (Tanis and Özyapici, 2012). The calculations in the first article have been done so as to determine the cost of hotel and rooms. Only one of the project has been taken into consideration and the analysis for the same has been done accordingly in relation to the data gathered (Nunez and Kalagnanam, 2012). The consideration has also been provided to all the activities which are involved so that it will enable in overcoming the issues which were presented in the earlier systems (Riediansyaf, 2014). The processes which have been applied will remain same in all the organizations and the industries. In another article, the author has talked about the compositing systems instead of the hospitality sector. Here the two compositing systems have been taken into consideration so as to evaluate the applicability of the activity based costing systems. The calculations are also shown but not with the same details as in case of the earlier one (Askarany and Franklin-Smith, 2014). The identification of cost is not one of the important or significant factors in the analysis rather than the evaluation of both the systems within the organization. The outcome which has been achieved in the first article is only achieved in respect of one factor but in this case it has been achieved in respect of both the systems (Kravet, 2014). The economic as well as the economic benefits which are been achieved have been compared with that of the plans set at the initial stage so that the variations between the actual and the planned can be evaluated and the accordingly the future actions can be taken by the organization. This factor has been ignored in the first article. In first the findings was related to the collection of the appropriate data so as to make the outcomes reliable while in another one the best system among two of them was the main motive of the analysis (Riediansyaf, 2014).

Therefore, it can be said that both the articles have used distinct sector as well as the approaches to demonstrate their findings with the main purpose of the applying the activity based costing in their operations (Askarany and Franklin-Smith, 2014).     

Two Selected Articles on Activity Based Costing

The conduct of the process of the research work has provided the authorities of the concerned company with certain outcomes (Askarany and Franklin-Smith, 2014). Such outcomes can be used by the company in dealing with varied aspects that can act as a barrier in the normal and smooth conduct of the operations (Demski, 2013). The varied sets of the outcomes that have been identified with research process are listed below.

As per the finding of the study it has been observed that the hospitality sector with the implementation of the Activity Based Costing system can get better control or command on the factors of cost (Drucker, 2012). This will in addition assist them in the elaborated decisions on the use of the resources available so that the maximum benefits can be grasped leading to the attainment of the objectives (Askarany and Franklin-Smith, 2014). Further provided the research finding elaborates that the company with the adoption and implementation of the Activity Based Costing system the company will be able to set the standards along with the suitable measures that can assist them in meeting the requirements of the standards (Weygandt et. al., 2015). The company will be able to make the calculation associated with the factors in an easy manner such that the activities can be performed in a proper manner. Besides, the company can be able to align the current as well as future activities so that to ensure effective work patterns (Riediansyaf, 2014).

Another outcome that have been observed with process of research is that the implementation of the Activity Based Costing system supports in the flexibility in the operations that leads to the proper variations in the internal operations as per the external operations (Askarany and Franklin-Smith, 2014). This will ensure easy and accurate working of the manager accountant as it will provide them with significant reports that can lead to better functioning. In addition the changes or the modifications that are required to be made within the organizations can also be attained by the proper and defective adoption of the Activity Based Costing.

The other outcome with respect to the Activity Based Costing is that there are series of the steps that needs to be focused on by the authorities of the company (Demerjian et. al., 2012)

This is mainly due to the various problems that are linked with work patterns so that to ensure that all the activities can be conducted as per the standard (Askarany and Franklin-Smith, 2014). With the Activity Based Costing system there will be two types of facts that can be grasped that involve that the Activity Based Costing system supports in the proper allocation of the resources (Lohr, 2012). This assists that the company can utilize their assets in the best possible manner. Further, it provided the proper alignment between the cost factors and the activities to be perused. This will ensure that the proper budget could be maintained (Riediansyaf, 2014).

This will facilitate the manager in making viable and accurate decisions with respect to the future activities so that the business concern can attain a viable and reliable position in the market. After all the discussion it was overviewed that the continuous supervision of the terms of the market must be done from time to time so that the variations can be analyzed that can provide the authorities with the aspects of opportunity and threats so that the working can be managed effectively (Riediansyaf, 2014). Further the company will be able to attain a suitable command on the factors of cost leading to the greater level of productivity greater level of profit margin. As such the company will be able to attain the objectives leading to a strong position in the market (Riediansyaf, 2014).

Conclusion

It can be summarized from the overall report that the activity based costing is one of the tools of accounting that is used so that the effectiveness within the premises of the organization can be maintained. The proper understanding in relation to the activity based costing has been undertaken by both the articles. The various aspects which have been involved while understanding the advantages and disadvantages through the application of activity based costing are also been undertaken. The articles have been selected through proper evaluation so that the actual outcomes of the research can be achieved. The purpose of both the articles is also determined so as to make the understanding easier. The first article has depicted about the use of the activity based costing in hospitality sector while the other one has laid the emphasis on the composite systems. The similarities and the differences between both the articles are also identified. The findings achieved from both the articles have been presented in proper and accurate manner as it will enable the top level authorities to take decisions accordingly which in turn may helps the organization in achieving goals and objectives.

References

Angelone, S. (2015) U.S. Patent No. 9,183,590. Washington, DC: U.S. Patent and Trademark Office.

Askarany, D. and Franklin-Smith, A.W., (2014) Cost Benefit Analyses of Organic Waste Composting Systems through the Lens of Time Driven Activity-Based Costing. Journal of Applied Management Accounting Research, 12(2).

Demerjian, P. R., Lev, B., Lewis, M. F., & McVay, S. E. (2012) Managerial ability and earnings quality. The Accounting Review, 88(2), pp.463-498.

Demski, J. (2013) Managerial uses of accounting information. Germany: Springer Science & Business Media.

Drucker, P. (2012) Management challenges for the 21st century. UK: Routledge.

Hilton, R. W., & Platt, D. E. (2013) Managerial accounting: creating value in a dynamic business environment. UK: McGraw-Hill Educat

Jones, T., Atkinson, H., Lorenz, A., & Harris, P. (2012) Strategic managerial accounting: hospitality, tourism & events applications. UK:  Goodfellow Publishers Limited.

Kravet, T. D. (2014) Accounting conservatism and managerial risk-taking: Corporate acquisitions. Journal of Accounting and Economics, 57(2), pp.218-240.

Lohr, M. (2012) Specificities of managerial accounting at SMEs: case studies from the German industrial sector. Journal of Small Business & Entrepreneurship, 25(1), pp.35-55.

Maher, M. W., Stickney, C. P., & Weil, R. L. (2012) Managerial accounting: An introduction to concepts, methods and uses. USA: Cengage Learning.

Nunez, M., and Kalagnanam, J. R. (2012) Managing data quality risk in accounting information systems. Information Systems Research, 23(2), pp.453-473.

Riaz, U., Murtaza, G., Saifullah, F.M. and Farooq, M., (2018) Comparable Effect of Commercial Composts on Chemical Properties of Sandy Clay Loam Soil and Accumulation of Trace Elements in Soil-Plant System. International Journal of Agriculture and Biology, 20, pp.85-92.

Riediansyaf, M.D., (2014) The Application of Time Driven Activity Based Costing In the Hospitality Industry: An Exploratory Case Study. The Journal of Applied Management Accounting Research (JAMAR), 12(1), pp.27-54.

Tanis, V.N. and Özyapici, H., (2012) The measurement and management of unused capacity in a time driven activity based costing system. Journal of Applied Management Accounting Research, 10(2), pp.43.

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015) Financial & managerial accounting. USA: John Wiley & Sons