Implementing Activity Based Costing In CIMIC Group: A Management Essay.

Discuss about the Strategy and Organizational Structure Implementation of Activity.

The major purpose of making this report is to provide proper acknowledgment of using management accounting tool in real life organisation. This reading is based on research journal articles which will explain importance, use and significance of management accounting tool through detailed analysis. Analysis will be based on accounting and management journal and articles. Activity based costing is to be chosen as per instructions and purpose of this study will be explained based on two research management articles.  A proper discussion will be made based on similarities and differences in findings of two research articles. It will include a recommendations and outcomes out of research findings which will justify usage of management accounting systems (tools) in Australia Company. For this purpose, an organisation will be taken as example named CIMIC Group.

Activity Base costing system succeeded in products and services. ABC view use in purchasing department. Activity Base Costing acceptable in cost calculation and managerial accounting as a very useful system. Activity Base Costing is a type of managerial accounting which define the cost of activities without the effect of other variables that result provided to management on time. It’s kind of a tool to evaluate operating cost & in result provide method of understand the underlying activities of existing cost. ABC also gives the accurate information about cost of resource demands from customers, services, individual products (Horngren, et al., 2013).

ABC is a costing system. It’s provided the detail about cost of each activity along with resource to all service and products. ABC also provides non-production cost. ABC help in management account. ABC provides more accurate information about product & service that any other system provides. Activity Base Costing defines the true cost of each product & service with accuracy. With the help of Activity Base Costing, it recognises business operations for taking decision. ABC is mostly using by manufacture company. This will help to manufacture for his business plan. From the Activity Base Costing manufacture earns more profit & defines the accuracy of investing amount & knows about the actual product cost. Activity Base Costing processes this in three steps. This can collect the data from cost of product & assemble the overhead cost. ABC couldn’t collect the data from accumulating all cost (Rajasekaran & Lalitha, 2011).

 Its transfers overhead cost from high rate to low rate. Some time it difficult to know about the actual cost of product due to some indirect cost, employee salary etc. for these types of data we unable to understand about the actual cost of product (Fisher, 2015)

Features of Activity based costing:

Financial mangers taking help of Activity Base Costing for gain more profits by knowing actual cost of product. For knowing actual product cost, we need a multiple accounting process & that can take much more time & not providing accurate data. So, we take help of Activity base Costing & provide the accurate data & that process provides the actual cost of product. This will exactly know about the profitable or unprofitable amount of nay product & manufactures taking help of these data in their business. That can be easily earning more profit. Activity Base Costing very helpful in his filed no any other system that can replace Activity Base Costing System (Fisher, 2015).

1. Activity Based Costing is a costing strategy in which all costing facts and information related to process, products and departmental data are included.
2. Use of ABC Analysis can be done to compare cost data with previous movement of cost and administrative cost flows and predetermined facts.
3. ABC analysis supports the management to enable their relevant and accurate understanding of resources and responds to different cost as per process requirements.
4.  Company can be made with the help of ABC analysis, it is moderate management tool that monitor financial statement as per growth rate of company in business benefit concern   Accounting Based Costing come after more study & research. In this system to provide accurate data this will change the face of accounting system. At that time when lack of knowledge of costing & methods this will come & change complete the face of accounting. It’s traditional way of overhead accounting.

In this research analysis based report, two research based article has been taken based on Activity based costing, which is essential to make this study more reliable and specific in the context of business operational decisions. These research journals will explain the significant use of Activity Based Costing in the business (CIMIC group).

The first journal “Accounting and Management Accounting systems” which explain the topic titles” the relationship between activities based costing, business strategy and performance in Moroccan enterprises”.  The second Journal name of Accounting and business management which depicts about Activity based costing and its strategies. The major purpose of using both research Journal as supportive article is to make proper understanding of “how Activity Based Costing” works”, “How it can be used in the business decision of the company.

The purpose of this study and using both journals is to refining more specific general approaches of defining and evaluating more exact and reliable product cost and business activity based on process. Activity based costing is accounting analysis methods which developed by Cooper and Kalpan to assign all overhead end projects, jobs and process. The use of these research journals attempt to elaborate an important topics related to activity based costing and its usage in business operations. It major aim is to justify the rectify the nature of ABC analysis and to determine the projected profit of this application to the company under research. To research perspective, now a days the light of exploring interest in the matter of benefit and of the implication of ABC systems in CIMIC Group of the company (Innes, & Mitchell, 2011)

1. Basically, it will highlight the process and concept of ABC systems in relation to know and understand the application of ABC analysis.
2. To verify the ways and benefits of implication of ABC systems in the Business operation.
3. Adoption rate of ABC systems in Australia, how it works in the different business environment of Australia.
4. How ABC strategies impacts on business decisions and usage of ABS concept impacts business performance (Gosselin, 2017)
5. How it affects the global rises of financial decisions and accounting standards in business?

From the above points, both Journals want to give proper review related to the concepts of ABC systems and its decision making process. Journal “Accounting and Management accounting” depicts the uses of ABC systems. In this research, the study concludes that if company wants to imply this systems as management tool, they will definitely lead to efficiency with two major benefits: firstly, able to develop internal management, processes and acts within the organisation and it observes the indirect and recovery cost than traditional management systems (Arora, 2013).

Explanation of purpose of both journal topics in the context of “Activity Based Costing”

Other management journal “ “Journal of accounting business and management” shows an explanation most specific and to expand the concept of ABC systems. Hence, the major motive of study such topics related to ABC systems. It explains the number of reasons also to be stated after ABC adoption. Overall research are to be and on explained topics. It will provide the number of detection of fraud and ABC Company met their requirement as per their requirements (Foster &  Swenson, 2017) “for the manufacture some product consumes the activity & activity consume the costing. This system provides directly & indirectly costs information about the product. This will automatically help in improve the process of production. These provide more advantage & benefits. So, manufacture just need to know about this system method & technique. The company must provide training about this system for his mangers &b Employee. So, they can know about this system & apply this with get much more accurate information about product costing. At the end it will directly get beneficial for taking quick decisions & process of production.

Through the above table, it is observed that both Journal have used different approaches to define importance of ABC costing but their major focus is to deliver same content and views which are related to ABC costing technique. At this time of technology will help to define this type of management model such as ABC that can explain about product actual cost. If we couldn’t get help of Activity Base Costing system then we face more problems about like huge amount data of product costing, labor charges, indirect charges. These type of data in big amount & calculate this data is very difficult to understand. If use other method or system to know about the actual cost of product then we need much longer time compare to Activity Base Costing System. ABC helps the business to do so. It’s real cost of product or not we couldn’t know but with help of Activity base Costing we much more accurate about the costing of each product (Lee, 2011).

Accuracy check of Cost behaviour:“Journal of business and management” explain that ABC model is the concept which checks the accuracy of cost behaviour and product reliability and durability. Through this Journal, it can be understood that usage of ABC model in the business help in checking accuracy behaviour, to figure out causes of treats and trace the area of costs related to managerial responsibility.

Similarities and Difference between analysis of findings:

Performance development: According to this Journal, ABC management tools improve management process which help in determining   cost, it increase the performance of the cost as per cost opportunity matters. It develops the program and development performance in order to deliver projects and output on time. It improves the managerial and financial position based on competitive era of companies (Kaplan Robert, 2012). 

Measure complexity of projects: ABC model helps in determining and measuring complexity of big projects, it helps the management of the company to evaluate business operations cost and product performance based on complex nature of the projects. ABC model use cost analysis concept in order to determine and control additional cost. This journal also explains that companies can evaluate their product transparency and reliability of project in order to make them more productive and much easier than other projects. It recognises all usual and casual relationship regarding cost driver to activities. Journal has also explained (Turney Peter & Stratton Alan. 2018).

Providing financial information: Through this Journal, we can understand that ABC model is able to explore financial and non-financial model both effectively. It helps in define accuracy and reliability of each product. It creates high benefits, which helps the companies to application of ABC model within their organisation effectively. It is based on new technology which provides transparent and effective results related to the financial business decisions (Jawahar Lal, 2016).

Activity Base Costing System provide overhead accounting data. This will help to rectify the inaccurate cost information. This is just because of we choose wrong type of method.  From the Activity Base Costing System, we redesign the structure of any product costing. We improve over decision of product price.

From this method the manufactures get benefit from known about the actual cost of product. If manufactures not use this system, then they fear about potential loss of status &manufacture always feels fear about product pricing.

Just because of the costing calculation amount is big & hard to get accurate data. In this we use ABC system & break out these barriers of fear.
For use of Activity Base Costing System, every mangers & Employee will be aware of this system & know about its technique & formulas so that they can study & collect all required data & process through ABC system (Cooper & Kaplan, 2018).

Conclusion:

Based on the study of Activity based costing, research analysis implied those methods which are related to traditional costing techniques. The use of ABC was come into light which business tried to move towards modern technology and processes, so that the ABC Model approached in order to explore business organisational business activities. This report concluded use and importance of ABC model in business decision making. It has revealed the reliability and accuracy of ABC model towards business decisions. This journal has explained about ABC model and relationship between business strategies. It helped the business and individual to understand and control cost behaviour in order to increase business benefits and productivity, similarities and differences between two research journal have been explained in this assignment which create understanding of significance of ABC model in depth.

References:

Arora. M. N., (2013) Cost Accounting. New Delhi: Vikas Publishing House Pvt Ltd.

Cooper. R. & Kaplan. R., (2018) Cost Cutting Activity. Economist, PP. 57-67.

Fisher, J. (2015) “Contingency-Based Research on Management Control Systems: Categorization by Levels of Complexity”, Journal of Accounting Literature, 14, PP. 24-53

Foster, G. & Swenson, D. W. (2017) “Measuring the Success of Activity-Based Cost Management and its Determinants”, Journal of Management Accounting Research, 9, PP. 109-141

Gosselin, M. (2017) “The effect of strategy and organizational structure on the adoption and implementation of activity-based costing”, Accounting, Organizations and Society, 22(2), PP. 105-122

Innes, J. & Mitchell, F. (2011) “Activity based costing: a survey of CIMA members”, Management Accounting, October: PP. 28-30.

Jawahar Lal. (2016) Cost Accounting, New Delhi: Tata Mcgaw-Hill Publishing.

Kaplan Robert. (2012) In Defense Of Activity – Based Cost Management,  Management Accounting, PP. 58-63.

 Lee. Y. (2011). Activity- Based Costing At Cal Electronic Circuits, Management Accounting. Oct, 36-38.

 Merz Mike & Hardy Arlen. (2013) ABC Puts Accountants On Design Team At HP. Management Accounting. Sep, PP. 22-27.

Narayanan. G. & Ratna. S. (2015) Activity Based Costing At In Steel Industries. National Bureau Of Economic Research. 

Neumann Bruce R., Gerlach James H., Moldaure Edwin., Finch Michael And Olson Christine. (2014) Cost Management Using ABC For IT Activities & Services. Management Accounting Quarterly, PP. 29-40.

Pigott , D., (2012) ABC In Apharmaceutical Company A Remedy. Management Accounting, PP. 18-21.

Rajasekaran, V., & Lalitha, R., (2011) Cost Accounting, New Delhi Dorling Kindersley (India) Pvt. Ltd

Turney Peter & Stratton Alan. (2018) Using ABC To Support Continuous Improvement. Management Accounting, PP. 46-50.