Implementation of ABC Costing Model in Woolworths

Running head: ABC COSTING IMPLEMENTATION
ABC Costing Implementation
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1ABC COSTING IMPLEMENTATION
Table of Contents
1. Introduction..................................................................................................................................2
2. Alignment of ABC Model...........................................................................................................2
2.1. Mission & Objective of the Company..................................................................................3
2.2. Woolworths Corporate Strategy...........................................................................................4
2.3. Role of ABC Model in Woolworths.....................................................................................5
3. Implementation of ABC Model in Woolworths..........................................................................6
4. Suitable Management Accounting Tool for Woolworths Besides ABC model..........................7
5. Conclusion...................................................................................................................................8
References........................................................................................................................................9

2ABC COSTING IMPLEMENTATION
1. Introduction
The Activity Based Costing (ABC) model could be considered as an accountancy method
that can accurately attribute each and every cost which an organization incurs during its
operations. It defines the relationship among the resources that are consumed during the
operation of various business unit of a particular company (Allain and Laurin 2018). This
method simply improves the product costing by making it much more accurate then it was. This
method also helps the managers of the organization to understand their costs and act accordingly.
In other words, it provides the managers with competitive edge while making business strategies.
Hence, when an organization lags behind, then this method supports the decision makers when
needed.
This paper will highlight the position of Woolworths Pty Ltd, which is a respected brand
in Australia within retail business that offers quality clothing, beauty products as well as
homeware goods. Moreover, it also in partnership with Asba Bank provides financial services.
Woolworths Pty Ltd is headquartered in Australia and is listed under Australian Stock Exchange
(ASX) (Alles 2015). Hence, Woolworths with some diverse business operations have various
indirect cost which it need to ascertain and this nature of business provides a room for activity-
based costing to identify the various costs accurately.
2. Alignment of ABC Model
Understanding the various costs incurred by the business and the drivers of the same is
desired by the organizations. However, a catch remains when it comes to the method for
assessment of the costs incurred by various operations within the business. Without a perfect

3ABC COSTING IMPLEMENTATION
method it becomes difficult for the organization or its managers to keep the track of the various
indirect costs which the organization incurs (Angelopoulos and Pollalis 2017).
The activity-based costing model has been adopted by numerous firms around the globe
and hence it has been considered as one of the prominent accosting techniques among the
managements across the globe. Though it is used within many organizations but the primary use
of this technique is within the business with various operational unit which deals in range of
products and service. In a firm with various range of product, it is difficult to identify the cost
than the firms with single product. It happens that in such firms the costs are sometimes over-
costed and sometimes under-costed.
The companies with competitive business environment encompassing technological
advancement generally needs to understand their costs in order to manage them in a better way
(Balakrishnan, Blouin and Guay 2018). The traditional method failed to provide the accurate
costing for the company’s products previously but this new model has made it possible to
determine the cost of product at each and every level. Mostly, the active cost of production is
attributable but the direct cost is generally hidden. Hence, this method reveals all the indirect
cost associated in the production process.
2.1. Mission & Objective of the Company
Woolworths aims to become the most renowned brand especially the preferred retailer for
the youth, families and kids. It looks forward to improve its stock turnover and enhance its reach
in the global retail market. It also looks forward to improve its distribution network as well as
supply chain. Woolworths does have several strategic points so as to achieve its long-term
business goals. Moreover, the organization also desired to take a leading position in liquor and
food markets. The primary motive of Woolworths is to maximize its shareholder’s value (Dong,