ABC Costing Model for NIB: Enhancing Profitability through Cost Reduction

This paper explores the application of the Activity-Based Costing (ABC) model for NIB, a leading Australian health insurer. The ABC model helps identify and allocate costs to specific activities, providing a more accurate understanding of cost drivers and enabling NIB to optimize its operations and enhance profitability. The paper analyzes NIB's mission, vision, and business strategy, highlighting how the ABC model can align with these objectives. It also discusses the benefits of implementing the ABC model, including improved cost visibility, enhanced decision-making, and increased efficiency. The paper concludes with recommendations for NIB to effectively implement the ABC model and leverage its potential for cost reduction and profit maximization.

Table of Contents
Introduction.................................................................................................................................................2
ABC model...................................................................................................................................................2
NIB Mission and Vision................................................................................................................................2
NIB Business Strategy..................................................................................................................................3
NIB - Apply the ABC model..........................................................................................................................3
Recommendations.......................................................................................................................................4
Accounting Management Tools...................................................................................................................4
Conclusion...................................................................................................................................................5
References...................................................................................................................................................5

Introduction
The main aspect of the assignment is to understand the importance of ABC Costing and how
these methods will enable the business in enhancing the profits through the reduction of cost.
ABC model is a key accounting activities which enables in identifying and assigning the cost to
the respective overhead activities, this is done in a more logical manner than the normal
approach. The ABC model assigns the cost to the overall activities which are the real aspect of
the overhead, it then assigns the cost of activities only to the products which are actually
demanding them. The company which is considered for the analysis is NIB, which is one of the
key Australian health insurers which is providing the health and the medical insurance to more
than 1.2 million Australian residents. The company also provides the private health insurance so
as to provide more than 100,000 international students and workers, also the company operate as
the third largest level insurer and a distributor under the name World Nomad Group. The
company provides health insurance services to the people of Australia and New Zealand, it
operates on various broad areas, they are Resident health insurance program, international health
insurance, World Nomad and Options. The company provides health insurance services to
individuals, family, life, travel and funeral aspects. It also facilitates the access to dental
treatment, cosmetic aspect etc.
ABC model
The ABC model is an accounting method that allows a company to associate resource-based
costs with the business process, not just for products or services. With this model, you can
allocate resources and other related costs and get the products they use. It should be noted that
the ABC cost system does not exclude costs and, on the other hand, helps provide more detailed
cost information and display user-based products. . The main advantage of the activity-based
cost model is that it allows the boss and auditor to understand overhead and lead product-based
products. Management can improve profitability by carefully monitoring total cost and
performance, improving business process efficiency and helping identify costs at different levels
of production or service. In addition, this model encourages the organization to focus on
improving the quality of products and services, such as TQM, and constantly improving the
process, which improves the design and control of the organization's various processes. and will
be inclined to associate with business strategy to make effective decisions. Using the ABC cost
model, the company identifies waste or process efficiency and measures to eliminate them by
visibility of activities without activities. In addition, the ABC cost method helps managers make
clear pricing, construction or purchase decisions, budgets and forecasts, etc., which mainly
includes construction costs. (Brigham, 2010)

NIB Mission and Vision
The main aim of the NIB holdings is a leading financier and the facilitator of heath insurance
services to the individuals of Australia, the company is willing to service the customer through
product innovation, provide greater value for money, provide enhanced customer service,
becoming an employer of choice and a best corporate citizen. The company is also intended to
provide better shareholder returns to the shareholders. The management is willing to assist the
individuals in accessing the world class health care services based on their requirement.
NIB Business Strategy
The company's management focuses primarily on diversifying the business portfolio through
telecommunications services in different geographic areas. This improves operational efficiency
and reduces the effects of business variations and the business cycle in the organization. The
company intends to maintain sufficient profit margins for the benefit of all stakeholders.
Management will clearly work with a broader operational strategy, long-term and cost-effective
procedures, explore opportunities for expansion, and use resources and resources in a sustainable
way. (Berman, 2013). Management believes that by improving operating costs and improving
efficiency, the best and most innovative forms of telecommunications services are improved by
reducing costs for internal and mobile robots and automation to achieve more profit for all
stakeholders. improve the process by improving the ongoing development methods based on the
business model. The operational management model is very simple and surprisingly looks over
the entire business, creates a competitive process advantage, improves work, organizational
measures and performance. Public administration has general contractual aspects and includes
aspects that ensure continuity in the supply of basic commodities, implement cost-effective
measures, improve sustainable management chain management and create efforts. (Ray, 2011).
The company aims to influence the overall application of standards across all asset classes based
on international considerations. Management always includes detailed planning and effective
employment contracts and clearly supports training and access to creative decisions.
NIB - Apply the ABC model
The primary goal of leadership is to consider the ABC model as a business model that focuses on
improving corporate governance through older, present and future companies. The use of the
ABC model requires significant leadership support and dedication. auditors need to improve the
business process and accounting conditions for carrying out the ABC analysis. (Bragg, 2017).
The template should be limited to the previous information, but also to the budget and the
prediction of information and information. Cost allocation values must determine the costs and
data specified in the model, which will reorganize the cost segments for each segment, business
functions and services at different geographic locations, and evaluate the company's ability to

spend on commodity processing and marketing. By implementing the ABC model, auditors can
prepare and report to senior executives who help them make quick decisions about construction,
procurement, budgets and other areas. (Weygandt, 2011)
ABC is a clear and sophisticated tool for the total spending budget that generates business
forecasts, including revenues, investments and other key actions. This model will be a clear tool
for detecting future expenses, planned operations and surpluses or deficits. The amount and
information in the budget helps to eliminate waste and avoid inappropriate treatment activities.
The model will help the management to clearly understand the error margin in the manufacturing
process. It should be noted that in today's competitive environment can not cope with financial
errors, management needs to better understand resources, prices, capital budget, production line
and technical aspects. Drivers must analyze the competitor better and be aware of the cause and
effect, resulting in costs and commitment to process development. These considerations allow
management to achieve production costs, allocate resources efficiently, allocate all related costs
and improve company profitability. (Brooks, 2012)
Recommendations
Management of Participation: The management of the organization must be creative and provide
all the resources of the accounting team for carrying out the ABC analysis. It should be noted
that implementation of the ABC model in the business model is a strategic decision, which
means that accountants and financial managers decide to improve business processes.
Support for business executives: A business's business process is beyond geographical
boundaries, so management must engage entrepreneurs in a smooth transition of ABC's business
model. The company can apply new and innovative technology to obtain business support and
apply the ABC model for all parties.
Accounting Management Tools
Balanced Scorecard is one of the most important ways to do business. The rest helps the
company and management, especially the auditor, to evaluate the machine's protection and
investment. The balance is very weak for finance, customer, innovation and internal analysis of
the company. Scorecard Scale contributes to the company's work in line with the company's
vision and long-term strategy. The panel contains economic perspectives, internal perspectives,
organizational skills and finally customer perspectives. One of the most important benefits of
Balanced Scorecard is to improve the process and encourage employees to achieve
organizational goals. In particular, employment growth, especially customer satisfaction
analysis, looks at the process of increasing economic profitability. Internal perspective: (Kaplan,
2011). The internal perspective is largely linked to a business concept that determines individual

individuality, depending on customer needs. The boss needs to focus on critical business to meet
customer needs. Organization capacity: It is related to efficiency and organizational innovation.
Companies like IBM and SAP ERP, part of Balance Scorecard, are part of the understanding of
innovation opportunities. Customer data must be based on the understanding that customers are
satisfied with the products and services they want or not: You respond to products and customers
about service information, so the leader can count on customer satisfaction and innovative
products. Financial plan: Data collection and time are still critical at this stage, and the minister
provides financial requirements for analyzing financial information.
Value chain analysis is another way of analyzing production costs. Value chain analysis is based
on the delivery of finished products at different production or transformation stages. One of the
most important benefits of value chain analysis plays an important role in the development of
high-quality business customers. The tool is used to analyze the activity, value chain and
evaluation and design. Business Analysis: Businesses must now identify activities that help
produce goods and services. Value analysis: Analyze the value chain, value added to each
production phase and generate valuable products. Evaluation and Planning: Finally, we evaluate
the plan that evaluates possible changes and action plans. The company is based on relationship.
These quotas show the company's actual capacity and growth. The business case contains several
indicators that help the company and the investor to understand how the business generates
profits or losses. In addition to profitability and corporate accounting, return on investment and
operating income includes sales of goods and services. This is one of the most important tools
that show the actual cash flow and the actual production of the business.
Conclusion
From the above it has been found that accounting management is very useful for supporting
long-term organizations. Account management techniques help create a strong internal
environment for organizations. Use different tools and techniques to describe your thoughts in
your eyes and ears. ABC's costs are largely based on the activities performed during the
manufacturing process. In addition, TQM technology is a technology that provides quality
products and services to the organization, reduces waste and improves productivity. Finally, the
auditors are responsible for managing the internal financial system through planning and control,
monitoring, decision making and law building.
References
Berman, K. (2013). Financial Intelligence. 2nd edition. Harvard Business Review Press.
Bragg, Steven. (2007). Throughput Accounting: A Guide to Constraint Management. 1st edition.
Wiley & Sons

Brigham, E. F. (2010). Financial Management: Theory & Practice. 5th edition. Cengage
Learning.
Brooks, R. M. (2012). Financial Management. 4th edition. Prentice Hall.
Kaplan, R. S., & Young, M. S. (2011). Management Accounting. 3rd edition. Prentice Hall.
Ray, G., & Eric, N. (2011). Managerial Accounting. McGraw-Hill/Irwin.
Titman, S. J. (2010). Financial Management. Prentice Hall.
Weygandt. (2011). Managerial Accounting: Tools for Business Decision Making (6th ed.).
Wiley.