ABC Costing Model for Pacific Energy Limited

Pacific Energy).
ABC Costing Model
Costing model analysis
Name of the Author

Contents
Introduction.................................................................................................................................................1
Activity based costing model-.....................................................................................................................2
ABC model in accordance with the goals, strategies, missions and objectives of Pacific Energy Limited..4
Recommendations-......................................................................................................................................5
Another Management Accounting Tool suitable for the use of Pacific Energy Limited..............................6
Conclusion...................................................................................................................................................7
References-..................................................................................................................................................8

Introduction
With the changes in the economic condition and complex busienss structure, each and
every organization should use proper costing model the recording the costs of the busienss in
different process. If the cost of the production is distributed in different work department the nit
will eventually increases the effectiveness and overall business functioning of organization. ABC
costing is a technique that is basically used for reducing the overhead cost generating from
different operations in an organization. Production process is a very huge process and it involves
a number of activities. There are different resources that are needed to fulfill those activities like
material, labor, electricity, water and so on. So, it is very important to check whether resources
are not properly utilized and there should be an accurate and proper utilization of resources.
Resources involve a cost factor. As the usage of resources increases the cost of the product also
increases simultaneously. ABC costing helps an organization in the proper allocation of
resources and suggests ways to reduce the overall cost of the product. This is a study about a
Pacific Energy Limited that is a very renowned energy generation company in Australia (Pacific
Energy, 2017). This company has gained momentum in market by offering best types of
chemicals to clients throughout the time. Pacific Energy Limited wants to provide products to the
customers that can satisfy their needs. It also wants to get famous all over the world. There are
many organizations that possess very complex operations and it becomes very difficult to
allocate resources as well as cost, so, in such organization this process helps a lot (Alsharari,
2016).
Activity based costing model-
Activity based costing model is a very effective as well as efficient way used by the
organization as it helps in analyzing the deviation of cost in relation to making things easier. This
method helps organization to create a proper analysis on the cost. It majorly tracks all the
activities happening in production process and the resource utilized in the same (Palmer &
Hynard, 2007). By create a proper tracking record, cost incurred and resource involvement can
be identified. ABC model is mainly known for its applicability on manufacturing units but it is
also applicable on the organizations where there is a high complexity of operations (JUSZCZYK
& LEŚNIAK, 2016). Resource allocation is a very important task that is taken care by ABC