ABC Costing Model for Woolworths Company: A Costing Analysis Tool

Woolworths Company
ABC Costing model
Costing analysis tool
Name of the Author

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

Introduction
With the increasing ramified economic changes and complex busienss structure, each and
every organization needs to use effective ABC costing model. This model assists in bifurcation
of the costs of the business in different work process which will increase the overall outcomes of
the business at large. ABC costing is a very effective method that helps in calculating the
overhead cost. It assists in doing the analysis related to minimization of overhead cost without
compromising the quality of the product. It allocates the overall overhead costs in machine
hours that help in proper analysis. It calculates the cost of each and every activity involved in the
production process (Woolworths, 2017).
It is also used in effective allocation of resources in different production operations in the
organization. It basically targets in reducing the total overhead expense belong to an
organization. Below study is related to a retail company, Woolworth. Woolworth has a very
good position in retail market and it provides a variety of products including clothes, homeware
and food items. It is also involved in providing financial services as it has a joint venture with a
bank named Absa. It provides loans, store cards and Woolworth visa card to its employees. It
was founded in 1924 by the name “Walworth’s Bazaar Ltd.” It also involved in selling of
Magazines, DVD’s, Health/beauty products and stationary items. It has its online services too,
where anyone can click and collect the product of their choice. It has been proved a very
convenient option for the customers (Lahiri, 2016).
Activity based costing model-
There are several management related activities in an organization that involves a cost factor. It
helps in tracking all the activities related to resource utilization and overall cost incurring in
creating final output. Manufacturing process involves various jobs and each job has cost and
resources involved (Stout, 2014). Resources are the essential element for carrying out production
activities as resources convers the input into final output. Resources are allocated to a particular
operation according to the cost allotted to them. In these matters, ABC plays an important role
and helps in doing the analysis over the costs (Warner, 2010). It helps to know the actual
resource requirement and actual cost incurred for each activity in the process of creating output.