Activity Based Costing Model Implications in Management Accounting
Added on 2021-06-14
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Running head: ABC MODEL USE IN MANAGEMENT ACCOUNTINGABC Model Implications in Management AccountingName of the Student:Name of the University:Authors Note:
1ABC MODEL USE IN MANAGEMENT ACCOUNTINGTable of ContentsIntroduction.........................................................................................................................2a. Concept and Features of Activity Based Costing (ABC) Model........................................2b. Alignment of ABC model with the current goals and strategies of NAB:.....................4i) Mission and Objective of NAB:.....................................................................................4ii) Corporate Strategies of NAB:.......................................................................................5iii) Role of ABC model in achieving the strategies of NAB:..............................................6c. Recommendations on ABC Model Implementation in NAB............................................8d. Suitable Management Accounting Tool for NAB Rather than ABC Model......................9Conclusion..........................................................................................................................10References.........................................................................................................................11
2ABC MODEL USE IN MANAGEMENT ACCOUNTINGIntroductionThe objective of this recent paper is to offer a brief analysis of the activity based costing(ABC) model as well as the characteristics described from the business perspective. In attainingthe objective of this report, the model is related with an ASX listed company in order toenhance the information on management accounting that is presented to the top managementteam. The organization that is selected in this report is National Australia Bank (NAB) that ispositioned among the largest financial companies within Australia (Ahmed & Kannaiah, 2016).This will be evaluated in terms of earnings, consumers as well as market capitalization. Reliedon existing corporate strategies and goals of NAB, the alignment is ensured with this model.This facilitates the bank’s top management in effective decision making. Moreover, the reportfocuses on recommending a management accounting tool for NAB that can support themanagements’ decision making process. a. Concept and Features of Activity Based Costing (ABC) ModelABC model can be explained as an accounting method which explains activities carriedout on the company’s behalf and along with that indirect costs are associated with the products(Almeida & Cunha, 2017). In addition, the model explains interlink between costs, indirectactivities along with product costs with the support of this relationship. Moreover, the indirectexpenses are also associated with the products that are less compared with the conventionalmodels related with accounting. Conversely, it also turns out to be difficult to align certain costsby means of ABC model. For example, indirect expenses like the management and office
3ABC MODEL USE IN MANAGEMENT ACCOUNTINGemployees’ compensation that are not simple to be allocated to a particular produced well. Forsuch reasons, the method has attained its niche within the manufacturing as well as industrysectors (Angelopoulos & Pollalis, 2017). In addition ABC accounting method is useful in targetcosting, profitability evaluation associated with product line, costing of products, and consumerprofitability evaluation along with service pricing. ABC accounting method has attainedincreased popularity in every business companies as this might result in maintaining bettercorporate strategy and focus in a situation the costs are understood and allocated in aneffective way. There are several effective features associated with ABC model that is explainedunder:In ABC model the expenses are segmented into fixed as well as variable costs that areeffective in providing quality information for preparing an effective cost system within acompany (Arora & Raju, 2017). Moreover, the cost behavior patterns can be segmented in abetter manner with proper implementation of ABC Model.The cost behavior patterns in ABC costing are directly linked with diversification, cost,volume and organizational events. In addition, within ABC model there must be certainreorganization of suitable cost driver that can facilitate in explaining overhead associated with aproduct. Within ABC model, the cost behavior patterns are explained with the support of costdrivers in the organizations.
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