Activity-Based Costing (ABC) Model: A Case Study of Evolution Mining Ltd

abc accounting method

Contents
Introduction......................................................................................................................................2
Objectives and Mission of the company..........................................................................................3
Strategy of the company..................................................................................................................3
Implementation of ABC Model.......................................................................................................3
Other options for the company........................................................................................................6
Conclusion.......................................................................................................................................6
Reference.........................................................................................................................................7
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Introduction
The ABC accounting method is the methodology of identifying the activities of a firm and then
assigning costs to them. This cost is also accompanied with the resource allocation to know the
cost of resources that come into play in the activities. The ABC method also shows the relevance
of each activity on the end result and the final output. The ABC method is mainly useful to
understand which activity has the most and least influence of the total production of goods and
services.
Evolution mining Ltd is essentially a gold mining firm. It was formed in the year 2011 by the
merger of Catalpa Resources Ltd and Conquest Mining Ltd. The firm of Evolution Mining Ltd
has a record of being consistent and reliable in their production and the cash cost guidance as
well. Evolution Mining Ltd is a firm that identifies, develops and then operates gold related
mining in Australia and New Zealand. The company operates a total of 6 gold mines. They also
deal with the mining of silver and copper along with the gold mining. They have their head
office in Sydney, Australia.
ABC model and its features
The ABC model of accounting identifies all the direct and indirect costs of all the activities that
are involved in the operations of the firm. For a perfect fit into the existing accounting system,
the ABC method needs to analyze the resources that are being utilized and the activities and their
associated costs.
The main features of the ABC model are many. It is a very simple method that can be
implemented with ease. It is one of the most cost effective methods of accounting as it analyzes
the activities being performed in the organization that will help in the development of the goods
and services. With the implementation of the ABC accounting method, all direct and indirect
costs that are related to the activities in all functional departments can be evaluated. This will
help the production and sales teams to understand the cost of resources that are needed for the
completion of the goods and services. The costs that get divided are done in tow categories,
namely
- Fixed costs
- Variable costs
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