Importance of Activity Based Costing in Organizations

Running head: MANAGERIAL ACCOUNTING
Managerial accounting
Name of the Student:
Name of the University:
Author’s Note:

1MANAGERIAL ACCOUNTING
Abstract:
The report is prepared for evaluating the research paper relating to the implementation and
importance of ABC (activity based costing) in different organization. The selected management
topic that is ABC has been explained in the current study. Furthermore, the similarities and
differences in the two selected journal articles have been explained. The outcomes and lessons
derived from such research papers and its usefulness to the management accounting
professionals have been demonstrated.

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Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................2
Explanation of activity based costing:.............................................................................................2
Explanation of article 1:...................................................................................................................3
Explanation of article 2:...................................................................................................................5
Explanation of similarities and differences between the findings of two articles:..........................8
Research findings useful for the management accounting professionals:.......................................9
Conclusion:....................................................................................................................................10
References list:...............................................................................................................................12

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Introduction:
The report is prepared for conducting the research on the topic “Activity Based Costing”
by selecting two journal articles from the accounting and management accounting journals. It is
suggested by recent literature in management accounting that there have been considerable
changes in the environment in which management accounting is practiced. Such changes have
been due to highly competitive environment, information technologies, new management
strategies, customer services and new focus on quality. The practice of management accounting
has introduced new management and cost accounting systems such as activity based costing,
customer costing, balanced scorecard and activity based management (Chak and Fung 2015). In
developing countries, there is little research on the adoption of such advanced practices. It is
suggested by the evidence that during the last decades, there have been changes in the
management accounting.
Discussion:
Explanation of activity based costing:
Activity based costing (ABC) is the method of managerial accounting that helps in
tracing the overhead cost to the activities and accordingly assigning them to objects
(accaglobal.com 2018). Such costing method has the main focus on process of production or
identification of activities that are used in processing a job. After then, grouping of such
individual activities are done with similar process into a cost pool relating to single activity cost
driver. Such method of costing is regarded as the most accurate way of assigning indirect cost
and helps in overhead expenses allocation to products and jobs based on the amount of activities
that are required to produce the product. ABC is a methodology for allocation of overhead cost