Application of Activity Based Costing in McMillan Shakespeare Ltd

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student
Name of the University
Authors Note
Course ID

1MANAGERIAL ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Activity Based Costing methods and its features:......................................................................2
Alignment of Activity Based Costing methods with McMillan Shakespeare Ltd:....................4
Alignment with McMillan Shakespeare corporate strategies:...................................................4
Use of ABC Model in McMillan Shakespeare:.........................................................................5
Recommendations:.....................................................................................................................6
Recommendations of alternative management accounting tool:...............................................7
Conclusion:................................................................................................................................8

2MANAGERIAL ACCOUNTING
Introduction:
The current report is associated with the understanding of the practical aspects of the
digital company that is associated with the service of providing salary packaging, novated
leasing, financing of fleet and managing service (Angelopoulos and Pollalis 2017). The report
primarily places its emphasis on the applications of the Activity Based Costing method in
McMillan Shakespeare Ltd. The Activity Based Costing is regarded as the young method of
management and recently several companies have placed their emphasis on adopting its
techniques.
Even though the concept of Activity Based Costing was created long before but it is
gained greater importance and managers of several firms have increasingly began
implementing the Activity Based Costing methods in the McMillan Shakespeare Ltd.
McMillan Shakespeare is considered as the global organization and listed among the top 200
ASX listed companies (Mahal and Hossain 2015). The McMillan Shakespeare Ltd is held as
leading single source solution provider of the salary packing, novated leasing, financing of
fleet and managing service. MMS has 21 subsidiary company and among them 15 of the
companies are incorporated in Australia two in New Zealand and four in United Kingdom.
The report would be taking into the considerations the applications of the Activity Based
Costing methods as well as suggesting different alternatives for the company.
Discussion:
Activity Based Costing methods and its features:
Activity Based costing methods is regarded as the new concepts in the theory of
managerial accounting. It is held as the procedure of assigning the costs based on the benefits
that is received from the numerous kinds of indirect activities (Cugueró-Escofet and Fito
2016). This usually comprises of the ordering, setting up the projects, quality assurance etc.

3MANAGERIAL ACCOUNTING
Activity Based Costing methods is also referred as the collection of numerous kinds of
financial and operating performance information drawing authoritative activities for the
companies and its products.
The basic objective of the Activity Based Costing methods is that places emphasis to
the activities that are fundamental to the objects of costs. Activity Based Costing methods is
used as the tool of computing the costs of numerous goods and services that are produced by
a business entity (Almeida and Cunha 2017). The primary concept of the Activity Based
Costing methods is that it deals with the allocation of costs and largely places emphasis on
the allocations of the indirect costs to the objects that are generated inside the entity. Activity
Based Costing methods assigns most of the costs based on the specific cost drivers that
results in momentous influence on the procedure of allocations. ‘
The primary features of the Activity Based Costing is stated below;
a. One of the important features of the Activity Based Costing methods is that it
separates the aggregate costs and categorises it to the fixed and variable costs
(Kamala et al. 2015). These costs are held as imperative in offering superior
information to generate correct results of costs for the direct and the indirect materials
that are placed in the production procedure.
b. One of the most characteristic features of Activity Based Costing methods is that
places focus on the activities of the fundamental cost objects (Mills 2016). While the
traditional methods of costing is largely reliant on the more general purpose of the
cost system and it is not made in accordance with the requirement for differentiating
activities.
c. Another important feature of the Activity Based Costing methods is that it makes use
of the available cost information that helps in improving the overall quality of the