Activity Based Costing Model for Origin Energy

Activity Based Costing Model 1
ACTIVITY BASED COSTING MODEL
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Activity Based Costing Model 2
ACTIVITY BASED COSTING MODEL
Table of Contents
Executive Summary.....................................................................................................................................3
Introduction.................................................................................................................................................3
Explanation Activity-based model and its features......................................................................................4
Explanation of how Activity-based costing aligns with the goals as well as strategies of the Origin Energy
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Objectives and mission of the Origin Energy...........................................................................................6
Corporate strategies of the Origin Energy...............................................................................................6
Explanation of how Activity-based costing system enables Origin Energy in achieving their strategies. 7
Recommendation about the implementation of Activity-based costing model for Origin Energy..............8
Appropriate management tool suitable for Origin Energy apart from Activity-based costing model..........9
Conclusion...................................................................................................................................................9
References.................................................................................................................................................11

Activity Based Costing Model 3
Executive Summary
This paper discusses a modern approach to apportioning the exact cost of energy to a
given cost center or product in the Company known as the Origin Company. Activity-based
costing which is useful in the identification of particular cost drivers and after that assigns costs
depending on the details of the product mix, facility’s equipment, and operation. The paper will
use ABC method to allocate the values of energy in the chosen manufacturing environment.
This approach can also help the organization to predict and analyze the amount of energy used
in the industry. The costs of energy at Origin Energy located in Australia are applied as an
illustration of this modern model. This paper uses the principle of ABC system explicitly to
comprehensive energy management and energy costing in the organization. This paper also
discusses the recommendation that the Origin Energy should put in place to ensure that this
management accounting tool is appropriately implemented in the organization. Lastly, the
paper enlightens another model that can also help the Origin Company to achieve most of its
strategies.
Introduction
Origin Energy is one of the Listed Company in Australia. The Company undertakes the
energy business. The organization consumes the massive amount of resources, and the cost of
energy is also increasing, and the prediction is that the trend will continue even to the future
years to come. The constant changes that happened in the sector of energy and necessitate
them to acquire relevant information useful in decision making, need a rethinking on the type
of the costing system that the Company should apply to be active in the industry. Due to the

Activity Based Costing Model 4
financial and economic manifested in the sector, Origin Energy must discover ways to stay
strong as well as reducing costs; ensure that its activities continue as usual in the industry with
the role of becoming best of the best in the industry. Therefore, the company requires different
measures to enhance the information system as well as ensuring that the operational track
most of the costs in the company. The complexity of the organization and other different
challenges such as ways to monitor the energy within the processes necessitate the
organization to model the systems, but the system Complexity will make the organization to
suffer more costs regarding information and time to facilitate the creation of the model. At the
same, most of the organization such as the Utility Companies begins to implement modern
technologies to facilitate the distribution of energy. The most favorable management
accounting tool that will enable the Origin Energy to solve most of the issues that affect its
operations and be relevant in the industry is the adoption of the Activity-based costing model.
This approach will enable the management to verify whether a particular Response and
Demand is viable to the organization. The method will also assist in modeling how the facility
uses the energy. It will also offer the required structure to be used in evaluating the product
and processes costs in the organization. The paper is separated into parts with each part
discusses the issues relating to the Activity-based costing.
Explanation Activity-based model and its features
ABC is the management accounting tool used to find costs to process or product of the
Company. Rather than apportioning costs directly to specific products and services, they are
allocated to the Company’s activities (Dalci, Tanis and Kosan 2010). Then, the products cost are