Activity Based Costing For Beach Energy Limited

This report discusses the benefits of Activity Based Costing System for Beach Energy Limited. It explains the features of ABC costing tool and how it aligns with the company's strategies. The report also recommends the implementation of ABC system and provides an alternative costing system.

Running Head: ACTIVITY BASED COSTING SYSTEM 1
Activity Based Costing For Beach Energy Limited
Student by (Name)
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Executive summary
Breville group limited is a busy company with massive plans and operations. With so
many activities going on in the company, a need for better management as well as a proper
costing system is vital. The following report describes the Breville Company’s mission as well as
objectives and corporate strategies of the company. How activity-based costing, which the ideal
costing and management tool for Breville group limited company, is in alignment with these
strategies and objectives are also addressed. The feature of activity-based costing is ideal and
compatible with most companies operate. An alternative costing method is also briefly discussed.

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Table of Contents
Introduction.................................................................................................................................................3
Activity-based costing and its features........................................................................................................3
Definition................................................................................................................................................3
Key features of activity-based costing.....................................................................................................4
How ABC costing tool aligns with Breville group limited strategies..........................................................4
The mission of Breville group limited.....................................................................................................4
Objectives of Breville group limited............................................................................................................5
Corporate strategies of Breville group limited.........................................................................................5
How activity-based costing is in alignment with Breville group Limited’s strategies and goals.................7
Recommendations for implementation of activity-based costing system in Breville group limited
Company management................................................................................................................................8
Alternative costing system that could be used in place of activity-based costing system............................9
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10

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Introduction
Breville group limited is a developing and distributor of small electrical kitchen
appliances. The company owns several brands, Breville, Kambrook, Ronson, a Sage by Heston,
Solis Gastrback, stellar, Catler, bork and Rivera & bar. The company’s business can be divided
into two that is development sector and distribution sector. Due to the high number of activities
to run the two sectors effectively, the company needs the most cost-effective and efficient
management system as well as costing tool. The following report is a description of activity-
based costing and management tool. The system’s distinctive features are also discussed in the
report as well the alignment of these features with company’s goal and strategies. The role of the
system in helping Breville group limited achieve is targets and implement the strategies laid
down is also looked at in the report. The report is finalized by an alternative costing system that
could be used in place of ABC system.
Activity-based costing and its features
Definition
Activity-based costing tool identifies company’s activities and assigns a cost to each
activity concerning resources to all products and services that each activity has consumed.
Activity-based costing approach involves tracing resource consumption and costing the final
product and services in a company or an organization (Zimmerman & Yahya-Zadeh, 2011).
ABC system appreciates the relationship between cost, activities, and products and from this
relationship, indirect costs are assigned to products. The method applies best in the
manufacturing sector. This is because some costs such as salaries and administrative cost
incurred by a company are hard to assign.

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Key features of activity-based costing
Some of the common features of ABC costing tool that differentiates it from other
traditional costing tools are as follows.
In ABC costing method, the total cost is divided into types, that is, fixed cost and variable
cost. The division of total cost is important in providing quality information to design a cost
system. The method also distinguishes the cost behavior patterns (Fatah, 2013). Cost behaviors
patterns are volume related, diversity-related, events related and time-related. The appropriate
cost drivers are identified to ensure track on the overhead to a product. The cost drivers
determine the cost behavior pattern.
How ABC costing tool aligns with Breville group limited strategies
The mission of Breville group limited
The Breville's main mission is to innovate as well as produce the best kitchen appliances
available in the market. Transformation of the current kitchen appliances into more effective
ones is the main dream of the company (Zaman, 2009). Breville is working relentlessly to bring
the most innovative and differentiated products in the market. The company financial
performance is no pleasing. Since the company has been experiencing low revenues, a new
mission to improve on the same has been laid down. Expanding the business is also another
company’s mission. Breville believes increasing its distributional centers will play a huge role in
stabilizing the company’s revenues and also improve on the same (Verhagen, Bermell-Garcia,
van Dijk & Curran, 2012).

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Objectives of Breville group limited
Breville’s main objective is to develop the most updated model of simple kitchen
appliances. The company aims to be the developer of the most updated kitchen appliances.
Expanding its market is also another Breville’s objective (Torres, 2014). The company wants to
meet the demand for its products which can only be achieved by increasing its market reach.
Working towards a more stable revenue generation trends is the currently upcoming objective.
Breville wants to avoid the situation of financial fluctuations.
Corporate strategies of Breville group limited
The company has laid down strategic moves in a bid to achieve its objectives and uphold
its mission.
The following are strategies of Breville group limited.
American distribution centers seem to be performing better. Breville has identified an
opportunity to improve its financial performance as well as stabilize it. The company wants to
expand its operations center as a strategy to solve the issue of revenue fluctuations (Torres,
2014). Expansion strategy is also aimed at improving the shareholder’s value. With improved
profits, as a result, dividends and other bonus to shareholders will increase.
Technological transformation is another strategy employed by Breville group limited.
The strategy is aimed at helping the company develop the most modern appliances in the market.
Innovations and development are what keeps Breville Company in the market. To ensure the best
innovation in line with varying trends in the market and demand for appliances, the company
will need the most advanced production and research technology (Terungwa, 2012). Continuous
changes in technology are a strategy that Breville Company has been employing. This has helped

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it achieve the most popular innovations. This strategy is also aimed at transforming the financial
status of the company. Financial status transformation is an indirect impact of this strategy.
Breville is looking forward to forming beneficial alliances with other companies. This
strategy is aimed at stabilizing financial fluctuations. With the huge capital base, a benefit from
alliances, the company will be in a position to regulate its production and distribution activities.
Alliances are also aimed at improving the acceptability of the company so as most people will
invest in the company (Terungwa, 2012). Allying with other companies will also enable Breville
group limited expand their market which is mainly focused objective?
Researching what the consumer’s preferences are. Researches will help the company
focus on improving their products. The company’s dream to be the dominant company in the
industry can only be achieved is its products are in line with what the consumers want. By
employing this strategy, the company will have ample information on innovations. With
developing level of innovation, the company’s success is guaranteed (Tavana,Yazdani &Di
Caprio, 2017). The strategy will also help the company build on customers brand loyalty. Brand
loyalty is a competitive advantage over the company’s competitors.
Improving working environment is another strategy aimed at achieving its objectives.
Breville wants to ensure that the employees of the company are working in the best conditions
and also are satisfied. W happy and satisfied work team will reduce the internal factors limiting
the company’s performance.

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How activity-based costing is in alignment with Breville group Limited’s strategies and
goals
ABC costing and management tool allows companies to identify and quantify the
activities that they perform to deliver products and services. The value of activities that Breville
group limited engages can easily be identified and the value evaluated. With this information, the
company will be able to assign a cost to their products (Taticchi,Tonelli & Cagnazzo, 2010). The
system will help the company evaluate its actual profits to make better decisions relating to the
financial position of the company.
Activity-based costing is an optimal decision-making tool. With the incorporation of this
system as a management tool in Breville Company, it will play a huge role in assisting making
the following decisions. The system will help the company in making strategic designs. The fact
that Breville company wants to be the dominant completer company in its business’s industry, it
will be forced to make a lot of strategic decisions on the profitable areas to open the distribution
centers for their products. With ABC system, the management can evaluate the cost of setting up
these centers and expected profit to make the best decision (Szychta, 2010). Also, the system will
help the company in making operational decisions. Decision-based on operations such the
amount to be produced to counter the demand is critical to the success of Breville Company.
Cost of such operations needs to be evaluated to avoid over-planning which may lead to losses.
With ABC costing system, evaluation of such cost will be made easier and more accurate.
Planning and budgeting is also another area of decision-making process where ABC is of great
importance. ABC system will equip the management with information on how changes in the
budget will affect costs. Also, the cost of implementing strategies laid down by the Breville's
management can also be evaluated using ABC system (Sandborn, 2013). With this information,

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Breville Company can make the best planning decision concerning the financial status of the
company.
ABC costing system provides a lot of data to support the process improvement initiatives.
The system’s models facilitate improvement initiatives. This is in alignment with Breville's
strategy to improve shareholder’s value and also to become a dominant company (Barros &
Ferreira, 2017). Given the ambitions of Breville group limited, ABC costing model is the most
effective accounting as well as a management tool (Mohammed, 2011). The company will be in
a position to identify available opportunities which will allow maximum cost saving.
With effective use of ABC costing system, Breville group limited will be able to
understand the true value of its processes, products, and services. With this information, the
company can make the relevant decision to make necessary improvements to cut down the cost
and maybe maximize output (Kapić, 2014). The information is also very important in making a
pricing decision. Better pricing decision will give Breville limited a competitive advantage over
its competitors. The information will help the company not to overprice their products which
might lead to loss of customers. Underpricing issues will also be avoided.
Recommendations for implementation of activity-based costing system in Breville group
limited Company management
ABC system will be replacing the traditional accounting tools. Before the tool can be
fully incorporated, the management and other necessary staff need to be trained on the same.
ABC system is different from other costing techniques. Therefore, the staff members need to be
oriented from traditional techniques to this new technique (Hall, 2010). The staff also needs to be

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equipped with some experience on how to use the tool effectively. This will sharpen the staff’s
skill hence an efficient flow of work will be realized.
The alignment of the tool with company’s strategies and operations need to be evaluated.
The issues that activity-based coating system addresses need to be carefully evaluated (Downes
& Oddie, 2010). This will help Breville group limited evaluate the systems compatibility with
company’s operations and objectives. This way, Breville group limited company can evaluate the
limits of this system and come up a way to counter this limits. Evaluating the system will also
help Breville Company avoid the unplanned inconvenience which might yield to massive loss
(Gervais, Levant & Ducrocq, 2010). The value that this system will add to the company over the
earlier used techniques need to be evaluated to ensure does not make a worse decision.
Alternative costing system that could be used in place of activity-based costing system
The time-driven system is the ideal substitute for the activity-based costing. The system
is the advancement of activity-based costing. The time-based costing requires less amount of
data compared to activity based tool. The tool mainly estimates the functional capacity of
committed resources and their cost and the unit times for performing transactional activities
(Fatah, 2013). The technique key feature of the traditional ABC system is that the latter
technique requires less time and resources to implement and is more accurate.
Conclusion
According to the report, it is evident that Breville Company requires a more advanced
costing and managerial tool. Activity-based costing is an ideal tool that does not only align with
company’s key corporate strategies but also is rich with the decision- making assistance to the

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management. With ABC technique, Breville Company will be more efficient and more value to
customers, shareholders and business will be realized.

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References
Barros, R. S., & Ferreira, A. M. D. S. D. C. (2017). Time-driven activity-based costing:
Designing a model in a Portuguese production environment. Qualitative Research in
Accounting & Management, 14(1), 2-20.
Downes, J. and Oddie, C., (2010). Mergers and Acquisitions: ACCC Issues. Commercial Law
Quarterly: The Journal of the Commercial Law Association of Australia, 24(2), p.19.
Fatah, A. M. A. (2013). An empirical study of the use of cost accounting systems in the Libyan
agricultural firms (Doctoral dissertation, Universiti Utara Malaysia).
Fatah, A. M. A. (2013). An empirical study of the use of cost accounting systems in the Libyan
agricultural firms (Doctoral dissertation, Universiti Utara Malaysia).
Gervais, M., Levant, Y., & Ducrocq, C. (2010). Time-driven activity-based costing (TDABC):
An initial appraisal through a longitudinal case study. Journal of Applied Management
Accounting Research, 8(2), 1.
Hall, M. (2010). Accounting information and managerial work. Accounting, Organizations and
Society, 35(3), 301-315.
Kapić, J. (2014). ACTIVITY BASED COSTING-ABC. Business Consultant/Poslovni
Konsultant, 6(32).
Mohammed, I. A. (2011). The Practicability of Activity Based-Costing in Nigeria: A Case of
GOFCECON Limited.

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Sandborn, P. (2013). ACTIVITY-BASED COSTING (ABC). In Cost Analysis of Electronic
Systems (pp. 73-82).
Szychta, A. (2010). Time-Driven Activity-Based Costing in Service Industries. Social Sciences
(1392-0758), 67(1).
Taticchi, P., Tonelli, F. and Cagnazzo, L. (2010) Performance measurement and management: a
literature review and a research agenda. Measuring business excellence, 14(1), pp.4-18.
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framework for sustainable supplier selection. International Journal of Logistics Research
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Terungwa, A. (2012). Practicability of time-driven activity-based costing on profitability of
restaurants in makurdi metropolis of benue state, Nigeria. journal of contemporary
management.
Terungwa, A. (2012). Time-driven activity-based costing and effective business management:
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Torres, R. (2014). The effect of current activity-based costing (ABC) implementation in Eskom’s
finance field (Doctoral dissertation, University of the Free State).
Verhagen, W.J., Bermell-Garcia, P., van Dijk, R.E. and Curran, R. (2012). A critical review of
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Zaman, M. (2009). The Impact of activity based costing on firm performance: The Australian
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Zimmerman, J.L. and Yahya-Zadeh, M. (2011). Accounting for decision making and
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