Implementation of ABC Model - PDF

Running head: IMPLEMENTATION OF ABC MODEL
Implementation of ABC Model in Venture Minerals limited
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1IMPLEMENTATION OF ABC MODEL
Table of Contents
1. ABC Model Concept and Features..................................................................................2
2. Association of ABC Model with Goals and Strategies of the Company.........................2
2.1. Organization’s Goals and Mission............................................................................4
2.2. Corporate Strategies of the Company.......................................................................5
2.3. Function of ABC Model in the Organization...........................................................6
3. Recommendations Based on ABC Model Implementation.............................................8
4. Suitable Management Accounting Tool..........................................................................9
5. Conclusion.....................................................................................................................10
References..........................................................................................................................11

2IMPLEMENTATION OF ABC MODEL
1. ABC Model Concept and Features
Accountancy method of Activity Based Costing (ABC) is deemed to analyze the
association of consumed resources, these good as well as the incurred expenses in the same for
identifying the cost that is suitable for all the activities. In addition, ABC accounting technique
improves costing related with a product through offering it high accuracy in contrast to the
traditional methods (Allain and Laurin 2018). It also offers guidance to the managers in realizing
allocation of resource use for facilitating them to develop strategies in a competitive manner. It is
gathered that several organizations consider providing importance to ABC costing method
through using it in order to attain a competitive advantage through decreasing the expense. In
addition, it also offers decision support to the organizations in a condition several cost systems
fail to do the same.
Venture Minerals Limited is among the most renowned organization that is
Headquartered in Australian is listed within Australian Stock Exchange (ASX) as a renowned
mining company in the nation (Angelopoulos and Pollalis 2017). The company has its business
operation in developing world class mineral deposits that is recently exploring in Western
Australia for Nickel Cobalt. Considering the same, with having numerous business units Venture
Minerals Limited turns out to be among the major organizations that might use activity-based
costing. Moreover, this report will recognize the gaps that can be filled by the company through
use of this costing method.

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2. Association of ABC Model with Goals and Strategies of the Company
There has been an increased interest among the companies in releasing their expenses
along with the major influencers of the same. Conversely, a concern exist regarding the ways in
which costs can be understood along with observing differences among several expenses
experienced by the company at the time of its business conducts (Cannavacciuolo, Illario,
Ippolito and Ponsiglione 2015). Therefore, it makes problematic situation for the organization’s
accountants and managers to maintain a suitable tract of the expenses. It has been evidenced that
over the previous years, the activity-based costing technique has been implemented by the
companies as it has been observed as common techniques of management accounting. It is
basically employed in case the companies have varied range products along with several
operations. In such plant, property and equipment, the accuracy of attaining costs is quite
complex in comparison to others. In these companies few of the products are under costed and
few others are over-expensed.
As the recent business environment is becoming highly competitive with increased
technological development, the organizations are making great attempts in dealing their expenses
(Chenhall and Moers 2015). In comparison to traditional methods, opportunities of accuracy are
observed to be low that can be misleading and makes the process of decision making complex
for the managers. Despite being simple, this method failed to recognize the indirect expenses
with accuracy. For this reason, with emergence of activity-based costing technique all the cots
related wit the company is acquired irrespective of the fact that it is direct or indirect.

4IMPLEMENTATION OF ABC MODEL
Figure 1: Activity Based Costing Model
(Source: Chouhan, Soral and Chandra 2016)
2.1. Organization’s Goals and Mission
Venture Minerals Limited is positioned as a conglomerate that deals with several
business lines within the New Zealand and Australia. The organization attempts to be efficient at
carrying out ethical practices in the business operations along with the stakeholders. As it is
positioned as a renowned company, it has an objective to improve the standards for both the
consumers and stakeholders (Coronel and Morris 2016). Along with sustaining high standard of
the company’s ethics, the organization intends to make sure certain satisfactory returns for
investors along with stakeholders’ wealth maximization. The company has also indicated its
responsibility towards social and environment development. Additionally, it also intends to
develop the economy along with the major contribution.

5IMPLEMENTATION OF ABC MODEL
The organization’s primary financial objective is to offer the shareholders with true and
fair value of the company is looking forward to enhance the culture of the workplace. This
organization structure is intended to get implemented all through its branches or be it in the in or
outside the national boundaries. High level of information along with transparency is in the
objectives of the company. In case the company’s employees are trained to strictly adhere by the
business ethics at the time of carrying out their designated job.
The organization attempts to sustain the best product quality in order to maintain their
customer satisfied and also makes sure that the consumer attains right information regarding any
product they utilize. The major objective of the organization also encompasses the sustainable
development along with the associated society (Lu, Sridharan and Michael 2016). It has also
intended to invest within the technological advancements for sustaining competitive advantage
along with successful allocation of resources. The organization also has positive focus on value
creation along ith upliftment of brand that is possible by means of wealth generation while
maintaining the necessary ethical norms. For this reason, it has also developed numerous CSR
strategies that encompass well being of all its stakeholders.
2.2. Corporate Strategies of the Company
The major strategies of the organization are to offer shareholders with suitable return or
in other works value maximization. The major values of the company are focused on openness,
integrity, boldness along with responsibility (Coronel and Morris 2016). The organization
operates ethically towards several dealing along with the transactions. It also maintains necessary
transparency in financial statements reporting along with attaining ideas and feedbacks in a
better manner. Accounting the conducted errors along with learning from same is in the values of

6IMPLEMENTATION OF ABC MODEL
the company. Venture Minerals Limited attain responsibility for any decisions and work towards
improving company performance in order to sustain its reputation.
Venture Minerals Limited intends to offer autonomy to the business conducts so that a
specific unit operates in an efficient way. They are not confined within the complex strategy and
plan is implemented as required. The initial growth facilitator of the company is focused on
attaining an exceptional talent and fir using them towards complex works in order to be highly
sustainable in the market (Hald and Thrane 2016). It recognizes the capabilities of company’s
staff along with working towards promoting commercial ability all over the leadership base.
Therefore, it also makes sure that the decisions made by organization is supported by financial
decorum. In addition, they also work towards improving the business culture as well as
encouraging innovation and creativity. Venture Minerals Limited sustains high level of social
responsibility and this can be attained with their balance sheet. This is for sustaining
competitiveness within their costing along with maintaining capital for the opportunities that can
serve as a tool for generating value.
The strategies of Venture Minerals Limited in attaining objectives for developing the
operational excellence is necessary for current business and for meeting the organizational needs.
It also facilitates the company’s approaches for attaining high growth and for maintaining
increased stability (Kim, Han, Yi and Chang, S., 2016). In addition, the company also redevelop
is its portfolio through offering value added transaction within the business operations.
2.3. Function of ABC Model in the Organization
Suitable realization of the expenses might be necessary in developing a better strategy for
Venture Minerals Limited. As ABC model explains the techniques of costing, it also maintains

7IMPLEMENTATION OF ABC MODEL
record of the particular objects that experiences the cost for the company. Based on the common
belief, the accountants believe that inventory cost will offer every expense about it does not so
that ABC technique offers the actual expenses. The major advantage of such technique is that it
offers indirect cost in order to compute the overall expenses. Within the traditional technique, the
direct expense is traced in order to trace the major product and the manufacturing overhead is not
traced along with that it is allocated for the product (Oseifuah 2018). Therefore, the inability for
tracing the real cost there remains an error. It can be realized that the new method really traced
the expenses directly at the goods along with the exact costs that is supportive along with making
reliable making decisions.
The costing method might facilitate the company from misutilization of its resources on
the activities that does not add any value along with facilitating the managers for recognizing
profitable projects. The system of cost accounting majorly facilitates three major goals that
encompass allocation of several expenses in order to develop a financial statement offering
information to the cost managers along with offering cost anticipation (Venture minerals limited
2017). Conversely, in Venture Minerals Limited the activity-based costing indicates several
functions as this organization is within diversified segments. These functions incudes consumer
satisfaction through improve the pricing system along with decreasing the price cutting in
maintaining parallel profitability. It can also facilitate the management in recognizing the
profitable products along ith the ones those remain unprofitable. Within this, the organization
might maintain its strategies systematically based on the target market and products. The
activity-based costing might also facilitate the company in dealing with their inventory in a better
way for obtaining high rate of turnover by means of their suitable valuation. Venture Minerals
Limited might also make several departments and business activities effective in case they have

8IMPLEMENTATION OF ABC MODEL
better understanding regarding operations cost related with the processes. It might also facilitate
in distinguishing production expenses focused on idleness and finally for financial accounts
assimilation (Yigitbasioglu 2017).
3. Recommendations Based on ABC Model Implementation
ABC model use in Venture Minerals Limited might require enough support firm the
company’s upper management. For this model is required to be employed, it is vital to be
included within the major values. The overall technique of costing is required to be changed
along with the department accountable for working in the same must be trained so that they can
efficiently implement this model in the company. Therefore, it is vital for the management
structure of the organization to understand the design of ABC model. Conversely, it is required
being implemented all over the cross-function team rather than a specific accounting department.
This is possible in case the company develops a specialized team including people from all the
organizational departments from several business operations. This is necessary in order to train
them to employ the data which is developed from activity-based costing technique. Such team
must include several representatives from the distinct departments of all the business operations.
Therefore, a consultant for it must be hired for attaining necessary advice.
The major cause for which Venture Minerals Limited must support ABC costing method
implementation is due to the fact that the managers requires indicating resistance towards change
devoid of absence of leadership from upper authority. In addition, devoid of suitable support, the
importance of ABC model can be the determinant from perception of the subordinate (Otley
2016). Therefore, it might be recommended that the Venture Minerals Limited’s management

9IMPLEMENTATION OF ABC MODEL
must realize their cost in all the departments of the business operations. It might facilitate the
company to use the model in a better manner for developing the external financial reports.
4. Suitable Management Accounting Tool
One of the technique which might be efficient for management accounting in Venture
Minerals Limited is budgetary control. This technique is deemed to have advantages due to its
contribution towards controlling and planning of several activities at distinct company levels. It
is gathered that anticipation of budgets is conducted in a better manner by managers (Malmi
2016). This is for the reason that it might support them in realizing the actual company cost level
position that can facilitate it in taking vital decisions. There are numerous advantages that can be
attained by Venture Minerals Limited by means of budgetary control implementation.
Through budgetary control use, Venture Minerals Limited might assimilate labors of
district personnel in the organization for attaining common goal. Sch technique will synchronize
all the conducts carried out by the company and use it in order to attain the shared objectives. It
can also support the company’s management in recognizing the expenses of all the departments
in all business conducts. Moreover, if any organizational department is observed to exceed the
anticipated budget then necessary actions must be taken by the management in attaining the same
(Mahal and Hossain 2015).
Budgetary control system of Venture Minerals Limited will also provide the organization
with necessary knowledge to maintain budget from its previous experience through analyzing the
failure and success of the budgets in the previous years. This can also facilitate the organization
in analyzing the error along with offering suitable information which might be developed in
present or future budget anticipation.

10IMPLEMENTATION OF ABC MODEL
5. Conclusion
Venture Minerals Limited turns out to be among the major organizations that might use
activity-based costing. Considering this, the report focused on recognizing the gaps that can be
filled by the company through use of this costing method. It was gathered from the paper that;
ABC accounting technique improves costing related with a product through offering it high
accuracy in contrast to the traditional methods. It also offers guidance to the managers in
realizing allocation of resource use for facilitate them to develop strategies in a competitive
manner. Moreover, ABC model use in Venture Minerals Limited might require enough support
from the company’s upper management. The overall technique of costing is required to be
changed along with the department accountable for working in the same must be trained so that
they can efficiently implement this model in the company.

11IMPLEMENTATION OF ABC MODEL
References
Allain, E. and Laurin, C., 2018. Explaining implementation difficulties associated with activity-
based costing through system uses. Journal of Applied Accounting Research, (just-accepted),
pp.00-00.
Angelopoulos, M. and Pollalis, Y., 2017. Activity Based Costing (ABC) as a tool for Lean
Transformation: The Case of the Greek Power Public Corporation (PPC).
Cannavacciuolo, L., Illario, M., Ippolito, A. and Ponsiglione, C., 2015. An activity-based costing
approach for detecting inefficiencies of healthcare processes. Business Process Management
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Chouhan, V., Soral, G. and Chandra, B., 2017. Activity based costing model for inventory
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Hald, K.S. and Thrane, S., 2016. Management Accounting and Supply Chain Strategy. In 1st
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Kim, Y.W., Han, S.H., Yi, J.S. and Chang, S., 2016. Supply chain cost model for prefabricated
building material based on time-driven activity-based costing. Canadian Journal of Civil
Engineering, 43(4), pp.287-293.
Lu, C., Sridharan, V.G. and Michael, S.C., 2016. Implementation of the activity-based costing
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Oseifuah, E.K., 2018. Activity based costing (ABC) in the public sector: benefits and
challenges. Management, 12, pp.4-2.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
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Venture minerals limited, 2017. Annual Report. Available from
http://www.ventureminerals.com.au/index.php/investor-resources/asx-announcements-page/asx-
announcements/annual-reports Accessed on 2017.
Yigitbasioglu, O.M., 2017. Drivers of management accounting adaptability: the agility
lens. Journal of Accounting & Organizational Change, 13(2), pp.262-281.