Activity Based-Costing Method - Assignment
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Added on 2020-06-04
Activity Based-Costing Method - Assignment
Added on 2020-06-04
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MANAGEMENTACCOUNTINGContents
INTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................1A). Cost per unit of activity driver for listed activity:............................................................3b). Bill of activities and cost per unit for lamington:.............................................................4PART B............................................................................................................................................6A). New membership plan and fee structure enhance its ability to plan its cash receipts:....7B). Estimate the effect on sales revenue emerging from planned change in the fee structure:7C). New membership plan and fee structure:.........................................................................9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONManagement accounting is the tool which is used for accountable for handling activities of thefirm. they likewise accountable for handling the available finance for escaping liquid fundsdeficiency. Under this, the budgetary process is defined in an effective manner, their advantagesand disadvantages are also defined. The second part of this report is related to the pricingdecisions.PART AABC definition:It is a methodology of assigning indirect costs to services and products involving finding cost ofproducts based on consumption of every activity. It is a refined approach of costing productsreplacing traditional practices it can be also understood as adding indirect cost to direct costwhich results in increasing of indirect cost and unnecessary proliferate of losses (Zimmermanand Yahya-Zadeh, 2011). This method helps in management for making flexible cost model toease out difficulty of differentiation and identification of indirect and direct cost.objective ABC estimate overall costing of element of all products, services and activities.They try to identify and omit unprofitable and overpriced products Also identify products which are involved in production process.identify and classify products and place them on cost hierarchy i.e. unit-level, facility level, production level.Identifying cost driver for each activitycalculation of unit cost according to type of activity.Activity rate calculation e.g. activity per unit in relevance to cross driverscost hierarchy Factors of Activity Based Costing:Estimating time- they mainly emphases on time driven costing activities which helps in achieving budget in prescribed time and with minimal costingCost calculation- through this costing method several input variables can be taken which helps in formulation easing out in solving complex outcomes.1
Identification of services, products and values- it identifies the value of the product and elements those which are unprofitable and low in sales.Financial institution- like effective implementation in manufacturing industry they can also be implemented in analysing services related to financial sectors where they can be attributed explicitly.Lean accounting- it is a time driven activity which eases calculation and planning in accounting activities applicationsapplied in both costing and financing activitiesthey have practical analysis of surveys in accountinghelps in reducing costs in production and organisational levelneutralising unnecessary production cost Advantages and disadvantages:Advantages they estimate accurate production cost by concentrating on effective relationship in context of cost occurrence.They inform about cost behaviour which identifies activities decreasing values of product.They trace overhead costs related to process, customers and department.They enhance better decision making by having adequate analysis of product and fix theirselling prices.They are helpful in service industry and financial sectors where overhear cost and indirect cost are very high which hamper growth of organisation.Limitationsthe analysis is very expensive and cannot be afforded by small scale industries.Input variables are large so it makes it a complex process which is not easy to understand by everyoneit is very difficult to find the effectiveness of ABC analysis in public sectors like budgeting practices hence it cannot be trusted to be implementedit is a time consuming task as it need large sources of data.2
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