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Management Accounting - Costing Techniques

   

Added on  2021-06-18

11 Pages2461 Words92 Views
Running head: MANAGEMENT ACCOUNTINGManagement AccountingName of the Student:Name of the University:Author’s Note:
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MANAGEMENT ACCOUNTING1Executive SummaryThe main purpose of this assignment is to analyze the costing techniques which are applied bybusinesses in Australia for the purpose of measuring costs and allocating the same to differentproducts. The assignment will be analyzing the techniques of traditional and activity-basedcosting to find out which is more appropriate. The assessment will also be focusing on thebenefits which Activity based cost provides to a business. The assignment will be concludingwith recommendations as to which technique should a business choose for the purpose ofmeasuring the costs which are associated with the business.
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MANAGEMENT ACCOUNTING2Table of ContentsIntroduction......................................................................................................................................3Literature Review............................................................................................................................3General Principles of indirect cost allocation Under Absorption Costing..................................4Advantages and Disadvantages of Absorption Costing Model...................................................5General Principles of indirect cost allocation Under ABC Model of Costing............................6Advantages and Disadvantages of ABC Model of Costing.........................................................7Findings and Recommendations..................................................................................................8Reference.........................................................................................................................................9
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MANAGEMENT ACCOUNTING3IntroductionThe main purpose of this assignment is to analyze the basis cost concepts and methodswhich are used by business such as traditional method and Activity based Costing (ABC)method. The assessment also focuses on the selection of the most appropriate method out of thetwo. Costing is regarded as an important part of the management of the business wherein the costwhich are incurred by the business are evaluated (Hilton & Platt, 2013). The estimation andidentification of costs are important as the same are used for the computation of profits which areearned by the business (Fullerton, Kennedy & Widener, 2013).The concept of traditional costing may be defined as the techniques which allocatesindirect expenses which are related to the business to the items which are produced by thebusiness on the basis of volume. Some of the common units which are considered for thepurpose of cost allocations are number of units produced, total labour hours used in theproduction process and even total machine hours used in the production process (Parker &Fleischman, 2017). The main objective of traditional costing technique is to effectively ascertainthe costs of the business and also predict the profits which the business is going to earn (Thomas& Gilbert, 2014). On the other hand, ABC model of costing can be defined as the accountingmethod that is used by business for the identification of the activities which a business isengaged in and on the basis of such assign the indirect costs or overhead costs to the products(Tsai et al., 2013). Under this method certain costs which are difficult to assign can be doneeasily such as depreciation cost on the machineries.
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