Management Accounting for David Jones: Features of Activity Based Budgeting and its Suitability

Running head: MANAGEMENT ACCOUNTING
Management Accounting
David Jones

MANAGEMENT ACCOUNTING 1
Table of Contents
Introduction................................................................................................................................2
Overview of David Jones.......................................................................................................2
The vision of David Jones Limited....................................................................................3
The mission of David Jones Limited.................................................................................4
Values of David Jones Limited..........................................................................................4
Overview of Activity Based Budgeting and Features............................................................4
Features of Activity based budgeting.................................................................................6
Difference between traditional budgeting system and activity based budgeting...................7
Checking the Suitability of Activity Based Costing for David Jones....................................9
Conclusion................................................................................................................................11
References................................................................................................................................12

MANAGEMENT ACCOUNTING 2
Introduction
Management is the procedure of recognizing, evaluating, analyzing, understanding, and
communicating info to the administration that is focused towards attaining the goals of the
organization (Nørreklit, 2017). Management accounting is also called cost accounting. The
main dissimilarity between financial accounting and managerial accounting is that financial
accounting is attentive towards offering data to the external parties of the company, and
management accounting information is supporting the executives in the business in taking
proper decisions. There are various tools available that support management accounting
determines and handle their resources, costs, and strategies of the organization (CGMA,
2013). One of the significant tools of management accounting that support organizations in
planning their budgets and managing resources of every activity of the business is Activity
based budgeting. The purpose of this report is to highlight the use of activity based costing
and its features in an organization. The organization that has been selected for pursuing this
report is David Jones, which is an upmarket department store in Australia, deals in different
products and altering its operations with time. After discussing this report will review
whether Activity based costing will be suitable for David Jones or not. In the end, an
argument will be presented that will highlight the dissimilarity between traditional budgeting
and activity based budgeting.
Overview of David Jones
David Jones is the upmarket department store of Australia, which is owned by the retail
group of South Africa i.e. Woolworths Holdings Limited. David Jones established this firm in
1838, a Welsh trader, and forthcoming politician after he settled to Australia, and is the eldest
unceasingly functioning department store in the whole world still operating under its original
name. Presently, David Jones Limited has 45 stores placed in most of the states and territories

MANAGEMENT ACCOUNTING 3
of Australia (except in the Northern Territory and Tasmania) (IBIS World, 2013). The main
rivals of David Jones are the big, high-class subdivision chin of store i.e., Myer. In 2016, the
company opened its first store in New Zealand market after purchasing Kirkcaldie & Stains.
In the same year, the parent company of David Jones i.e. Woolworths Holdings Limited
proclaimed that headquarter of the company is shifted from Sydney, New South Wales to
Richmond, Victoria (David Jones, 2018).
In 2013, Myer management approached David Jones with a provisional, non-binding,
revealing offer for a possible union of the two businesses. Myer thought that the combined
group would have produced highest earnings and sales before tax and interest in 2013 of
around $5.0 billion and $364 million, correspondingly. Moreover, Myer estimated that a
union of both the companies could have helped in attaining around $85 million of continuing
yearly cost collaborations within three years, mainly determined by organizational
competences. The David Jones board disallowed the proposal in November 2013 (David
Jones, 2018). In 2014, again Myer went to David Jones offering to purchase the business at
market value, with David Jones possess a market capitalization of around $1.7 billion. Myer
also specified that its CEO Bernie Brookes would be competent in handling both the entities
if the merger will take place. David Jones recognized the letter affirming it would think about
any offer that will be in the best interest of the company’s shareholders (David Jones, 2018).
The vision of David Jones Limited
The vision of David Jones Limited is to be the most responsible retailer in the world that
could reflect their passion and commitment to be involved in a good trade, for their people,
planet, and customers (Woolworths Holding, 2018).