Managerial Accounting - ABC Model

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student
Name of the University
Author’s Note

1MANAGERIAL ACCOUNTING
Executive Summary
The first part involves in explaining different aspects of the Activity Based
Costing mode (ABC model) along with its features. The next part shows the
mission, objective and corporate strategies of Tassal Group. The next part
shows how the implementation of ABC model ensures the correct
achievement of the mission and objectives of Tassal Group. The last part
recommends two ways for the effective implementation of ABC model. The
last part of the report shows an alternative management accounting model
of ABC model.

2MANAGERIAL ACCOUNTING
Introduction
The main objective of this report involves analyzing and evaluating the
various aspects and factors of the Activity Based Costing (ABC) mode. Some
of the major areas of discussion related to ABC model is the features of the
model, the characteristics of the model, its implementation and others. The
major purpose of this report is to analyze the different aspects of ABC model
by relating it one of the Australian Security Exchange (ASX) listed business
organizations; and Tassal Group Limited is taken into consideration for the
completion of this report. Tassal Group Limited is one of the leading salmon
farming companies in Australia. The company was established in the year of
1986 and got listed under ASX in the year 2003 (tassalgroup.com.au 2018).
a) Explanation of ABC Model and its Features
ABC model puts focus on the relation among the costs, activities and
products for the assignment of the indirect costs to the products of the
companies (DRURY 2013). ABC model does this whole system less arbitrarily
as compared to the traditional costing methods. However, there are many
instances where the companies face complexities in assigning specific costs
under ABC model. For this aspect, salary, an indirect cost, can be taken into
consideration as it is difficult for the companies for the allocation of this cost
to the products or services. In spite of this, massive popularity of ABC model
can be seen in both the manufacturing as well as service industries. In

3MANAGERIAL ACCOUNTING
addition, business organizations use this ABC model for analyzing the
profitability from the customers, for the implementation of target costing and
others (Dale and Plunkett 2017). Thus, it can be said that the ABC model has
gain popularity almost all areas of cost accounting.
The following discussion sheds light on the major features of ABC
model:
1. Business organizations become able in segregating the overall costs
into two board categories of variable costs and fixed from the
assistance of ABC model. Due to this segregation of costs, it becomes
possible for the business entities in the adoption of appropriate costing
system as per the nature of their business operations (Öker and
Özyapici 2013).
2. One major feature of ABC model is that the cost accountants become
able to distinguish between the patterns of cost behavior in the
manufacturing or business operations.
3. It provides assistance in linking the patterns of cost behavior in the
business organizations with various other aspects of costing; they are
time, cost behavior and others.
4. In the presence of ABC model, the enmities become able in the
identification of the cost drivers in order to trace down the costs
overheads (Öker and Adıgüzel 2016).