Managerial Accounting

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
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1MANAGERIAL ACCOUNTING
Executive Summary:
The goal of this report is to evaluate the implications of the activity-based costing system
from the viewpoint of the business organisations. For effective evaluation of the topic, the
report has considered selecting two journal articles on different organisations belonging to
different industries. The two journal articles include the application of the activity-based
costing system in an organisation and the ways through which it enhances the cost
reporting structure. The significant outcomes obtained after evaluation are recommended
to the Australian management accountants so that they could improve the management
accounting procedures in place.

2MANAGERIAL ACCOUNTING
Table of Contents
Introduction:............................................................................................................................ 3
a. Explanation of activity-based costing (ABC) system:............................................................3
b. Purpose of the two studies and research questions set out for topic exploration:..............4
c. Similarities and differences in the findings of the two studies:............................................9
d. Four specific outcomes useful for the Australian management accountants:...................10
Conclusion:............................................................................................................................. 13
References:............................................................................................................................ 14

3MANAGERIAL ACCOUNTING
Introduction:
With the increasing speed of globalisation, all business organisations are focused
towards raising their profits. Under such condition, when there is increase in sales revenue,
the variable costs tend to rise as well. Hence, this has mandated the need for the
organisations to select a suitable costing method having the ability of recording and
analysing the business costs (Chenhall and Moers 2015). In the current modernisation era,
many business organisations are using activity-based costing (ABC) system in order to
identify and allocate costs. This is because the traditional costing systems fail to assist the
organisations to cope up with the varying business environment. As a result, ABC system has
evolved over time to assist the organisations in overcoming the loopholes inherent in
traditional costing system so that effective business decisions could be undertaken.
ABC system enables the organisations in allocating indirect business costs effectively
based on the activities for manufacturing the various products. ABC system could be applied
to organisations involved in manufacturing various products (Christ and Burritt 2015).
Moreover, the system helps the management of an organisation in identifying the costs and
its related activities and accordingly, allocation could be made. The working procedure of
the ABC system is distinctive in nature compared to traditional costing systems, as it takes
into account machine hours as the base for cost allocation of the organisations. In this
system, the nature of the activity is taken into account and then the organisation identifies
the respective cost unit.