Managerial Accounting - Solved Assignment
Added on 2021-06-15
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Managerial AccountingManagerial AccountingTri-semester 1 2018Individual AssignmentHolmes InstitutesStudent NameDate1 | P a g e
Managerial AccountingExecutive SummaryThis report has been prepared Based on a request by the Bega Cheese limited board of directors. It is aimed at evaluating the firm for appropriateness of the ABC model, in the report, we have given a highlight of Bega Cheese, its business operations, strategies, missions as well as objectives. In addition, the report highlights basic aspects of ABC model including its features. Afterward, an analysis was done on the ABC's application to the Bega Cheese organization and recommendations given. We have recommended that the company should consider putting in place the ABC system. To facilitate this the company, need to develop a data collection structure that t will assist record the activities of the firm for the purpose of allocating the costs conveniently. Finally, it has been suggested that the company consider the use of break-even analysis as a way of understanding its sales level and the volume that will effectively cater for the company costs. 2 | P a g e
Managerial AccountingContentsExecutive Summary....................................................................................................................2Contents.....................................................................................................................................3Introduction...............................................................................................................................4ABC and its features...................................................................................................................4Breakdown of the ABC model................................................................................................4Defining activities in the ABC model......................................................................................5Features of ABC model...........................................................................................................5How the ABC model aligns with the current goals and strategies of Bega Cheese Ltd.............6Company missions and objectives.........................................................................................6Company corporate strategies...............................................................................................6How ABC model assist in achieving Bega Cheese Ltd strategies............................................7Recommendations.....................................................................................................................8Other management accounting tool suitable for Bega Cheese Ltd...........................................8Conclusion..................................................................................................................................9References................................................................................................................................103 | P a g e
Managerial AccountingIntroductionAs a professional cost accountant, I was appointed by the directors of the Bega Cheese limited to evaluate the firm and assist explain how the Activity Based costing model can improve the management accounting information that is available to the top management. This report will, therefore, evaluate the structure of Bega Cheese limited in relation to the features of ABC model. Afterward, an analysis will be done regarding the suitability of ABC model to the firm and recommendations made.Bega Cheese limited in a dairy company which is based in Bega, New South Wales Australia. The firm was founded as an agricultural cooperative under the ownership of dairy suppliers. In 2011 the firm was transformed into a public company and was listed on the Australian Securities Exchange. Majority of the company shares are held by the Bega's farmer suppliers. The company's major source of revenue is the retail of cheese and processes cheese products under the Bega brand. Other brands by the firm include Tatura, Royal Victoria, Dairy Mont, and Melbourne. The firm exports its products to over 40 nations acrossthe globe. The firm also retails core dairy products which include cream cheese, cheese, andpowdered milk. This contributes up to 40% of their trading revenue [ CITATION Bei17 \l 2057 ].ABC and its featuresActivity-based costing is a method applied in cost accounting to identify the activities performed by a firm and then assign the overhead costs to products based on those activities. The ABC model takes in to account the relationship between activities, costs and the products. Using this relationship, the overhead costs are assigned to products in a less arbitrary manner than in the case of traditional costing methods [ CITATION Dou02 \l 2057 ]. There are a number of costs that are complex to assign under this model. For instance, indirect costs like management and office staff salaries are normally complex to assign to a given product unit. Due to such complexities, the ABC technique has found a niche in the manufacturing sectors.Breakdown of the ABC modelThe ABC costing is most popular in the manufacturing sector due to its ability to enhance the reliability of cost data. With this, the model is able to produce an almost exact estimate 4 | P a g e
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