Why Some Management Accounting Techniques are More Widely Used than Others

ESSAY TOPIC: “Organisations need to understand why some
management accounting techniques may be more widely used than
others critically discuss”

Contents
INTRODUCTION...........................................................................................................................1
ANALYSIS......................................................................................................................................1
Activity based costing..................................................................................................................1
Activity based costing V/s traditional costing system.................................................................3
Usage of traditional costing system over ABC in Ireland and United Kingdom........................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting is a method of developing of management accounting reports with
the help of MA systems which assist in analysing regular activities of an organisation by its
managers (Cooper, 2017). There are various management accounting techniques which assists a
company to analyse and interpret their operational costs. These techniques are used by
organisations according to their suitability and relevance. The aim of this essay is to develop an
understanding against the fact that why some organisations use specific management accounting
techniques over other (Van der Stede, 2017).
In this essay, activity based costing used in Ireland is considered as base which is then
compared to traditional costing system used in Ireland and United Kingdom in manufacturing
industry. These techniques are selected in order to fulfil the aim of understanding the fact why
traditional costing system is used over activity based costing in Ireland and UK after high
efficiency and benefits of ABC costing. In present essay all selected management accounting
techniques are discussed along with comparison between them. Reasons are also identified to
analyse why few management accounting techniques are widely used than others.
ANALYSIS
Activity based costing
As the name suggests, activity based costing is a managerial accounting technique which
traces overhead costs of specific activities and then assigns it to relevant account. This method
assists a manager to allocate the costs to the departments by which these costs have incurred.
ABC technique is based on the process in which management accountant first identifies all the
activities which are conducted by the organisation and then group those activities under certain
heads and departments. After classification, similar activities are assigned to a cost pool
regardless whether these costs are direct or indirect (Dale and Plunkett, 2017). Every cost pool is
known as a single activity cost driver. This method helps an organisation to allocate its expenses
to various jobs and products according to the suitability of the organisations. Unique aspect of
this technique is that it allows an organisation to allocate indirect expenses as well which helps
them in downsizing the resources which are outsourced which ultimately lead to maximum
utilisation of resources. Due to suitability of this method for all the organisations, this method is
more used than other methods. This essay is based on the fact that some management accounting
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