Managerial Accounting Report: ABC Model and CIMIC Group Strategies

This report provides a detailed analysis of the Activity-Based Costing (ABC) model and its potential application within CIMIC Group Limited, a global infrastructure, mining, and services company. It begins by explaining the ABC model, its features, and how it aligns with CIMIC Group's current goals and strategies, including its mission, objectives, and corporate strategies. The report identifies the company's mission to generate sustainable returns and its objectives centered on integrity, accountability, innovation, and delivery. It further explains how the ABC model can assist in achieving the company's strategies by improving product design, providing accurate cost information, and supporting effective decision-making. The report then offers recommendations for implementing the ABC model, emphasizing its relevance as a cost management tool and its ability to facilitate continuous improvement. Additionally, it suggests Time-Driven Activity-Based Costing (TDABC) as an alternative management accounting tool, highlighting its potential to enhance value creation for customers and improve resource utilization. The report concludes by underscoring the importance of these accounting tools in supporting strategic and operational improvements within CIMIC Group.

Managerial accounting
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Contents
Introduction:....................................................................................................................................3
a) An explanation of ABC model and its features...........................................................................4
b) An explanation of how ABC model aligns with the current goals and strategies of the
company...........................................................................................................................................5
i) An identification of the company’s mission and objectives:........................................................5
ii) An identification of the company’s corporate strategies.............................................................6
iii) An explanation of how ABC model assist in achieving the company’s strategies:...................6
c) Provide at least two (2) recommendations about the implementation of ABC model for CIMIC
Group:..............................................................................................................................................8
d) Apart from ABC model, suggest one other management accounting tool suitable for your
company and justify it.....................................................................................................................9
Conclusion:....................................................................................................................................11
References......................................................................................................................................12
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Introduction:
This report will explain about ABC model and its significance in the context management
accounting information. The major aim of preparing this report is to discuss management
accounting model in the form of ABC technique. ABC technique is activity-based costing
technique which is used for proper and effective working management of the company. This
reading will explain about CIMIC Group Limited and application of ABC model within the
organisation. In the further discussion, Features, characteristics and its significance will be
described in order to make proper corporate strategies and to provide effective financial and
operational assistance to achieve company’s strategies.
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a) An explanation of ABC model and its features
Activity Based Costing (ABC) is the costing technique which is used to recognise financial and
costing activity as per company’s requirements and assigns all costs of each activity including
production, sales, purchase and other resources related to products and services. It provides
accurate and exact information and knowledge of cost, administration as per requirement of
actual consumption by each production activity.
Definition:
CIMA (Chartered Institute of Management Accounting) explains ABC is a concept of costing
and evaluating activity which includes tracing and tracking each production cost and resources
consumption as per costing and final output. It is used to organise and interpret cost drivers to
attach manageable costs to their output (Hoozée and Hansen, 2017).
Characteristics and features:
With ABC technique, the company is able to manage elements of entire products, services and
make sound estimates to inform and make an effective and relevant decision related to problem-
solving criteria.
1. Better management: ABC Model is utilised throughout the company for sound financing,
costing and accounting activity. It is modelling process, adopted for the full scope as per partial
and full requirement in the management of the company.
2. Financial decision-making process: ABC model helps the company to identify inefficiency
and problems within the management. It supports the company to recognise more resources for
effective allocation in order to make profitable financial and production decision (Hoozée and
Hansen, 2017).
3. Cost control: ABC model are used to control over costs related to administration, production
and other financial activity of products and services. It figures out unnecessary process to
mitigate risk and increase essential steps of costs.
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b) An explanation of how ABC model aligns with the current goals and strategies of the
company.
With the use of ABC technique, CIMIC Group can apply ABC model to identify and eliminate
those services and products which are an unprofitable and unnecessary process. It lowers the
prices of those products which have higher prices as per services portfolio. It also helps and
eliminates production and services procedure that are ineffective and make the proper allocation
of each production and processing concepts for higher and better yield. In the CIMIC Group, the
ABC methodology defines and assigns all organisational resources cost and as per production
requirements. ABC is the tool which is used for product and service understanding at profit and
market based and for the betterment of production processes (Afzal, et. al., 2017).
i) An identification of the company’s mission and objectives:
CIMIC Group: CIMIC Group (ASX: CIM) is the world largest infrastructure, mining resources
and services providing company ’s mission and objective are given as below:
Objective and principle:
CIMIC has also an investment of 45% in market shareholding in the HLG shareholding.
Company major objective is to increase its market shareholding through business expansion. The
company believes in integrity, Accountability, Innovation and Delivery. This objective helps the
company to identify business actions for CIMIC operation and guide such action to enhance
company’s productivity and efficiency. Each of these objectives is mean to be underpinned by a
continuous focus on safety which can be fundamental to CIMIC’s operation (Dai, 2017).
Mission:
The company mission is to generate and corporate sustainable returns and expected governance
for shareholders and external users by offering and delivering projects for their clients by
providing safe, rewarding safe and fulfilling better careers for employees.
Company’s missions are:
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1. Providing support, safe and positive flexible working place.
2. Providing supportive and collaborative culture which would be engaged in the superior
performance of the employees.
3. Proper delivery of technical and financial excellence by the creation of innovative and
successful invention and solutions.
4. Generating sustainable cash-flows and recognising funding requirement which could help in
evaluating values for shareholders.
ii) An identification of the company’s corporate strategies
CIMIC group Limited is the company which ensures that comprehensive and cognitive series of
policies, accounting principles and procedures relating to the operational, economic and
corporate guidelines. Corporate Strategy of the company includes financial ethics and code of
standards which support to recognise risk management to reduce it and combat other managerial
risks. CIMIC Group Limited is basically responsible for offering and delivering all operating
parameters related to business entities that include setting financial, operation and production
control, mitigating risks factors, conducting audits and investment overview (Tedla and Patel,
2018)
Management of risks is the major key element in the corporate strategies of the CIMIC Group
including all business strategies to manage it as a key contributor to the success. CIMIC risk
management framework is tailored to the business collaboration and effective strategies
embedded largely in order to align with the existing process to the company’s corporate
objectives. As per corporate government statement 2017, CIMIC Group’s corporate compliance
related to core principles of business operation can be identified easily through the use of ABC
model.
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iii) An explanation of how ABC model assists in achieving the company’s strategies:
according to the managerial and business environment of CIMIC Group, it is all triggered by
global competition and accounting innovation with the use of financial and accounting
collaboration of various techniques in the business, ABC model is one of them. ABC model can
use in the CIMIC group as per company’s demands and performance by providing them relevant
data, information about costs and performance related to company’s activities, products and
services procedures (Afzal, et. al., 2017).
1. ABC Model helps to design product and services to meet customers and company’s both
requirements and expectations. It delivers original and accurate facts to enhance productivity and
delivery of profit.
2. It provides signal and assurance where either rapid and continuous benefit or regular
improvement would be made or not regarding production, efficiency and speed. That company
needed.
3. Proper guidance of product mix including marketing, production and investment related to
products features, designs, quality and delivery process.
4. Effective support for negotiation, distribution and services activity to increase marketing and
promotion process for targeted audiences and customers (Kumar and Mahto, 2013).
5. The utilisation of ABC model for valuation of inventory and measurement of administrative
costs related to goods and services by financial reporting. It involves external and internal
circumstances with investors, creditors and regulatory authority.
6. Estimation of the costs is the major part and work of ABC tools which support in managing
and observing costs of products, services and customers oriented needs in order to understand
and collaborate and improve economics operations.
7. it is a medium of providing accurate and timely cost and finance related information by
impacting economic feedback to the management and operators regarding products and
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managerial efficiency to make business more strategic and helps CIMIC group in making
operational improvements.
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c) Provide at least two (2) recommendations about the implementation of ABC model for
CIMIC Group:
ABC activity-based costing can be defined as the methodology of financial and costing activity
which can be used to measure cost performance of activities, product and services related to cost
resources and object. Such resources can be recognised with the help go ABC analysis related to
administrative, production and sales activities of the company it usually identifies cost drivers
and their relationship with company’s costing activity. CIMIC Group can be allowed to measure
costs of the activities used for the production and with measuring approximate relationships with
production as per production and other department requirements.
Proper recommendation for CIMIC group in the context of ABC model:
1. In today's’ competitive environment, CIMIC Group requires such kinds of systems as cost
management tool in order to access relevant theory and priorities related to cost information to
survive in the market. So the ABC systems are more relevant and flexible for the CIMIC
business for providing them useful and accurate cost information to meet cost obligation related
to cost of the product, services, processes, distribution channels and market segments and cost
projects for a true measurement of cost to reduce unnecessary cost and increase effectiveness.
2. ABC Tools can also be taken as an organiser which can be recommended for economic,
normative and financial deterministic reasons. ABC Model is useful for the CIMIC group to
determine their corporate objectives and maintain the level of the flexible working environment.
It is able to complete the demand of fundamental mind shift by the management. It allows the
CIMIC group to make continuous improvement by increasing cost awareness, understanding
funds requirements and superior allocating of overhead related to the top most cost objects
(Stefano and Casarotto Filho, 2013).
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d) Apart from ABC model, suggest one other management accounting tool suitable for
your company and justify it.
Apart from the ABC model, TDABC is the financial and management accounting tool which can
be utilised as an improvised version of ABC. Time Driven Activity Based Costing is the
subsequently defined as a disciplined focused management tool which can be adopted by CIMIC
group to improve those values which are provided to the customers. And profit could be
enhanced by delivering such value in an effective manner (Bagherpour, et. al., 2013). TDABC
includes cost driven analysis, activity analysis and performance measurement by evaluating best
resources of data. TDABC is the management tool which is used to allow to company to focus
how to redirect and improve the use of resources by an increment in values of resources created
for customers and other stakeholders.
TDABC is adopted for managing all work into two part first for operational improvement
decision and second would be strategic improved decisions.
1. Operational management and improvement decision can be used to make doing a thing right
by performing activities more efficiently.
It includes:
 Activity management
 Business operational management (Business re-engineering)
 Total Quality
 Performance management
2. Strategic improvement decisions: TDABC tools are used to manage to do the right things by
choosing such activities that could be performed through following things:
 Product design
 Product plus customers mix
 Supplier relationships (including prices, order size, delivery and packaging)
 Market segmentation (Abad, 2016).
 Distribution Channels
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TDABC can be adopted by the managers of CIMIC group to perform well and evaluate financial
and costing meeting ability of the company. Management accountants of CIMIC group could be
Able to perform an effective role in the management of the company through TDABC technique
and designing skills. They can easily identify what is appropriate for the company and beneficial
to protect the management and strategies from outside fluctuations. CIMIC Group will be able to
judge the level of market trends and economy by adopting this technique through recommended
methodologies for the relevant assignment related to understanding of costing information in the
form to support efficient and effective changes occurred in the management process while
implementing TDABC in the CIMIC group and Company (Bagherpour, et. al., 2013).
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Conclusion:
This report has been prepared to describe managerial accounting in the terms of evaluating,
concluding and measure the financial performance of the company. This report study has been
revolved around CIMIC Group which needs to evaluate their market position and figure out
adaptability of costing systems. This report has also provided proper execution and
recommendation for utilising ABC tool in the CIMIC to make management more improvised and
well performed. Apart from the ABC management tool, this reading mentioned about Time-
driven activity-based costing tool and it features to be utilised in the CIMIC group in order to
make useful understanding of costing information and relationships to support both systems ABC
and TDABC for their application in the management of the company.
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