Managerial Accounting Report: ABC Model Analysis of Tassal Group

This report provides a comprehensive analysis of the Activity Based Costing (ABC) model in managerial accounting. It begins with an explanation of the ABC model, its features, and characteristics, emphasizing its role in cost allocation and its widespread use in both manufacturing and service industries. The report then examines the mission, objectives, and corporate strategies of Tassal Group Limited, an Australian salmon farming company, and demonstrates how the ABC model can align with and support the achievement of these goals. The report outlines the implementation of the ABC model within Tassal Group, including the identification of costing activities, resources, and cost objectives. Furthermore, it recommends two key strategies for effective ABC model implementation and suggests budgetary control as an alternative management accounting tool. The report concludes by highlighting the benefits of budgetary control in planning, monitoring, and controlling various activities related to Tassal Group's operations.

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

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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.

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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 addition, business organizations use this ABC model for analyzing the
profitability from the customers, for the implementation of target costing and others (Dale and

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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).
5. The adoption of ABC model helps the business organizations in dividing their costing
activities in sub activities and develops the cost pools that provides assistance to carry
on the costing operations of the companies.

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b) Alignment of ABC Model with the Goals and Strategies of Tassal Group Limited
As per the above discussion, business organizations can achieve their goals and
objectives with the help of ABC model. The following discussion shows the mission, objective nd
corporate strategy of Tassal Group Limited.
i) Mission and Objective of Tassal Group Limited
The mission of Tassal Group involves in bringing the sustainable health and wellbeing to
the communities and the environment in which the company is operating and the customers
with the help of superior quality of product. For this reason, the aim of the company is to work
along with their employees, suppliers, customers and stakeholders to achieve the mission
(tassalgroup.com.au 2018).
For this reason, the objective of the company is to collaborate with all the stakeholders
of their organizations so that they can ensure the achievement of the goals and objectives of
the business organization. Another major business objective of Tassal Group is the promotion
of Zero Harm to their employees as to ensure safety is the number one priority of the company
(tassalgroup.com.au 2018).
ii) Corporate Strategy of Tassal Group Limited
It needs to be mentioned that Tassal Group has adopted the right set of corporate
strategies from four major perspectives; they are environmental, operational, financial and
social perspectives. These strategies are discussed below:

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o The main strategies focus of Tassal Group is the delivery of sustainable growth along
with global best practice returns. Thus, the strategic focus areas of the company are
environmental, financial, operational and societal value (tassal.com.au 2018).
o Another major strategy of the company is to keep gaining high profit margin along with
cost efficiencies so that the company moves closer to the global best practice return
from the fish performance. The major subparts of this strategy are to ensure
optimization of salmon sales return and to deliver strong gains in salmon growth. These
are the major corporate strategies of Tassal Group (tassal.com.au 2018).
iii) Role of ABC Model to Achieve the Strategies of Tassal Group Limited
The ABC model has gain major popularity for the fact that it can be applied in every kind
of company irrespective of manufacturing organizations or service providers. However, most of
the use of this ABC model can be seen in the manufacturing companies all over the world.
Considering the business operations of Tassal Group, the company can be categorized in the
manufacturing or processing organizations as the company involves in the processing of salmon
fish. It is possible for the management of Tassal Group to take the opportunity of cost saving
along with the fulfillment of organizational objectives by implementing ABC model in the
organization (Carli and Canavari 2013).
Three major sections can be seen under the ABC model; they are costing activities,
costing resources and cost objectives. In case of Tassal Group, the resource section of ABC
model includes the company’s expenditures from different processing departments. The
grouping of this departments can be done in different segments like the farming department,

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manufacturing departments, processing department, packaging departments and others along
with some of the common departments like the human resource department, finance
department, information technology department and many others. Thus, for the purpose of
cost computation, it is required to describe all these shared services. The next process involves
in the transfer of costs to the departments by the cost accountants. In addition, all the other
farming facilities of Tassel Group can be grouped by this cost. Thus, this aspect indicates
towards the fact that the implementation of ABC model increases the scope for cost allocation
for the company (Ríos-Manríquez, Colomina and Pastor 2014).
In the farming and processing operations of Tassal Group, the description of the costing
activities can be provided based on the farming operations along with the processing
operations of the salmon fishes. For this reason, these activities can be the purchase of farming
equipments, equipments for processing the salmon fishes, purchase of the foods of the salmon
fishes, purchase of the necessary medicines, chemical and others. For this reason, after the
definition of all of these farming and processing related operations, it is require segregating
them into various activities of ABC model (Sigüenza Guzmán, Abbeele and Cattrysse 2014). For
the purpose to place the cost activities, the next step is to give name and time the cost
activities. In this criterion, it is require considering the size of the batches so that the costing
activities can be carried out in the batch mode. Hence, the ABC model does the grouping of the
costing activities based on each department. In the presence of all these aspects, it will be
possible for the management of Tassal Group for the reduction of extra cost burden along with
the new technology adoption cost.

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The segregation of the cost objective part can be done in two ways. The computation of
the extra costs that the customers are required to pay while purchasing the product of Tassal
Group from different channels is involved in the first section. However, it needs to be
mentioned that the customers are not required to pay the same extra amount for the different
products of the company (Rbaba’h 2013). However, it is required for the management of Tassal
Group to make the computation of the extra cost separately as all the products will not have
the same amount of extra cost. With the application of ABC model, the management of Tassal
Group becomes able in deterring these extra costs so that the pricing of the products can be
done more accurately.
c) Recommendation on Implementing ABC Model
One major contributor that ensures the correct implementation of ABC model is the
extended support from the senior management of Tassal Group. The management of the
company needs to consider the fact that it is not the responsibility of the accounting
department to carry on the processes of ABC model implementation as the cost-functional
team of the company is accountable for the implementation of ABC model (Campanale,
Cinquini and Tenucci 2014). For this reason, it is needed for Tassal Group to form a team from
taking members from each department of the company so that effective data generation can
be done with the assistance of ABC model. If required, the company can take the help of
outside experts to get assistance in the ABC model implementation process.
Another factor is the resistance from the employees of Tassal Group for the
implementation of ABC model. In the presence of effective support from the management,

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effective implementation of ABC model can be ensured. Secondly, the employees of Tassal
Group will not provide enough importance to the ABC model and will not comply with the
systems of this ABC model if the senior management does not shows support towards the
implementation of this costing model. (Hardan and Shatnawi 2013). Apart from this, gaining
effective understanding about the existing costing model is required for the effective
implementation of ABC model. In order to ensure effective cost allocation, the management of
Tassal Group is needed to include the cross-functional team in the implementation process of
ABC model.
d) Alternative Management Accounting Tool for Tassal Group Limited
Apart from the ABC model, the management of Tassal Group can adopt the strategy of
Budgetary Control that is a major management accounting tool. The management of Tassal
Group should adopt this model as budget is considered as a crucial part to plan and control the
production processes of the companies. Apart from this, the management of Tassal Group can
use budgetary control in planning, monitoring and controlling different activities related to the
farming and processes of salmon fishes (Otley 2015). The benefits of budgetary control are
shown below:
1. The management of Tassal Group always has the option to integrate the efforts of their
employees and staffs to achieve the organizational goals and objectives. It implies that
the synchronization of all the activities can be done with the organizational objectives
in the presence of budgetary control (Maas and Van Rinsum 2013).

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2. In case the expenses of any specific department cross the budgeted amount, the
presence of budgetary control ensures that the management takes corrective
measures to revive the situation.
3. It would be possible for the management of Tassal Group to gather knowledge and
information about the past events so that this information can be aligned with effective
techniques to minimize the future possibilities of these errors. From this, the
management of Tassal Group can get the option to develop effective strategies
(Fullerton, Kennedy and Widener 2013).
Conclusion
The above discussion indicates towards the fact that the implementation of ABC model
provides the business organizations with the opportunity to control their organizational costs in
an effective manner so that the organizational goals and objectives can be effectively achieved.
It case of Tassal Group, the implementation of ABC model will ensure the cavemen of the
organization’s vision, objectives and strategies like ensuring stable growth, rise in sale of the
salmon fishes and others. For this reason, it is needed to have the full support of the
management of Tassal Group. The above discussion also shows that budgetary control is an
effective alternative management accounting method for Tassal Group.

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References
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