ACC310 Management Accounting Report: X Limited and Cost Analysis

This report analyzes the importance of management accounting in the decision-making process within an organization, focusing on X Limited, a manufacturing entity producing computer tables. The report highlights the issues X Limited faces, particularly the difficulty in selling ordinary tables due to improper costing, incorrect allocation of production overheads, and flawed pricing strategies, leading to higher prices than competitors. The report references traditional costing methods and recommends implementing Activity-Based Costing (ABC) for a more scientific allocation of overheads, leading to accurate cost determination and appropriate product pricing. The analysis draws upon several academic sources to support the proposed solutions, emphasizing the interaction between target costing and ABC, as well as the benefits of ABC in decision-making.

Management
Accounting
Importance of management accounting in decision making
process within an organization.

X Limited and issues faced by it.
• X Limited is manufacturing entity.
• Manufactures computer tables.
• Ordinary and deluxe models of tables are manufactured.
• The sale of Deluxe model is relatively easy.
• However, finds it difficult to sale ordinary tables (Hoozze
and Hansen, 2014).

Reasons behind falling sales ordinary
tables.
• Improper costing.
• Wrong allocation of production overheads.
• Wrong pricing.
• Higher price than competitors’ price.
• Costs as per traditional costing (Cokins, Capusneanu and
Barbu, 2011). .

Recommendations
• Activity based costing.
• Allocation of overhead of scientific basis.
• Determination of costs on ABC basis.
• Pricing the products accordingly (Askarany, 2011).

References
• Askarany, D. (2011). Interaction between Target Costing and
Activity-Based Costing: Is Target Costing a True Costing
Technique?. SSRN Electronic Journal, 2(4), pp.17-21.
• Cokins, G., Capusneanu, S. and Barbu, C. (2011). Decisions
Based on Synthesis Documents Information of the ABC
(Activity-Based Costing) Method. International Journal of
Accounting and Financial Reporting, 1(1), p.112.
• Hoozze, S. and Hansen, S. (2014). A Comparison of Activity-
Based Costing and Time-Driven Activity-Based
Costing. SSRN Electronic Journal, 1(2), pp.12-32.