Individual Assignment: Managerial Accounting Report, T3 2019

This report is a comprehensive analysis of managerial accounting techniques, specifically focusing on standard costing and target costing methods. The assignment includes a reflection on the student's learning experience, exploring the application of these costing methods in a real-world company, Woolworths. The report delves into the features and relevance of standard costing as a planning and control tool, while also examining target costing in an uncertain business environment. It compares and contrasts these two methods, offering recommendations for control purposes within the chosen company. The analysis incorporates insights from peer-reviewed articles, providing a practical understanding of how these accounting systems aid managers in making informed decisions and achieving business goals. The student reflects on the challenges faced in understanding the practical application of the costing techniques, and concludes that standard costing is more suitable in today’s uncertain business environment.

Running Head: MANAGERIAL ACCOUNTING
MANAGERIAL ACCOUNTING
Name of the Student
Name of the University
Author Note

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Table of Contents
1....................................................................................................................................2
Reflection of Two Journal.............................................................................................2
2....................................................................................................................................2
Experience....................................................................................................................2
3....................................................................................................................................3
Reflection on things Learned from Individual Assignment...........................................3
Bibliography..................................................................................................................4

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1.
Reflection of Two Journal
Standard costing and target costing are the two widely used costing
techniques by most of the organization. I, therefore, have chosen two peer reviewed
articles for comparing and analyzing these two costing techniques with the real or
actual company. For this, I have selected Woolworths Group. While doing analysis, I
was able to gain good and clear understanding about the subject. However, earlier I
was having theoretical understanding of the subject but later when I analyzed and
reviewed the articles in respect of real company, my perception towards the topic
was changed. I cannot deny the fact that I have not faced any difficulties. I have
faced difficulties because there is great different in gaining theoretical practically
implementing it. However, after I have thoroughly analyzed the topic, I have gained
good understanding of it.
The first article by Armitage is about relevance of the standard costing. The
management accounting practices uses is done not only big entities but also in
medium and short entities. The effectiveness in decision making can be possible, if
the modern practices of accounting such as standard costing can be used in
Woolworths. The big entities incurs costs in various activities of business operations,
so these entities needs to control their costs. Standard costing is the best technique
in planning flows of cash and controlling company’s costs. If Woolworths uses this
technique then they could be able to take key decisions by the proper estimation of
cost. Hence, I have learned that standard costing helps in doing comparison of
standard with actual performance. It maintains record keeping, carries inventory at
standard cost and reduces cost. The standard costing is mostly used in big entities
because it helps to achieve strategic effectiveness and making effective plans
accordingly.
The selection of second article was based on relevance and uses of target
costing in the uncertain environment of business. The article mentioned that target
costing is beneficial only for the agribusiness, as this helps their business for
enhancing ability as well as productivity. This technique gives competitive
advantage. However, there are other vital tools of managerial accounting, for
example ABC costing, total ownership costs and product life cycle costing that are
more vital and beneficial. Therefore, I was able to understand from this article that
despite of the fact that target costing helps in giving competitive advantage, the
process of this technique is time-consuming and environment of business fluctuates
by the time targets are set. In the long-run, this technique is not suitable. According
to me, Woolworth Group should not use target costing in the today’s competitive
environment.
2.
Experience
I was having amazing experience in learning about the costing methods.
While analyzing and reviewing article, I came to know regarding different aspects of
topic in relation to the chosen company. I understood how in real life, company
applies both the costing techniques that is standard and target costing. I have faced
great difficulties and challenges in understanding about real application of both

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costing techniques by the actual company. The challenge in understanding was that
how standard costing is different from target costing. Moreover, I have gained insight
that target costing is desired cost of company and standard costing is predetermined
cost of company. In current working environment, target costing technique is not
suitable, as there are requirement to make changes in cost of production. However, I
get to know that standard costing usually works under specified working conditions,
which can be achieved. The evaluation of target costing is done by deducting
required profit with external prices of selling and then backward. Compared to this, in
evaluation of standard costing, there is no consideration of profits and prices
because the focus of standard costing is done inwardly. Moreover, GAAP and
financial reporting are followed in standard costing, but contribution of profit margin
and management accounting is followed in target costing. I, therefore, experience
that for the large companies like Woolworths Group, target costing is not suitable.
3.
Reflection on things Learned from Individual Assignment
I have learned from the analysis of report, article and my experience that
standard and target costing are widely used costing technique. Both the techniques
serves different purposes such as standard costing focuses on controlling company’s
cost and planning budgets whereas target costing keeps its focus on cost reduction
and gaining competitive advantage. However, in the current changing business
environment, standard coting is more relevant costing technique compared to target
costing. In real life, business is operated in the environment that keeps fluctuating.
Hence, in long-run, target costing technique is not effective as it creates unrealistic
burden on company. Standard costing has various benefits compared to target
costing. Standard costing helps to do proper planning and control the cost. This
costing technique is managerial planning tool, which helps to maximize company’s
profit. Therefore, this method of costing is used in contemporary business so as to
make efficient plan by company’s management. I analyzed that this costing method
is effective in preparing budget and it helps to evaluates actual results with the help
of comparing actual budget with standard cost. This coting aims for reducing cost
and controls it so as to maintain lowest cost with effective quality.
If company’s performance is measured with the help of standard costing
method then important actions can be taken for controlling cost through periodic
comparison. In addition, development of cost variances can be possible through
standard costing because of the fact that it develops the attitudes of cost-
consciousness. It evaluates the requirement of labor, material, facilities and services
in the company. If this costing method is applied by company then plans can be
made as per company’s requirements and operations. At last after gaining good
insights on the subject, I can say that standard costing is more suitable in today’s
uncertain environment.

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Bibliography
Armitage, H.M., Wbeb, A. and Glynn, J., 2016. The use of management accounting
techniques by small and medium‐iszed enterprises: a field study of Caandian and
Australian practice. Accounting Perspectives, 15(1), pp.31-69.
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of
management accounting and its integration into management control. Accounting,
Organizations and Society, 47, pp.1-13.
Chungyalpa, W. and Bora, B., 2015. Towards Conceptualizing Business
Strategies. International Journal of Multidisciplinary Approach & Studies, 2(1).
Cooper, R., 2017. Supply chain development for the lean enterprise:
interorganizational cost management. Routledge.
LIMA, A.C., DA ISLVEIRA, J.A.G. and FERRO, S.H., 2014. TARGET COSTING:
EXPLORING THE CONCEPT AND ITS RELATION TO COMPETITIVENESS.
Maskell, B.H., Baggaley, B. and Grasso, L., 2017. Practical lean accounting: a
proven system for measuring and managing the lean enterprise. Productivity Press.
Özyürek, H. and Yılmaz, M., 2015. Application of Costing System in the Small and
Medium Sized Enterprises (SME) in Turkey. International Journal of Economics and
Management Engineering, 9(1), pp.389-397.
Stone, D., 2014, May. Cost Accounting Systems: A Holistic View from the Top.
In Proceedings of Global Interdis-ciplinary Business-Economics Advancement
Conference (GIBA), Clearwater Beach, Florida, USA (pp. 94-102).