Reflective Journal: Managerial Accounting, Standard and Target Costing

This reflective journal explores the application of managerial accounting principles, specifically focusing on standard costing and target costing methods. The student analyzes the use of these methods in two case studies: Active Sports Life (ASL) and IIT Automotive. The journal details the benefits of standard costing in budgeting and cost control, including variance analysis and price fixing. It also discusses the challenges of implementing differentiation strategies. The journal further examines target costing, its role in product planning, and its integration with value engineering. The student recommends process costing and job costing as additional methods and concludes by highlighting the importance of costing systems in decision-making and revenue generation. The journal references several academic sources to support the analysis.

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

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Reflective Writing
The assignment that I have done is based on the purpose and use of the management
accounting system, and the usefulness of it through which it will help the managers in taking
any business decisions. The articles that which I have talked about are the standard costing
and target costing. The organizations upon which the article are based are Active Sports Life
(ASL) and IIT Automotive. In the Active Sports Life (ASL), the approach of standard costing
has been applied and in the IIT Automotive the target costing approach has been applied.
On discussing about the article, I have gained much more knowledge about the
standard costing and target costing and how it helps in the operations of an organization. In
an organization, I have observed that the standard costing has been used as a tool through
which the manager or the higher management does use at the time of budgeting. In the
standard costing, the cost that are used in the process are materials, staffs and there are also
other costs which is needed at the time of establishments, they are labor and material. All the
accounting standards are determined previously at the time of budgeting and before the
production process begins. I have calculated variance with the help of standard costing and
actual costs, it can be calculated by comparing the actual costs and standard costs. At the end
of the financial period, the direct costs are being calculated, though the actual amount and
direct labor has been calculated set much earlier. With the help of the features of standard
costing, I have seen that the organizations are getting benefitted. With the help of standard
costing, the management team does get major help at fixing the prices at the time of pre-
production.
In implementing the standard costing process, there were certain formations that has
been done which I have seen it helps in the cost control and it also meet the requirements of
several stages. The organization that I have selected is Active Sports Life (ASL), which does

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helps in operational management and a better cost control. The current technique which I
have seen in the article is with the Total Quality Management, it does help in focusing the
relationship with the consumers and also see the complaints of production process. There
were major improvements that has been done, so that it helps in meeting the needs of
consumers. On reading the statement of Operations Manager of ASL, it has been seen that
there were certain cost cutting which has been done so that it helps in achieving the customer
services. Certain challenges that I have observed in reading this article on the Active Sports
Life is that, there were uses of differentiation strategy through which the organization gets
successful, but it does not help in the reduction of costs. There should be a need of
continuous monitoring which will help in the operational process. There are also training
given to the employees of the organization that make the work so easier and they become
more efficient in performing their activities.
Another article which I have talked about is with the target costing and organization
which I have selected is IIT Inc. There are certain stages of the production that includes
product planning, designing and also production. With the help of target costing, it does help
in the various stages of production as the cost has been targeted before. At the time of
budgeting, there are several divisions which includes finance, engineering, designing of
product, production and cost accounting. There is major support of the higher management
authority so that it does helps in the making the allocation of resources. In calculating the
target costing, the equation which I have used is [Target Price – Target Profit = Target Cost].
In considering the factors there has been various management policies that are being set so
that it helps in fixing the profit margin and also set the prices at which the goods have been
sold. I have also seen that if the target cost is much higher than the targeted costs, then there
has been various implementation of value engineering in the IIT Inc. It does helps in the

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stages of production and the quality is also being taken care of so that the consumers are
getting quality products.
In an organization, there are various ways through which the costing methods has
been implemented, that helps both in production and operation. Two of the methods of
costing that I will recommend to both of the organizations are the process costing and job
costing. In the system of process costing, it helps in the determination of the costing process
and there are three types of this costing which includes weighted average costs, standards
costs and first-in and first-out costing (FIFO). I personally believe that it will be much better
for the organizations which will have to change the process in the various systems. Another
system that I want to recommend is the job costing, which does helps in managing and
tracking the process with a better processing in management. There is also inclusive of
materials, labor, equipment’s which does help in the categorization of products. I have
observed that at the time of implementation, there has been three P’s which includes Plan,
Practice and Probe.
In concluding the article, which I have discussed above with the standard costing and
target costing and their implications in Active Sports Life and IIT Inc., it has been seen that it
does helps in the cost cutting and also in earning more revenue. With the help of the two
system that is recommended which are job and standard costing will be beneficial for the
organization in decision making process and also in the production.

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Bibliography
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and future. Management Review Quarterly, 68(3), pp.321-354.
Ahrens, T., 2018. Management controls that anchor other organizational
practices. Contemporary Accounting Research, 35(1), pp.58-86.
Al-Qady, M. and El-Helbawy, S., 2016. Integrating Target Costing and Resource
Consumption Accounting. Journal of Applied Management Accounting Research, 14(1).
Anghelache, C., Căpușneanu, S., Topor, D.I. and Marin-Pantelescu, A., 2019. Target Costing
and Its Impact on Business Strategy: Computer Program for Cost Accounting and
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Global.
Bargerstock, A. and Shi, Y., 2016. Leaning away from standard costing. Инновации в
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Bargerstock, A. and Shi, Y., 2016. Leaning away from standard costing: Lean companies
need value stream costing and new performance metrics. Strategic Finance, 97(12), pp.38-46.
Clifton, M.B., Townsend, W.P., Bird, H.M. and Albano, R.E., 2019. Target costing: market
driven product design. CRC Press.
Clifton, M.B., Townsend, W.P., Bird, H.M. and Albano, R.E., 2019. Target costing: market
driven product design. CRC Press.
Dugdale, D., 2017. Management control systems: Theory and lessons from practice. In The
Routledge Companion to Performance Management and Control (pp. 11-38). Routledge.

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Eisenberg, Paul. (2016). IMPLICATIONS OF STANDARD COSTING SYSTEM IN
MANUFACTURING: A CASE STUDY. Journal of Applied Management and Investments.
5. 162-165.
Gc, V.S., Suhrcke, M., Hardeman, W., Sutton, S. and Wilson, E.C., 2018. Cost-effectiveness
and value of information analysis of brief interventions to promote physical activity in
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Hamid, F.A.H. and Mansour, F.E.H., 2016. The Impact of Target Costing System on
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cluster randomised controlled trial. BMC public health, 16(1), p.618.
Jayaraman, R., 2016. Project cost control: a new method to plan and control costs in large
projects. Business Process Management Journal, 22(6), pp.1247-1268.
Lowe, E.A., 2019. On the idea of a management control system: integrating accounting and
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Maskell, B.H., Baggaley, B. and Grasso, L., 2017. Practical lean accounting: a proven
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Melo, R.S.S.D. and Granja, A.D., 2017. Guidelines for target costing adoption in the
development of products for the residential real estate market. Ambiente Construído, 17(3),
pp.153-165.

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Nowak, E., 2016. Deviation analysis as an instrument of cost control in an
organization. Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu, (434), pp.140-
147.
Pollard, W.B., 2018. An Active Learning Approach to Teaching Job-Order
Costing. Management Accounting Quarterly, 19(4), pp.10-10.
Sargento, A., Querido, A.I.F., Carvalho, H., Santos, I., Reis, C., Maximiano, M., Frederico,
M., Bernardes De Oliveira, S.M. and Leal, S., 2018. Defining clinical conditions in long-term
healthcare as a first step to implement Time-Driven Activity Based Costing (TDABC). BMC
Health Services Research, (18 (2)), pp.75-76.
Shi, Y., 2016. LEANING AWAY FROM STANDARD COSTING. Strategic
Finance, 97(12), p.38.
Üç, M. and Elitaş, C., 2016. Life cycle costing for sustainability. In Handbook of research on
waste management techniques for sustainability (pp. 96-107). IGI Global.
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The articles from where the literature review is being done are stated here:
Active Sports Life (ASL)
Eisenberg, P., 2016. Implications of Standard Costing System in Manufacturing: A Case
Study. Journal of Applied Management and Investments, 5(3), pp.162-165.

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Paul Eisenberg, L.L.M., IMPLICATIONS OF STANDARD COSTING SYSTEM IN
MANUFACTURING: A CASE STUDY.
IIT Automotive
College.cengage.com (2020). [online] College.cengage.com. Available at:
http://college.cengage.com/accounting/resources/students/readings/geier.htm [Accessed 13
Jan. 2020].