University Accounting Assignment: Management Accounting Articles

This report, prepared as a memo to Paulina Presto, analyzes two research articles on management accounting techniques for Small and Medium-sized Enterprises (SMEs). The first article, by Jayeola & Onou (2014), examines the implementation of target costing in SMEs within the Ogun industrial metropolis, highlighting its positive impact on profitability and sales turnover. The research employed a cross-sectional survey to gather data from 138 SMEs, revealing that target costing improves market share and overall business performance. The second article, by Kocakulah et al. (2017), explores the benefits of activity-based costing (ABC) in achieving a competitive edge in the global market. It contrasts ABC with traditional costing, emphasizing ABC's accuracy in cost allocation and its facilitation of future planning by identifying inefficiencies. The report details the methodologies and key findings of each article, along with their implications for advising clients on enhancing business performance through strategic cost management. The report also includes a personal reflection on the assignment and its learning outcomes.

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

1MANAGEMENT ACCOUNTING
Table of Contents
MEMO.......................................................................................................................................2
Summary of first article.........................................................................................................2
Summary of second article.....................................................................................................4
Business implications of paper on clients..............................................................................6
Personal Reflection....................................................................................................................7
Reference....................................................................................................................................8

2MANAGEMENT ACCOUNTING
MEMO
To: Paulina Presto
From:
Date: March 24, 2020
Subject: Research Articles on SMEs and management accounting
Dear Paulima,
I have come across two articles from searching function of library. This article is
chosen by searching the key words “Management accounting”, “Small and Medium sized
enterprise”, “Activity-based costing” and “Target costing”. The first article I have chosen is
(Jayeola & Onou, 2014) that is about implementation of target costing in SMEs in Ogun
industrial metropolis and the second article chosen is (Kocakulah et al. 2017) that is about
using of activity-based costing for achieving competitive edge in global market place.
Summary of first article
The paper by Jayeola discusses relationship that existed among the technique of target
costing and profitability and turnover of small and medium scale enterprise in the Ogun
industrial metropolis. Target costing is considered to be the practice of planning of cost,
management of cost and reduction of cost, whereby planning and management of cost is at
design and development cycles of costs in comparison to later stages of the development and
management of product. Its main objective is enabling executives of business for managing
profitability of business in the competitive marketplace. The target costing technique
implementation to the operations of business had tracked down cost drivers and led towards
reduction of cost. It implied that target costing technique implementation had significantly
improved sales turnover of investigated enterprises. Moreover, target costing technique

3MANAGEMENT ACCOUNTING
implementation had also improved profitability of the SMEs in the Ogun industrial
metropolis. It has been shown in the study that for enhancing business turnover,
implementation of the target costing technique helps in providing good strategy of market
research that is important for the competitive cost goals for the pricing that in turn is most
significant for setting goals of cost for the dynamic reduction of cost and improved market
share. The result of analysis of this paper indicates that adoption of the appropriate
techniques of cost management by surveyed business activities of enterprise had improved
market share of products and services of enterprises.
This research was conducted by employing cross-sectional survey. In this, collection
of data was derived from operations of the SMEs. The selection of sample represented
population of data. For this study, total 138 SMEs was selected from three-senatorial districts
in the Ogun industrial metropolis. The investigation of SMEs includes agro-allied, general
trading, confectionery and manufacturing. Further, multiple regression method was used for
exploring relationship between the one continuous dependent variable that is average annual
profit and number of the independent variable that is target costing technique. Lastly, SPSS
was applied for computation of five years figures of the average annual profit as well as
average annual turnover obtained.
The key finding of this research is that enhancement of the performance of business
needs to be considered as part of ongoing strategy and not the core strategy of growth. It has
been found in the research that the target costing implementation has significantly improved
position of liquidity and level of profitability of the enterprises investigated. Further, this
research concludes that implementation of the technique of target costing would enhance
sales as well as profitability of SMEs business in the Nigeria. These finding conforms to the
opinion of emphasizing significance of exploring variables of the cost management technique
as well as effects of the organizational culture for enhancing profitability and survival of

4MANAGEMENT ACCOUNTING
business. It also asserts that some benefits of the target costing could be explored for coping
up with the dynamic business environment of the SMEs in the developing economy for
improving profitability.
The implication of this research paper on the client is that she can be able to gain her
understanding regarding how target costing will be helpful in enhancing the performance of
business. The client will be able to analyze best possible way for making or acquiring
products at lowest costs, as cost minimization is most common financial goal of any business
(Jayeola & Onou, 2014).
Summary of second article
The introduction of activity-based costing has enabled the organizations for
identifying true costs of the processes and products and making sound decisions related to
expense and profitability of products that is produced by them as well as effectiveness of
business and manufacturing processes. The paper by Kocakulah has explored benefits of the
activity-based costing versus systems of traditional costing and presented arguments for
potential benefits to millions of the SMEs of world from the implementation of ABC. ABC
assists the entities in costing their products more accurately. However, system of traditional
costing relies on simple measure for allocation of the overhead. Contrary to the traditional
costing, ABC relies on the cost pools and drivers of cost for assigning costs according to the
overhead usage.
The most significant component of the activity-based costing is using of cost driver.
In order to manage the operations of business effectively, accurate costing is critical. The fact
that whether ABC is best system of costing or nor for entity, depends on implementation cost,
its practicality and obtained information through data collection of future. The management
needs to understand limitations and benefits of their system of costing. If critical decisions

5MANAGEMENT ACCOUNTING
are based on incomplete or faulty decisions then there are more chances to undermine the
current position of company rather than improving it. The entities adopting ABC technique
will find that does not only focusses on past, but it also facilitates future planning by the help
of pointing out inefficiencies that lowers the profits and impacts the competitiveness of
company.
The research was conducted by developing framework for the implementation of
ABC in the SMEs. The independent variables in this framework is SMEs characteristics and
challenges of ABC implementation. The requirements of ABC implementation are variables
of implementation process and outcomes of ABC implementation are dependent variables.
This framework of research suggests 3 potential tracks of the research. The first is that the
outcomes-focused research examines direct impact of the SMEs characteristics and
challenges of ABC implementation on the outcomes of ABC implementation such as impact
of the employee resistance on positive impact of the ABC on continuous improvement and
business performance. Second, the process-focused research examines impact of the SMEs
characteristics and challenges of ABC implementation on process of ABC implementation
itself such as impact of the informal and efficient internal communication on analysis of the
critical analysis during the process of implementation. Third, the outcome-based research
examines impact of the characteristics of SMEs and challenges of ABC implementation on
process of ABC implementation that in turn influences achieving outcomes of ABC
implementation such as impact of external linkage availability for consulting on critical
activities analysis during process of implementation.
The key finding of this paper includes identification of various factors both
positive and negative, which impacts implementation of ABC and outcomes in the SMEs.
This paper has found crucial role of the SMEs in the worldwide free market economies and
potential for the activity-based costing for supporting SMEs in becoming and remaining

6MANAGEMENT ACCOUNTING
competitive in global economy, as with the growing population of world, success of the
SMEs is representing 95% of the free-market enterprises around world, which is increasingly
important for providing livelihood and opportunities required.
The implication of the research on the client is that the she will understand that
how resources of the company can be assigned to the activities as well as activities to the cost
objects. This increases her knowledge of cost drivers and overheads and makes costly as well
as non-value adding activities much more visible for eliminating or reducing them. It will
help her in allocating overhead expenses in the managerial accounting (Kocakulah et al.
2017).
Business implications of paper on clients
Hence, both the papers have shown uses of costing techniques for enhancing
profitability and performance of business as well as decision-making in respect of SMEs. The
SMEs uses costing techniques for competitive edge, meeting requirements of customer and
efficiency of cost management. If the client uses target costing technique, then will help the
business to improve the market share and it will also lead towards increased wealth of the
stakeholders of the enterprises. This technique can be used for gathering price and market
information from the customers for determining specifications of product and target selling
price. However, if ABC technique is used by the client, then it will help in making long-term
strategic decisions and day-to-day operations of business. This help the business in improving
accuracy of cost and assigning cost based on the usage of resources and activities.

7MANAGEMENT ACCOUNTING
Personal Reflection
This assignment made me realize that costing technique plays significant role in
company in measuring and improving the efficiency, controlling the costs and making
decisions based on the technique, which ultimately results in profitability of overall
organization. I find the process of finding article by looking at the article by putting keywords
that links management accounting and SMEs. I then founded two articles from library, in
which one used target costing and the other one used ABC costing. Further, it was easy for
me to understand both the articles because both of the articles clearly described the costing
techniques and the findings of its implementation in SMEs. Moreover, I could use the
knowledge gained from the academic research forward, when I will be working in the
company and practically using these techniques for enhancing company’s profitability and
reducing costs. The other takeaway that I have learned from writing this assignment is how to
analyze research papers, how to make business memo and how to take decisions of company
relating to costing techniques.

8MANAGEMENT ACCOUNTING
Reference
Jayeola, O. L. A. B. I. S. I., & Onou, D. P. (2014). Implementing target costing in small and
medium scale enterprises in Ogun industrial metropolis. International Journal of
Humanities and Social Science, 4(8).
Kocakulah, M. C., Foroughi, A., Stott, A., & Manyoky, L. (2017). Activity-Based Costing:
Helping Small and Medium-Sized Firms Achieve a Competitive Edge in the Global
Marketplace. J Account Mark, 6(245), 2.