University Managerial Accounting Report: Costing Techniques Analysis

This report examines the significance of managerial accounting, particularly focusing on standard and target costing techniques. It analyzes the application of these techniques within the context of a steel and iron industry and a construction company. The report highlights the importance of standard costing in comparing expected and actual costs for cost control, and the role of target costing in product design and profit maximization. Through case studies, the report demonstrates how these methods aid in strategic decision-making, planning, and controlling operational activities. The analysis reveals that both costing methods are crucial for determining product costs at the development stage and for achieving business objectives. The report concludes by emphasizing the need for businesses to implement both costing techniques to reduce costs, increase profitability, and maintain a competitive edge in the market, advocating for a structured approach to their integration for effective decision-making.

Running head: Managerial Accounting
Managerial Accounting
Name of the Student:
Name of the University:
Author Note:

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From this report, I learnt the importance of managerial accounting in the
contemporary organization. Since, we know that the management manages the decision-
making process and responsible for the effective implementation of all the activities. For
effective functioning of the managerial activity, two of the most popular cost management
techniques are used by the organization that are target costing and standard costing. In this
article, I get to know about the importance of using standard costing by analyzing one of the
journal article on steel and iron industry and for target costing I have analyzed one of the
construction company. The main purpose of analyzing the two-journal article is to understand
the working and importance of the cost management techniques in the decision-making
process. Standard costing is the costing techniques in which an expected cost is compared
with the actual cost and the company measures actual deviation from the pre-set standard cost
(Panchenko 2017). Implementation of standard costing proves to be extremely beneficial for
the company as we can determine the predetermine performance of the firm and even
adequate budget can be ensured in all the business activities. Target costing refers to planning
process of the firm where various cost techniques are implemented to identify the cost of the
products and services (Sharaf-Addin, Omar and Sulaiman 20140. It is one of the modern
costing techniques and takes into consideration the developmental stage of product life cycle.
According to me, target costing includes the quality of the product and mainly focuses on the
profit maximization of the operational activities. Analyzing both the articles I came across
many similarities between standard costing and target costing techniques. I have reviewed
that both the costing methods are concerned in identifying the cost of product and services.
The management takes help of these techniques to frame an efficient strategic decision-
making by which all the objectives of the business entity can be achieved and even maximum
profits can be ensured by the firm. I have identified that the management used these methods

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because they are of great help to the managers for implementing the planning and controlling
purpose of the operational activities.
I have studied the case study and examined that the British iron and steel industry
uses standard costing tools in its managerial accounting system to develop the entire
accounting framework of the company. The industry has used double entry-booking system
in its business to evaluate price and profit of various departments. The industry faced a
regression period after which the ministry of supply wants to control the unethical activities
of the business such as price fixation and even wants to control the profits of the firm. The
industry was required to use certain new innovative modern techniques in its operational
activities to acquire fruitful results that will be profitable for the business. The ISB stated that
the main reason of failure of the industry is due to using large size equipment in the business.
Implementing standard costing made possible to measure the pre-determined cost and the
measure the cost with the actual cost. The deviation that is obtained was reported to the
management so that proper steps can be taken to reduce cost and increase the profitability of
the industry. In this case study, it is not possible to obtain profits from the trade union
department without having changes in the labour cost. It was decided by the management that
job evaluation method should be used in the business to ensure organizational efficiency.
The British steel and iron industry used various accounting practices in the management to
advance their cost and implementing innovative costing techniques that will measure the cost
incurred with adequate efficiency. I can conclude from this article that the management tried
to control the business operational cost. Even standard cost is compared with the actual cost
to obtain a clear picture of the total cost incurred in the operational activities of the industry.
I have explored an article of Construction Company related to implementation of
target costing. It mainly reflects the identification of the cost incurred during the designing
process of the product. This analysis takes into account the demand of the customers and then

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assign the cost to the product as per the requirement. The demand of a particular product
increases if according to the customer’s the product will be beneficial for them. I have
noticed that target costing mainly deals with the product-designing concept. Target costing
followed a well-sequenced process for implementation of various activities. The process
consists of vision and mission of the product, feature of the product and evaluate the target
profit. Firstly, a rough estimation of all the cost associated to the products are determined,
after that, an estimate is made about what could be the cost that can incur in the
manufacturing and designing of the product. Both quality and prices are taken into
consideration for the manufacturing process. A pre-determined design will always help in
making an efficient decision-making process. As per my opinion in today’s competitive
world, it is extremely important to identify the cost of the product at the development stage,
as it will help to minimize the cost. Even this costing method identifies the present market
condition and help the managers as per the situation. I can conclude that this case study
exhibits an efficient planning system that helps the management in decision-making process.
Hence, from the discussion I can conclude that to sustain for a long run and to
compete in the market, it is necessary for the business organization to implement certain cost
management techniques in the decision-making process. Both the costing tools are vital in the
determining the cost of the product and services at the developmental stage. I have examined
that for controlling purpose standard costing is used and for planning purpose target costing
method is implemented in the business. The journal relating to the British steel and iron
industry reflects the evolution of standard costing and the journal of target costing shows the
tool affects the manufacturing process of the business concern. Lastly, I concludes that to
make a well-planned strategy for the decision-making process and to make it successful both
the costing techniques should be used. The management should try to implement both the
costing tools in a structured manner to reduce cost and to achieve the targeted profit.

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Reference and Bibliography
Bargerstock, A. and Shi, Y., 2016. Leaning away from standard costing. Инновации в
менеджменте, (2), pp.4-11.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Melo, R.S.S.D., Kaushik, A., Koskela, L., Granja, A.D., Keraminiyage, K. and
Tzortzopoulos, P., 2014, June. Target costing in construction: a comparative study. IGLC.
Panchenko, A., 2017. Standard Costing: Advantages and Disadvantages.
Sharaf-Addin, H.H., Omar, N. and Sulaiman, S., 2014. Target costing evolution: a review of
the literature from IFAC's (1998) perspective model. Asian Social Science, 10(9), p.82.