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HI5017

Abstract

This paper explores Activity Based costing systems and discuss the costing system’s features briefly. It Identifies and explains why two different Australian organizations are acceptable for your chosen costing program. A Discussion for managers in each of the two organizations listed above the possible use of the cost information for decision-making. Based on the chosen costing report, summarize how real-life Company has built and applied the costing method. It discusses whether the costing system in the study meet the features discussed based on your selected costing article or not. Enter examples from your costing article in your answer. How useful was the cost information to internal users in the company based on your chosen costing article Speak to your costing article with examples. Two main lessons are given based on your literary results, educating contemporary organizations about the practical application of your costing method you choose.

Part A

2 Activity-based costing features

Activity-based costing attributes or traits are briefly explained below.

  1. Overall costs are classified into two categories, i.e. fixed costs and variable costs, which are required to include quality details and develop a reasonable expense scheme in a production concern.
  2. Cost behaviour patterns are properly distinguished.
  3. Price activity trends are volume-related, diversity-related, time-related activities.
  4. The required cost driver must be established to track overhead to a company.
  5. Cost drivers dictate cost behaviour.

As a product of a collective insurance management system reform, an insurance provider has built a program to remove some of the clerical workload involved with renewal underwriting to maintain fair and reliable premium estimates (Keel, et al, 2017).

Instead of manually estimating renewal rates, underwriters type out coded program input papers, determining a renewal rate dependent on a set of common mathematical and actuarial assumptions. Because such conclusions might or do not extend to a given regulation, the underwriters evaluate documents surrounding the regulations to determine if the basic estimates extend. When not, the coding sheet is changed correctly and resubmitted.

With $52 billion in sales and 123,000 workers, 97,000 in the United States, Chrysler turned out to assist ABC in converting a bureaucratic entity. In the 1980s, the car maker took major moves to boost operating efficiency, reduce costs, raise competitiveness and rejuvenate its model range. However, Chrysler eventually met up with such powerful rivals as Japanese automobile factories and Ford Motor Corporation. In the late 1980s, and his second in a decade, the financial crisis of Chrysler exposed the remaining amount of analysis (Akhawan, Ward & Bozic, 2016).

The leaders of Chrysler were dedicated to introducing a much more versatile, efficient, cross-functional and process-oriented system of the company’s hierarchical architecture. The organisation has been pressured to build its production teams for innovative goods and form stronger relations with manufacturers and distributors. In the late 1980s, they began to transform the organisation towards a process-oriented business, motivated by the early successes of teams.

The main spokesperson for using ABC to promote progress has been Lutz, who has helped the implementation teams and been the guiding force behind organising the whole firm around applications. He understood the difficulties of shifting employees and particularly of continued growth and a rise in sales in the automotive sector. He figured that ABC could support the method to show the expense and inefficiency of could operation.

The primary purpose of the old costing software was to help the department control the operations and the efficiency of inventories. However, some felt that the old system presented a good picture of the company’s costs, above and beyond accounting. Lutz was another sceptic. He was also frustrated during his time in Ford, BMW and Chrysler, as his creative suggestions regarding product design and changes to the development process were overlooked. Since corporate financial structures centred on direct expenses and relyed on predetermined expense measures such as overhead labour prices, he found they could not fairly evaluate his proposals. During Chrysler ‘s team roll-out, his grievances reappeared. Again, Lutz easily noticed that the company’s cost accounting system did not report running expenditures, far less disparity in value added and non-value-added transactions. He said, “This is my method,” whenever he saw an object on an activity-based costing.

Safety-Kleen, which currently has 6,600 staff and $800 million sales, accomplished its exponential success by empowering facilities executives to behave as businessmen. Plant managers were liable for determining whether to treat the waste delivered to their plants; they might treat the material themselves or send it to another plant or, in certain instances, to a third-party distributor. But typically waste was merely transported to the closest Safety-Kleen facility, whether or not it could be handled at the lowest rate. In reality, Safety-Kleen didn’t realize its services and products’ true costs. Cost-accounting numbers’ main purpose was to help the accounting department keep the books, not to help operations do their job.

When the burden on earnings grew, so did the hostility of management and marketers against accounting, as they didn’t believe their figures. Operations and marketing started producing their own statistics to help capital spending, cost, plant usage, and process management decisions. Top management slowly noticed that the organization had to start basing decision-making around what would produce the most income for the whole business, rather than what would be better for a particular factory. To make these choices, the business required even more precise knowledge on its production costs, including how much manufacturing, storage, and storing a batch of goods would cost for each factory. The business wanted a completely different cost-accounting method.

As Safety-Kleen and Chrysler eventually launched ABC, each soon found so multiple workers — from field staff to top management to whole departments — resisted. Others believed ABC would alter the existing institutional system. Others were intimidated because they suspected ABC would expose inefficient processes concealed by conventional cost-accounting schemes. Some didn’t like ABC as it’s new. And several administrators, especially those who thought ABC had to resist because they realised there was an immense amount of construction work to do. 

Why Collecting ABC Information Is Big Job

This was not shocking that Chrysler workers accepted the ABC system at several of the first job places where it was implemented. Chrysler has a lengthy tradition of performance-improvement projects that never managed to achieve as they expected and were substituted as soon as a new system launched. The reality that one branch briefly attempted and discarded an ABC model in the mid-1980s following a shift of management further fuelled suspicion.

As Lutz predicted, as the economy rebounded, workers wondered whether the business had to adjust. In fact, with both plants running at full speed, line and middle managers debated whether they had the resources to gather results. Many employees also feared an unspoken motive to introduce ABC to eliminate jobs. Several business director personnel and certain facilities executives were similarly unenthusiastic. The old cost-accounting method influenced their expertise and cost-related analysis. We, too, believed that ABC was the new fad and that existence would remain largely unchanged until it died.

Part B 

The initial resistance of Safety-Kleen was unusual partially because it was a mid-business fighter. ABC has begun with C the notion that Safety-Kleen might greatly improve. James Schulz, North American business manager who hired William J. Chaika, a test project for recycling centre assistants. The project was supported and approved by Schulz and Chaika ‘s supervisors — the business owner and chief financial officer — however Chaika was actively advocating the strategy.

Senior managers in Kentucky have chosen a pilot plant and they have planned to use the pilot plant in a significant field of production. They had to guarantee that they knew the actual cost of development of new multi-million dollar devices in the factory before they jumped in. Two Price Waterhouse analysts, one financial advisor, and two Safety-Kleen area controls recruited Chaika to deploy him in the ABC Device implementation phase. The problem began after they arrived. They were ordered to fail by the boss. There was no business for him to question him how his company could be run.

The manager told them to get lost whilst the accountants were in the Safety-Kleen New Castle factory in Kentucky.

The vice president of the recycling department, to which all plant managers related, and the five vice presidents responsible for one or more hazardous waste sources, all rejected Chaika. Operations and marketing have agreed that, but without clear objectives, the organisation would strengthen its policy making. Marketing needed information on selling prices and companies needed information on results. No party was satisfied regardless of its accounting roots. In comparison, the others felt the figures would challenge their turf. And the five communications vice presidents associated ABC with adjusting the ground rules and increasing the wages to calculate benefits.

Chrysler and Safety-Kleen encountered internal resistance after some initial obstacles, which acted as a model for other firms. Both businesses forced main workers to shake ABC equally and finally to adopt the method.

2

In comparison, Safety-Kleen, a small, fast-growing enterprise, switched to ABC because the accounting structure had expanded. In response to companies’ critical need to seek safe ways to recycle harmful waste, Safety Kleen was established in 1968. In one plant in Illinois the company began processing one sort of waste — mineral spirits. It needed a system of basic costs, which was sufficient for internal financial controls and investors to be provided with information. In an undeveloped industry, the biggest obstacle for the organisation was the use of large resources. A marketing, eco-friendly company; secondary business concern was operating productivity (Abu, Jamal din & Zakaria, 2017).

Safety-Kleen was nevertheless even larger and complicated by 1991. There was an increase of more than 100 hazardous substances being processed and an increase of eleven product categories, including recycled petrol, antifreeze, oil philtres, water solvents, and dry-cleansing. In eight states and Puerto Rico, the number of plants had increased to 12, most of them treating diverse types of waste. The competition had become more dynamic in the beginning of the 1990s. Increased growth, increased demand and several States began charging up to 25% of hazardous waste generators and recyclers.

3

SailRite Group’s ABC.

The costing of activities comprises five phases. When you are moving through the illustration of the SailRite Company, remember that the total projected overhead cost remains at $8 million. However, instead of divisions, the sum is divided into separate operations, and the overhead limit for each operation is calculated. The following are the five steps:

Step 1 : Identify events for completion of the risky commodity.

Every overhead method or practise is an operation. The objective is to take into account the things it can produce the goods of the company. Recruitment and recruitment in the organisation are included. Organizations use activity-based costing to recognise hundreds of activities needed for their goods, including Hewlett Packard and the IBM. The worst aspect of this move is to increase the operations of those with the greatest impact on overhead costs.

The accountant of SailRite identifies the following activities as having a major impact on overhead costs after meetings with employees throughout the company:

The second phase. Assign operating costs to operations of Phase 1.

In this move, the task operating costs associated with increasing operation are determined (i.e., the construction for each tasks of the expense pool). SailRite includes the cost pool for the purchase of materials, for example, purchase salaries, leasing for office space in the department and the depreciation of office equipment.

After close analysis of overhead costs (note that overhead costs are not raw resources or direct labour costs), SailRite ‘s accountant established the following estimates.

4

Advances of computerised Technology also resulted in a multitude of software that managers continually utilise for decision making and implementation. For different purposes, these devices were developed from scratch and differ considerably from standard electronic data processing systems. Very many managers have no input in the creation of these support structures, sadly, but at the same time non-managers are constrained in their understanding of how they should be employed. In spite of those inconveniences, the reviewer took much of the 56 systems he successfully evaluated into consideration. And how much managers can use the software to boost their organisations’ competitiveness is the difference between success and failure. The author suggests that these are the conditions for the mutual usage of programmers and managers to exploit the capabilities of modern technology.

Why would managers believe that a foot, deposited every other week on their tables, will be on anything rather than a pile of files?

For instance, everybody understands that a listing of debts is outstanding for computers. But what about all the demands and speculations regarding the role of the machine in management in recent decades? Whilst developments in easy information gathering, interpretation and show technologies have been made, my new study of 56 computerised decision assist systems confirms the common wisdom that to date very a few management structures have been streamlined, all indicators are that they remain unable to do so.

Rather, my results reflect what other researchers reported: apps are created, which are not used to substitute the decision-maker. In other terms, more citizens utilise so called decision-support structures for increasing their management performance in an increasing range of organisations.

Sadly, my study also shows that while ever more practical options are being created for the use of decision-makers, those who will gain from them still have three major troubles in their course.

Secondly, these market people tend to focus on technical developments, closely connected to my first point. Too much so, they do not know how these mechanisms can be utilised to increase people ‘s efficiency within businesses.

Finally, the most useful approach the management will consider is an extremely creative risk , especially when the change trigger emerges from a position other than the client.

In this article, I am specifically trying to highlight the high capacity of a variety of decision support systems, the challenges and risks confronting managers and implementers as well as a large range of methods to solving these challenges and risks without utilising the technology involved (Cidav, et al, 2020).

International consultants developed the systems in my second, fifth and seventh instances, while the first, third and sixth systems were innovations by team employees who are currently hired as entrepreneurs; only the fourth model has been focused on a particular consumer mandate. This pattern of innovative projects being implemented by everyone excluding consumers was present in many of the 56 systems.

Recovery — a network with shop floor servers.

One organisation management has introduced an automated shopping floor information system in support of production agents to improve percentage performance in a newly developed 50-phase process for processing microcircuits. Daily job reports on departure, release day, worker identification, etc are sent by operators. These foremen use programmes, customers, machines and tonalities to bet their information.

Among all ways, you can not have the software. We would follow up on activities, identify challenges in yields and fix day-to-day issues, such as who works on what amount, whether operators are ahead or below schedule or below estimates. The foremen have 13 simple commands to capture and view data on a cathode tube screen from the computer. Commands need you to tailor reports to your needs.

Recovery and review – a form of analytical portfolio.

I trained investment managers to test individual investments using an electronic software prior to contacting customers or making accepted business decisions. Managers should eliminate time intensive manual tasks, access up-to – date portfolio information in graphical or tabular form, and can conveniently order it.

The manager will analyse each portfolio and portfolio class depending on the situation — for example by evaluating it differently, getting sector-based or risk-level breakups and so on. In this kind of polyvalence, the Bank’s fund managers are utilising a wide amount of details more effectively, most of it was formerly accessible but only by tedious manual analysis.

Various archives and reviews — delivery systems helpful.

This is possibly the explanation why I looked at existing customer information systems through two consumer products corporations and a manufacturing company. To deliver accurate and cost-efficient ad hoc product evaluations for those in organisation promotion and strategy sectors, EDP ‘s basic roles were too inflexible. For each example, EDP systems information is now autonomously preserved, and tested in conjunction with proprietary independently obtained data sets and models for two scenarios (Heaton, et al , 2019).

In general, any method is a way to support decision makers by an individual or community. Identification of a challenge, applying current structures and knowledge to it, designing a solution as an empirical framework or an extra device and presenting the findings in an extended system edition. Their modus operandi is gradual.

Assessing steps focused on an accounting standard — origins and costs for activities.

An insurance company utilises an automated, source-and-application planning method to enhance operational decision making and financial forecasting over a two year cycle. Inputs are calculated in separate insurance and finance realms foreseen sales trends and projections of key individuals, such as future monetary-market rates. The performance is a net cash balance estimated weekly.

Conclusion

In three ways, operation costs (ABC) increases efficiency. First, the volume of investment pools is expanded to reduce running costs. It packages costs by process instead of placing all costs in an enterprise-wide cup.

Secondly, alternate mechanisms for assigning operational costs to goods such that spending is distributed in compliance with operations which increase costs and not in terms of quantities, like function or direct cost of labour.

Finally, ABC transforms the nature of different contingent expenditures, having traditionally believed liabilities immaterial — such as income, benefits, or wages — traceable against all transactional practises. Otherwise, ABC moves operational expenditure from large-scale to small-scale goods, resulting in an improvement in low unit costs.

References

Abu, M. Y., Jamaludin, K. R., & Zakaria, M. A., 2017. Characterization of Activity based costing on remanufacturing crankshaft. International Journal of Automotive & Mechanical Engineering14(2).

Akhavan, S., Ward, L., & Bozic, K. J., 2016. Time-driven activity-based costing more accurately reflects costs in arthroplasty surgery. Clinical Orthopaedics and Related Research®474(1), 8-15.

Cidav, Z., Mandell, D., Pyne, J., Beidas, R., Curran, G., & Marcus, S., 2020. A pragmatic method for costing implementation strategies using time-driven activity-based costing. Implementation Science15, 1-15.

Heaton, H. A., Nestler, D. M., Barry, W. J., Helmers, R. A., Sir, M. Y., Goyal, D. G., & Sadosty, A. T., 2019. A time-driven activity-based costing analysis of emergency department scribes. Mayo Clinic Proceedings: Innovations, Quality & Outcomes3(1), 30-34.

Keel, G., Savage, C., Rafiq, M., & Mazzocato, P., 2017. Time-driven activity-based costing in health care: A systematic review of the literature. Health Policy121(7), 755-763.

Pieter, J. E. (2018). Bridging the gap between theory and practice in management accounting. Accounting, Auditing & Accountability Journal, 31(5), 1486-1509. doi:http://dx.doi.org/10.1108/AAAJ-10-2015-2261

Question 2 – Week 3 (7 marks) 

  1. Total manufacturing cost for 150 Coffee table
  Job No. X10
Direct materials used                                   22,800 
Direct Labour used (600 *16)                                     9,600 
Applied Factory Overhead (30*400)                                    12,000 
Total manufacturing cost for Job No. X10                                   44,400 
  1. b) Calculate the cost per coffee table for Job No. X10?
Total manufacturing cost for Job No. X10 (A )                                   44,400 
Number of Coffee Table ( B )                                         150 
Cost Per Coffee Table (A/B)                                         296 
  1. c) List two uses of this unit cost information to the managers at Tik Tok Company.
  • Company can determine break even point  and level of profit.
  • Per unit cost helps in determining key cost drivers which increase overall cost of production. 

Question 2 – Week 5

  1. Calculations for activity rates for each of the overhead items
           
Activity Cost Pools Cost Drivers Estimated Overhead (A ) Expected Use of Cost Drivers ( B ) Activity Rate (A/B)
Purchasing Number of orders 1,200,000 40,000 30 Per Order
Machine setups Number of setups 900,000 18,000 50 Per Setup
Machining Machine hours 4,800,000 120,000 40 Per Machine Hour
Quality Control Number of inspections 700,000 28,000 25 Per Inspection

Here is the calculations showing activity rates for overhead items. For purchasing activity the rate is $30 per order, For Machine setups and Machining $50 per set up and $40 per Machine hours respectively. Quality control costs $25 per inspection. 

  • Using the rates in (1) determine the unit cost for TRI-X.
Calculation of Overheads applied
Activity Cost Pools   Activity Rate (A ) TRI-X Product ( B ) Applied Overheads (A*B)
Purchasing 30                                     17,000                                                    510,000 
Machine setups 50                                       5,000                                                    250,000 
Machining 40                                     75,000                                                3,000,000 
Quality Control 25                                     11,000                                                    275,000 
Total Overheads applied (A )                                               4,035,000 
Number of Units manufactured ( B)                                                     26,000 
Overhead Unit Cost (A/B)                                                         155.19 
Direct Materials 700.00
Direct Labour ($20/hour) 120.00
Overheads applied                                   155.19 
Total Unit Cost of TRI-X                                   975.19 
  1. Calculate the Gross Profit  on the Product TRI-X
Selling Price Per Unit 1600.00
Less Unit Cost                     975.19 
Gross Profit Per Unit                     624.81 

The selling price of TRI-X  in the market is $1600 per unit , as per the cost drivers and activity costs the total unit cost will be $975.19  which means  gross profit from the sale of goods  will be $624.8.

Question 3 – Week 6

  1. Cash receipt budget schedule , include total receipts per month
Cash Receipt Budget

 

 

Particulars July  August  September  Total 
Total Sales (A)                                 140,000                                  210,000                                                    280,000                      630,000 
Immediately Collected ( A *15% ) =( B )                                   21,000                                      31,500                                                      42,000                        94,500 
Less Cash Discount (B* 4%)                                         840                                        1,260                                                        1,680                          3,780 
Cash Collected from Immediate  (B – C ) =(D )                                   20,160                                      30,240                                                      40,320                        90,720 
One month later (A *25%) = ( E )                                     35,000                                                      52,500                        87,500 
Two months later ( A *40%) = ( F )                                                     56,000                        56,000 
Total  Receipts (D +E +F)                                   20,160                                    65,240                                                    148,820                      234,220 

Working Note

                                                                                                        Sales Budget
Particulars July August September Total
Number of Units Sold                                     1,000                                        1,500                                                        2,000                          4,500 
Selling Price Per Unit                                         140                                          140                                                            140                              140 
Total Sales                                 140,000                                  210,000                                                    280,000                      630,000 
  1. Prepare a material purchases budget schedule for each of the first three
                                                      Material Purchases  Budget
Particulars July  August  September  Total  October
Budgeted Production                                     1,450                                        1,650                                                        2,120                          5,220              2,460 
Add Ending Inventory @20% of next month                                         330                                          424                                                            492                              492 
Total Requirements                                     1,780                                        2,074                                                        2,612                          6,466 
Less Beginning Inventory                                           –                                            330                                                            424                                –   
Number of Units to be Purchased                                     1,780                                        1,744                                                        2,188                          5,712 
Direct Material Cost Per Unit                                           60                                            60                                                              60                                60 
Total Direct Material purchased                                 106,800                                  104,640                                                    131,280                      342,720 

Working Note

                                                                                                    Schedule of Payment of Material Budget    
Particulars July  August  September  Total 
Total Direct Material purchased                                 106,800                                  104,640                                                    131,280                      342,720 
Payment made in the following month                                 106,800                                                    104,640                      211,440 
Total Payments made for Purchases                                           –                                    106,800                                                    104,640                      211,440 
  1. a cash budget for the month of July. Include the owners’ cash 
                                                                Cash Budget 
Particulars July  August  September  Total 
Opening Balance                                 250,000                                  194,810                                                      52,650                      250,000 
Total Receipts                                   20,160                                      65,240                                                    148,820                      234,220 
Total Cash Available ( A )                                 270,160                                  260,050                                                    201,470                      484,220 
Less Payments
Material                                           –                                    106,800                                                    104,640                      211,440 
Labour                                   14,500                                      16,500                                                      21,200                        52,200 
Variable Overheads                                   18,850                                      31,600                                                      39,110                        89,560 
Fixed Overheads                                   42,000                                      52,500                                                      52,500                      147,000 
Total Payments ( B )                                   75,350                                  207,400                                                    217,450                      500,200 
Ending Balance (A -B)                                 194,810                                    52,650                                                    -15,980                      -15,980 

Question 2 – Week 8

  1. a) Using the general rule, determine the minimum transfer price.

When any manufacturing concerns are having factory outlets in more than one places  then they can transfer goods from one outlet to another  at transfer pricing. That transfer pricing  is the sum of  variable manufacturing costs and shipping cost and opportunity costs associated to the product. The calculation of transfer pricing are as follows: 

= $3.00 + $0.20 + $0.50 ($4.00-$3.50)

= $ 3.70

  1. b) Assume the Bottle Division has no excess capacity and can sell everything produced externally. Would the transfer price change?

When Bottle division consume  everything from the external sources then  transfer pricing would change  as goods generated internally and goods purchased from external channels have different costs  and vary  a lot.

  1. c) Assume the Bottle Division has no excess capacity and can sell everything produced externally. What is the maximum amount Perfume Division would be willing to pay for the bottles?

If Perfume division is going to purchase goods from bottle division which  sells products externally produced then Perfume division has to pay $4.00  per unit. As it is consuming goods which is produced externally not within same organisation.

  1. d) When is it more appropriate to use market-based transfer price rather than cost-based transfer price?

If there are two options cost based transfer price and market based transfer price, then market based transfer pricing is most simplest and elegant method. Company can earn highest possible profit rather than abnormal profit as per the regular  or mandate pricing schemes.

Question 3 – Week 10

Particular Alpha Beta Gama Total
Selling Price Per Unit 250 400 1500  
         
(-)  Variable cost Per Unit 80 200 800  
         
Contribution margin per unit 170 200 700  
         
Sales Units 12000 6000 2000 20000
         
Contribution margin 2040000 1200000 1400000 4640000
a. Weighted average contribution Margin       232
b. BEP       21551.72
c. Margin of safety       24999

Working Note 

Contribution Margin = Total contribution margin of Sales mix/ Number of sales units

Break Even Point Fixed cost/Contribution Margin per unit
Margin of Safety Actual Sales- Break Even / Actual sales
Projected Sales  25000
Total Annual Fixed Costs 5,000,000

Question 3 – Week 11

Particulars  80000 units For overseas selling Price (10000 units) 90000 units
Direct Material  57 57  
Direct Labour 60 60  
Variable Manufacturing Overhead 16 16  
Fixed Manufacturing Overhead 30 30  
Variable Selling and Administrative Costs 10.2 19.2  
Fixed Selling and Administrative Cost 27 27  
Import and Other Duties Cost   4.2  
Total Unit Cost 200.2 213.4  
Total Cost 16016000 2134000 18150000
Selling Price 240 242.6  
Selling Unit 80000 10000 90000
Total Sales 19200000 2426000 21626000
Profit 3184000 292000 3476000

Estimation of profit on the basis of 80000 units produced

Profit Percentage = 20

Profit For 10000 units = 42.68

  1. (b) Cost for selling damaged goods

There are 200 units of finished goods remaining as inventory with the company from last two months. The goods are now damaged due to environment and natural conditions, now if the company wants to sale them in market. Now, these goods are considered as damaged goods.  The feasible approach  for deciding  the selling price of the goods is the price offered by  market or cost of manufacturing  whichever is high.

  1. (c) “All future costs are relevant in decision making.” Do you agree? Explain. 

Future costs are pre decided costs for transactions in present time period. Yes, these costs are relevant for decision making. If any contract  between  parties are formed related to future transactions then it is good if in the contract future costs should involved because costs are changing with the pass of time and if future contracts are based on traditional pricing then no party will gain profit.  For recovery of cost and generating  profit , it is good  for making  contracts  on the basis of future cost.

References:

Accounting Tools. (2020). Transfer Pricing. Accountingtools.com [online]. Available at: https://www.accountingtools.com/articles/2017/5/16/transfer-pricing. [Accessed on 06.10.2020].

Introduction

The company is a perpetual identity which had a group of people which are collected to make the individual as well as the goals of the company fulfil.

The management accounting gives the way to the company to complete the individual as well as the company objectives. It can be achieved better with the management accounting. Management accounting will let the company understand the way of doing management as well as the way of reporting the statements. It clears out all the aspect of the management. 

Initially company was handled with the traditional way of accounting and management. Built with the time they had realised that the improvisation for accounting and management is needed. The research was done to knee the new way of management. Many case studies had been evaluated.

Below the assignment is based on the study done by the Watts, Yapa and Dellaportas in 2014. They had taken the new concepts of accounting as well as the new strategic management. They had dined research on the multinational manufacturing company. They want to know the overall impact of the research.

The journal which had taken for the comparison was David TaylorRobyn King; they also simplified the method of management. They had studied that the management can be done with the traditional method but the improvisation and the innovation is needed in the traditional method for the proper management.

  • Identify any three (3) specific examples of the different types of management accounting methods and/or techniques from the case

In the given journal it was found that the change was done in the later part of the 20th century in the accounting system. The cost accounting was introduced. The techniques like JIT; TQM was intimated in the organisations. The purpose of adopting new techniques was with the two perspectives first for the long term change and other was operational or short term change. The firm had made different goals for the different perspectives. The strategy trigger for adoption was taken into the consideration for making it successful change (Watts, et. al., 2014)

Firstly it was initiated in the research factors to identify what are the essentials of the new accountings system; later the outlines were prepared for the adoption. The next strafe was the implementation of strategy, while the last was the outcomes of the strategy

The outcome will decide the overall impact of the strategy and whether the changes can be taken for the long term or not. The 3 examples of the types of the management are:

Operational Decision making:  the company applies at the Key Performance Indicators (KPI). For the facility of production. The decision makers have issues about production. That the timeframes are have short term.  And the mangers were taking decision with the ground level. The company have not used ABC and Bam in the operations. There is external and internal benchmarking which will be relied on the capabilities of specific projects. They also used scorecards for managing the activities. The company is utilising all the resource to find the better way of the accounting. The new costing method bifurcate the cost of the product in the various stages. The indicators were evolved to adopt thru ABC costing in the accounts. This will help to justify the cost of operation in the product as they utilise the operating. The overall cost was not allocated in the proportion of the units produced. 

Tactical decisions making: the managers were involved in the generating KPI of the plants. The decisions were making the decision son the timeframe of 6-12 months. The management use tactical decision for making decisions. The company is calculating the supply chain management and the customer demands for making the tactical decisions. The decisions are mainly depend on the external information’s of the above. Management in addition with the management accounting system they are also laying emphasis on the information gathered from the external suppliers. There are issue arising in the decision making process as little information are not accurate. The company had also tried to implement the strategy on the initial level of the management but later on they had implemented in the overall company. The gradually adoption will help to know where the company had make defaults and how it can be recovered or can be rectified.

Strategic Decision making: the company had focused on the matters which had been leaded with the tie of 1 year. The shareholders, customers and the stakeholders have to be satisfied with the requirements of the global events. All the factors which are macro and micro economics will affect the strategic decision making. These are based on the mostly internal information of the company. The balances are based on the historical checks and the balances with the expected trends. The strategic managers have to be viewed the future to make decisions and to make better progress of the company. The company had also let the strategy formulation on the new accounting techniques. The company had made the strategies that how gradually adoption of the technique will help the company to adopt it as a whole.

2.  Are MAS relevant to contemporary organisations

(I) Yes MAS are relevant to the contemporary organisations. The company have to apply the management accounting for the smooth function of the business… 

It helps the manager to mating the records of the accounts and to verify it if it needed on the later. It will also helps in the organisation documentarian and proper maintenance of accounts. The MAS will helps to prevent fraud and the proper accounting of the records. It will keep the records the accounts for the long time. As well as the data will be secure as it password protected.

The advantage of MAS in the given case is:

  1. It helps in research and development of the business: it helps in the research of the organisations. The new planning is made as per the research conducted. It will helps in laying down emphasis to achieve the goals and objectives of the company. The organisation will make the new strategy for the achievement of the work. 
  2. Strategy formulation: the next step is to make the strategy. The strategy formulation is the step in which the strategy has been planed as per the requirements of the company. The formulation will be on the present as well the future issues of the company (Luthans & Doh, 2012). The company has to decide which will the best strategy among the all strategy for the company point of perspective.
  3. Operational Cost: the operational cost will be reduces with the MAS. The cost of wastage will be reduced with the proper accounting system. There will be the proper method and balancing the inventory. The correct method of the entry and the exit of inventory will be places. It will help in reduction of stole of the inventory and the proper records with the authorisation will be placed.
  4. Security: with the MAS the record will be properly secured and the data protection will be increased. The security of the MAS will be done through biometric as well as the password protects. The backup of the data will be taken and can be recover wt the of the disaster or the lost of the files.

Firstly it was initiated in the research factors to identify what are the essentials of the new accountings system; later the outlines were prepared for the adoption. The next stage was the implementation of strategy, while the last was the outcomes of the strategy

The outcome will decide the overall impact of the strategy and whether the changes can be taken for the long term or not. 

Comparisons with the other journal

the other journals was regarding the different value of management accounting in the new company the company had tried the historical method into he new start up company but  at the late stage the research was found that the traditional methods are not so good. So company had approached new methods for the innovation (Taylor, et. al., 2019)

The study was done with the Techno co, who had made start up and adopted new technology over. 12 months. 

The study found that the company had adopted both the methods of traditional as well as the new methods of the accounting, and the traditional method are made with the innovation in such a way to divers the functional areas.  

Another experiment was done to know how the hierarchy can be evidenced to manage the controls and how the innovated ideas can be generated with this. 

Difference in findings

The findings were different in the words nit in the result. Bath studies were concluded that the transitional methods are necessary to control the management but with the new innovations or with the new ideas. The organisations cannot be run on the original method but can be improvised with the new modern accounting. 

In the first case the new technology was used such as TQM or ABC to manage the casing of the product, It helpos in the manage the product and the costing method.

While in the other journal the new ideas are generated to the control the management with the traditional method. They started with the tradiotnal and reached to the new innovative method. 

3. What conclusions do you make about the relevance of MAS in today’s competitive and (in most cases)

The following are the conclusions of the MAS at the today competitive market:

  • Forecast: the forecast of the company can be easy with the MAS. It will help in the decision making. It helps in the decision which machine should buy, whether it should invest in this project or not. Is this will give more profits to the company? The answer of the entire question will be made though the MAS. The future trends will be analysed in the company. The MAS will be useful the company for the future predictions (Myrelid & Olhager, 2015).
  • Cash flows: the cash flows can be managed with the MAS. It will show from where cash had seen sourced out and where it has been utilised. The MAS will be making the proper CASH flow statement which will depict the interest borne on the loan of the company and the income of internet o which the company had made the investment. The company will be managing the investment and the flow of cash on that. The cash flow will also show that the company is funding through the banks or any financial institutions, or either through the issuing of the shares. The company will be making the records of the dividends that how much was paid in the last year, and how much it is to be proposed in this year.
  • Variance calculations: the calculation of the variance is that the amount swill shown actual in the profit and loss will be differ from he expected. It will helps in the finding the difference between the expected an actual figures of the above. If the difference is much than the expected than the reason behind should be evaluated (Myrelid & Olhager, 2015). The MAS will give the proper accounting method to calculate the variance and the reason behind that variance by calculating the percentage on the with the expectation
  • Rate of Return: the shareholder or the stakeholder both wants the maximum of profits on their investments. The MAS will calculate the rate of return and it will be compared with the last years of return, the MAS will find the reason if there is any reduction in the profits nada los will evaluate the reason for the extreme increment of the return.  It will also give the highest t amount expended on which content. If it can be evaded then company should evade on the report mentioned by the MAS.
  • Internal Control: the internal control can be done through MAS. The proper maintenance of employee’s s well as the assists can be done through MAS. The MAS will be locating the regular attendance of the employees if some employees are not performing as per the criteria then the mass will be reported on that. The MAS will also have records on the assets valuation. The valuation of the assets should be as per the norms of the accounting. The company should revaluate the assets or can impair it as the case may be.
  • Internal Audit: the Internal Audit of the company means to verify the management of the accounting. The internal auditors can verify each and everything as per the internal norms of the company. It wills are the audit of the company easier task, as all the records had been verified once. The internal auditor will have to manage each and every before  making the fuss

4. Provide four (4) specific outcomes or lessons learned from each of the two articles’ research findings.

The following conclusions drawn from the research:

  • The Case of a Newly Implemented Modern Management Accounting System in a Multinational Manufacturing Company 
  • Formulation of the strategies: the strategies were easy with the new management at system. The company had started it from the beginning; the strategy was formulated with the management level to the law level. The management were simplified with this. All the category of the management was handled with the proper account system or with the help of internal control. The findings were that the managers were involve and as well as the employees were participating in the process of, acing strategies. It were motivating their confidence as well s they were being treated as the part of the organisation’s 
  • New costing method: the new management accounting had started evaluating the new accounting conceits. Which were TQOM, ABC, JIT and all other? The company had started to follow the system from the initial basis. The basis to manage the accounts a weal the to manage the entire organisation with the proper format. The company had made process in the 4 parts. First the need of the techniques was evaluated, after that the company had decide wither this tech issues were applicable or not… next stage was the implementation of the strategy. The strategy was initiated with the lower process and the then it was taken on the grand level. The company then took it into larger level. The next stage of the strategies was taken for the overview. With this process the company had implemented the successful strategy. The company had implemented to the new costing method. With the new costing method, the company had managed inventory system, and the operating cost was bifurcated on the basis of the ABC costing. All the proper way helped in the reporting manner, all the reporting was done on the timely manner as well as in the format. The cost was allocated in the product as they were launching. 
  • Management controls, hierarchy and innovation: a case study of a start-up company
  • Old methods need innovation: the company had decided with the old traditional method. The later on stage the company had found that the company was not able to manage with the whole with the old method. Hence the company made a new innovation with the new technology, like added the new control methods, the security had been increased. Hence the control was managed in the proper way. The company were concluded the the company can be owned with the old traditional method but can be managed with the new method of the technology.
  • Easy control of management: the management had been simplified with the new technology method. The boards were managed, all the financial were regulated. The security was improvised, the reporting manner was better. Overall the conclusion was that the new management accounting method can be handled with the old rational method of management. 

Conclusions

The conclusion was very simplified with the case studies. In the given cases the company had adopted new technology. The case which is given with the brief was focused on the strategy formulation as well as the adoption of new accounting technique. The company had made strategies with the initial stage as all the part was divided into the 4 subparts to know the effects of the change.

The change in the management accounting from traditional to the modern accounting was must. Company will adopt the original method but innovation was needed in that as per the journal taken for the comparison. 

In the case which was written by thru Brat and the team they had adopted the new accounting method which had explained above. And also they had made changes in the strategy formulation. This innovation will help the company to adopt the technology very easily.

References

Luthans, F., & Doh, J. P. (2012). International management: Culture, strategy, and behavior. New York: McGraw-Hill.

Myrelid, A., & Olhager, J. (2015). Applying modern accounting techniques in complex manufacturing. Industrial Management & Data Systems115(3), 402-418.

Taylor, D., King, R., & Smith, D. (2019). Management controls, heterarchy and innovation: a case study of a start-up company. Accounting, Auditing & Accountability Journal.

Watts, D., Yapa, P. W., & Dellaportas, S. (2014). The case of a newly implemented modern management accounting system in a multinational manufacturing company. Australasian Accounting, Business and Finance Journal8(2), 121-137.