Discuss about the International Journal Of Contemporary Hospitality Management.
The underlying sections of the study has been taken into consideration with the “activity-based costing (ABC)” model related to its characteristics, application and from the perspective of an organisation. In this report, the ABC system is taken into account with Resolute Mining (listed under ASX), as the company is considered as high value for enhancing the overall management accounting criteria of higher management of the company. In the mining industry, Resolute mining is recognised as a developer, operator and explorer comprising of nine Gold mines across Australia and Africa, with a production of more than 8 million ounces of gold (Resolute 2018). The company has taken major initiatives in applying ABC system with an intention to enhance its management accounting system and getting a greater edge in achieving its goals and strategies. Lastly, the recommendation aspect of the report has enforced the system with organisation along with suitable management accounting tool depending on Departmental requirements (Ayachit, Attarde and Kulkarni 2014).
A significant criterion of costing under the ABC model is identified with conduction of business operation based on which the products are applied with indirect cost. An augmented focus is related to the activities, costs and products for the apportionment of indirect costs associated to these with less subjectivity as compared to the conventional costing system. Despite of this fact, managers often struggle in apportionment of cost with the help of ABC system and they often comprise of the indirect expenses such as staff remuneration which cannot be easily apportioned under the manufactured products. Due to this, the popularity of this costing system has been favoured across different industries especially in the mining sector. In addition to this, ABC system is also applicable in terms of “service pricing, product costing, target costing” and various types of other aspects of costing (Huysmans and De Bruyn 2014).
The evaluation of the study as per the above discussion have emphasised on special characteristics incumbent with the ABC system. Some of them are listed below as follows:
Based on the several secondary sources, a considerable amount of assistance is imparted to the organisations for alignment of present strategies and goals along with the costing techniques. In order to ensure the alignment, the primary needs and their identification are summarised as follows:
It needs to be noted that Resolute mining’s mission statement is considered with enhancing the business towards accomplishing particular strategies and objectives. Based on the mission statement of the organisation – “Mine Gold. Create Value”. Resolute mining, has proved its sustaining operations with two mines, “the Syama Gold Mine in Africa and the Ravenswood Gold Mine in Australia” and known as one of the largest producers of gold which is listed in ASX in FY 2017. It is to be further noted that this improved performance has been considered with the moderate costing of A$1,280/oz (US$934/oz) (Rml.com.au. 2018).
“Resolute’s flagship Syama Gold Mine in Mali” is further identified to benefit from the operational parallel sulphide and oxide processing plants. The underground mines in these areas have sustained a strong cash generation. In addition to this, the profit generated by the company has been able to provide cutthroat competition to other players in the market. The overall emphasis is also put by the company in terms of improving the morale, work ambience and confidence among the staff as this may lead to improved performance. This allows for ultimate business goals to be accomplished by the company (Rml.com.au. 2018).
The corporate strategy developed by Resolute Mining is considered in a such a manner which shows that business objectives are achieved along with the strategies which are set by the company as follows:
The implementation of ABC model is widely favoured in mining industry however certain characteristics cannot be implemented into this sector. It needs to be understood that in various cases the mining operators do not be any direct cost instead the costs are segregated into overhead expenses. The adoption of ABC costing system will allow Resolute Mining to enjoy several benefits which will consider its business objectives and strategies (O?zyu?rek and Dinc? 2014).
The ABC system comprises of activity, cost drivers and resources. In case of Resolute Mining Ltd the resource sections comprise of costs which are segregated into various departments. The departmental costs are segregated into the following categories:
Service department associated to human resources and information technology
The consideration of various factors for the cost calculation is associated with explanation of shared services. Moreover, the departmental service volume needs to be passed from one department to another. Aside from this, the offices of Resolute Mining and are segregated depending on the cost criterion. Henceforth, it can be clearly stated that ABC system leads to increase in cost assignment scope among all the offices and mining facilities thereby appropriately providing the opportunity for anticipating advertising costs (Barros and Ferreira 2017).
The main cost objectives can be elaborated based on operations and transactions carried by the selling activities of resolute mining. Therefore, in terms of organisational perspectives these might involve the purchasing of entire consignment, certain receipt of the services rendered to the vendors. Explanation pertaining to these transactions are allocated into ABC system. The next step involves naming of the activities and with what factors they will be put against each other. In this case, the size of bat for performing the activities in batch mode is an integral component. Henceforth, the Department needs to consider the group activities involved into ABC system. The consideration with Resolute Mining for additional cost pressure as a result of expansion activities can also be compensated with this costing system (McLaughlin et al. 2014).
The cost objectives can be differentiated into two sections. The first section will comprise of the additional costs which are taken care of by the financial managers in the relevant distribution channels across West Africa and Australia. Some of these activities may involve new exploration and Organic production growth among the goldmines. However, it needs to be discerned that the cost of new exploration should not be combined with organic production growth. In case the company adopts ABC system, it will have more scope for identifying the services which are offered between two different cost elements. Being said this, the element such as variety of a particular product needs to backed up by competitive advantage and business sustainability.
It needs to be understood that the top level of Resolute Mining should extend greater support for implementing ABC system within the cost accounting system. After approval, the cross functional team needs to implement the model across accounting department. In this case, the special team needs to unify the members from each department for using the delight ABC system. In addition to this, external specialists need to be appointed for advising successful enforcement of ABC system.
There are significant reasons which steer up the top management of resolute mining in supporting the overall system. Primarily, the subordinates and managers may not be interested to accept the change in case the top management does not take proactive measures to accept the new standards. Secondly, the implementation of this system may not mean much to the employees in case there is lack of support from the top management of the organisation. In order to assure that this system is followed across all hierarchies of Resolute Mining, the company needs to develop an in-depth understanding of present costing procedure which are incumbent within the organisation. For allocating the costs in a suitable manner, it is the role of cross functional team to acknowledge such improvement in costing procedure which will lead to success of the team itself (Linassi, Alberton and Marinho 2016).
As stated, ABC system will be accompanied with more benefits to Resolute Mining. However, there are certain management accounting tools which can benefit the organisation. Among various tools, budgetary control can be adopted by the organisation. Some of the common benefits teamed with this procedure are listed as follows:
Conclusion
The relevant discourse of the topic of the study has considered segregating the costs into fixed and variable costs based on the main cost drivers. This kind of differentiation of the cost allows business entities for formulating the enhanced in need of costing services. In case of Resolute Mining, the application of ABC system will have an important role with definite business activities which need special attention and evaluation. Based on the several types of considerations of the analysis, Resolute Mining will be able to allocate the cost in a most appropriate manner based on the services offered to the customers. Finally, the implementation of budgetary control will act as an alternative management accounting technique which will enhance the overall cost efficiency of the company. The rationale for this is due to the fact that it will minimise the additional burden of expansion costs among several other services associated to the vendors.
References
Ayachit, A. C., Attarde, P. M. and Kulkarni, S. (2014) ‘Activity Based Costing In Construction Project’, International Journal of Advanced Engineering Research and Studies, 4(1), pp. 09-14.
Bakar, N. R. binti A. (2014) ‘Impact of Organisational Factors on Budgetary Slack’, E-proceedings of the Conference on Management and Muamalah, (May), pp. 26–27. doi: 10.1017/CBO9781107415324.004.
Barros, R. S. and Ferreira, A. M. D. S. da C. (2017) ‘Time-driven activity-based costing’, Qualitative Research in Accounting & Management, 14(1), pp. 2–20. doi: 10.1108/QRAM-10-2015-0095.
Hayden, A. (2014) Activity-Based vs. Traditional Costing, QuickBooks. Available at: https://quickbooks.intuit.com/r/pricing-strategy/activity-based-vs-traditional-costing/.
Huysmans, P. and De Bruyn, P. (2014) ‘Activity-based costing as a design science artifact’, in Proceedings of the Annual Hawaii International Conference on System Sciences, pp. 3667–3676. doi: 10.1109/HICSS.2014.457.
Kapian, R. S. and Anderson, S. R. (2014) ‘Rethinking activity-based costing’, Technology. Available at: https://www.homeworkmarket.com/sites/default/files/q1/26/11/abc-_company_article.pdf.
Linassi, R., Alberton, A. and Marinho, S. V. (2016) ‘Menu engineering and activity-based costing’, International Journal of Contemporary Hospitality Management, 28(7), pp. 1417–1440. doi: 10.1108/IJCHM-09-2014-0438.
McLaughlin, N., Burke, M. A., Setlur, N. P., Niedzwiecki, D. R., Kaplan, A. L., Saigal, C., Mahajan, A., Martin, N. A. and Kaplan, R. S. (2014) ‘Time-driven activity-based costing: a driver for provider engagement in costing activities and redesign initiatives’, Neurosurgical Focus, 37(5), p. E3. doi: 10.3171/2014.8.FOCUS14381.
O?zyu?rek, H. and Dinc?, Y. (2014) ‘Time-Driven Activity Based Costing’, INTERNATIONAL JOURNAL OF BUSINESS AND MANAGEMENT STUDIES, 6(1), pp. 97–113.
Resolute. (2018). About. [online] Available at: https://www.rml.com.au/about.html [Accessed 23 May 2018].
Rml.com.au. (2018). [online] Available at: https://www.rml.com.au/uploads/7/2/0/8/72081691/corporate_governance_statement_updated.pdf [Accessed 23 May 2018].
Rml.com.au. (2018). [online] Available at: https://www.rml.com.au/uploads/7/2/0/8/72081691/1690776.pdf [Accessed 23 May 2018].
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