Executive summery
In competitive market, main objective of the business is to execute its operation in smooth manner and offers higher quality of products in fewer prices. The environment increase competition, ongoing rapid changes and requires for deliberate decision has to increase the concepts of management accounting requirements. ABC management tools help the business to gather relevant information and contribute in decision making process to increase profits in marketplace. The report shows that, in order to sustain in market for long time and accomplish profits organization needs to utilize ABC costing techniques in its business process. The objective of report is to assess the effectiveness of ABC in Accent group limited and their contribution in business activities.
Introduction
Industries in present generation face ever-increasing completion in international and national marketplace. Companies main motives are to offers higher quality of services, reach quickly and less cost of products and services in this environment. Moreover, decision making procedure helps the business to sustain in market for long time and achieve higher market share in successful manner (Zimmerman, & Yahya-Zadeh, 2011). In order to achieve this objective organization needs up to date accounting information system in its business process such as ABC i.e. activity based costing methods techniques.
Therefore the present report is deals with the explanation and effectiveness of the ABC methods in business process. The report also provides effective information regarding how it helps the business to compete in competition market and leads their performance in useful manner. At last the report focused on the other costing techniques apart from ABC. In order to deals with the performance and effectiveness of the ABC methods, ASX listed organization Accent group limited has been selected in this report. ASX is known as the Australia Security exchange sometimes known as Sydney stock exchange. The organization is the regional leader in retail sectors and offers footwear more than 420 stores (accentgroup, 2018).
Explanation of ABC and its features
Hansen, Mowen, & Guan, (2007), said that ABC costing methods is an innovative costing methods mainly used to deals with the deficiencies of existing system in successful manner. Activity based costing methods helps the management of the business in decision making procedures regarding competition strategies and products mix. The main activities associated with the activity based costing methods are to analyze and evaluate the activities and collect the information associated with the costs. Moreover, these techniques would help the management to trace the costs associated with the activities and output the measurement in successful manner. As studies conducted by Bromwich, & Bhimani, (2005), said that traditional costing methods allocate the indirect expenses to goods and services based on the charactestics of single factors that mainly not causally associated to the level and type of employment or work consumed.
Traditional cost allocation factors incorporate the number of direct work hours necessary to produce a unit, the expenditure of that direct labour, the buy expenditure of merchandise resold, or the quantity of days occupied . These are expansive midpoints that don’t reflect causality for the indirect expenses. The issue is that utilization of these allocation techniques brings about allocations that fluctuate with changes in the allocation premise. ABC frameworks perceive that individual’s goods and services or clients don’t expend indirect expenses in those extents (Macintosh, & Quattrone, 2010). Instead of this they emphasize on around the work exercises of individuals and equipment needed to deliver every item or give each services and their utilization of each of those activities.ABC follows indirect expenses (ordinarily called “overhead”) to services, products and clients by recognizing asset and their costs, the utilization of these assets by exercises, also, the execution of exercises to deliver yield. Example of the resources assets mainly includes the pay rates, working supplies, equipment depreciation, also, and electrical power.
ABC i.e. activity costing methods is refereed as the accounting methods mainly utilized by the management of the organization for assigning accurately the extent of the resources utilize as well as indirect expenses incurred to obtain a services or products (Cadez, & Guilding, 2008). The main objective of the development of the ABC methods in business activities is that it helps the organization to enhance full costs as well as unit computation procedures.
Features associated with the activity based costing techniques
How ABC aligns with organization objective
Activity based costing is the accounting procedures that mainly helps the business to collect relevant information regarding their operating expenses. Expenses in the business activities are assigned to particular activities including manufacturing, planning and engineering and then activities is related to the different services and products (Garrison, Noreen, Brewer, & McGowan, 2010). In such manner activity based costing techniques enables a business to make decision which services, resources and products are helps them to enhance productivity and which contributing negative performance or to loss. After successful analysis and evaluation of the cost of the products, management them able to provide information to make a better budget and obtain higher profits that helps the business to run their operation in smooth manner. Generally, ABC is the most effective methods utilized for a long time period and helps the business to achieve better market share.
The main mission and objective of Accent group limited in given below;
The mission of the business is to provide an efficient, transparent, fair and organized marketplace provide a safe environment for purchasing products and services.
Objective of the business
Accent group limited strategic initiatives
The organization Accent group limited’s main strategies is to be the international most respectful retail organization and achieve higher share in both national and international market (accentgroup, 2018). The strategic objective of the organization is to maintain trust, resilience as well as integrity and making diverse ecosystem of services, products and stakeholders partnerships. In addition to this the organization main objective is to offers innovative solutions as well as technology to customers and strengths the collaborative culture among individuals.
ABC helps the business to trace the activities associated with the business in successful manner and also helps them to calculate the expenses of each activity that involves the resources. Apart from that it would helps the organization to control the business activities and helps them to reduce time in successful manner. With the help of the implementation of the ABC techniques, the management of the business can purchase the material and lower process and increase profitability successful manner (Cadez, & Guilding, 2008). As per the Accent group limited strategic objective, it is seen that the organization main objective is to provide a safe, attractive, comeptive, creditable and transparent investment environment; therefore this can be accomplished by the management through adoption of the ABC techniques in business process. Implementation of the ABC techniques provides accurate information regarding costs associated with the organization’s activities. Therefore, use of ABC methods helps the organization to provide more accurate information of services and product costing and leading to more accurate in pricing decision making process that helps them to offers transparent and accurate information in front of customers in better manner. Implementation of the ABC methods helps the business to reduce all sorts of unnecessary expenses that helps the business to save the expenses in better manner. On the hand, with the help of using ABC analysis techniques all sorts of bottlenecks associated with the business activates in better manner and helps the business to perform its operation in smooth manner. Apart from that, ABC techniques helps the organization Accent group limited to improve relationship between the customer and organization in successful manner and this would helps them to achieve their objective i.e. is to be the international most respectful financial marketplace in successful manner (Horngren, 2009). . Accent group limited is based on the retail sectors therefore the main objective of the business is to retain more customers and increase online traffic in better manner. Therefore, utilization of ABC techniques helps the business to analyze market scenario and cost associated with the products in successful manner.
As studies conducted by DRURY, (2013), said that in present competitive market, business can retain more customers if they can offers better quality of products in less price. Hansen, Mowen, & Guan, (2007),said that the main benefits associated with the ABC techniques is that it provide the accurate information to management regarding unnecessary costs and helps them to reduce production costs so that they can offers quality products in less prices. This can not only helps the business to increase customers but also helps them to execute their operations in smoothes manners in marketplace. Thus from the evaluation and discussion it can be said that Accent group limited accomplished its strategic objective in successful manner after implementation of the ABC techniques in its organization.
Recommendation about ABC implementation
According to Horngren, (2009), increasing expenses and diversity of products and services are the major cause of adoption and implementation of the activity based costing techniques. Implementation of the ABC techniques performed in several major steps such as reviews organization financial information, established purpose and objective of ABC system, identification of the main activities, trace overhead activities, calculate costs associated with project and use of ABC analysis in management decision making process and improvement. The first recommendation that after successfully implementation of the ABC system in Accent group limited helps them to increase higher performance and also helps in decision making procedures. From the findings and analysis it can be seen that the main purpose of the business is to increase higher revenues and customers satisfaction; therefore ABC analysis helps them to accomplish this objective in successful manner. As studies conducted by Hansen, Mowen, & Guan, (2007),said that ABC system aids the organization to determine unnecessary costs and also provide the price of products or services in better manner that would helps them to analyze regarding products are profitable or not. ABC analysis techniques also help the organization to determine customer segmentation in successful manner. An ABC technique helps the management to provide accurate and reliable information and using these information management effectively determine their customer trends. Thereby it can be recommended that implementation of this techniques helps the business to reduce issues associated with the business activities in successful manner that helps them to eliminate practices that are wasteful and costly in successful manner.
Suggest other management accounting methods
Apart from the ABC accounting tools, it can be suggested that the organization Accent group limited needs to implement budget control accounting tools in its business process. Implementation of this tool helps the business to make sure that business’s actual profits and expenditure adhere closely to their financial planning. In addition to this, it helps the business to obtain its strategies objective in better manner (Scapens, 2006). The main benefits of this technique are that it helps the management in coordinating the activities among different department and increase the profitability by reducing wastage. Moreover budget control accounting techniques helps the business to build objective and correct the variance. In some case performance of the business is not well, and then it would helps the organization Accent group limited in determining the issues and responsibities (Bromwich, & Bhimani, 2005). By effectively promoting costs consciousness among the workers, budget control techniques bring economy and efficiency. Therefore the analysis shows that implementation of the budget control techniques helps the business to increase revenues and reduce issues in successful manner.
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