Discuss about the Analysis of Behavioral Intention on ABC System.
The use of management based on activity (ABM) along with costing based on activity (ABC) remains to be the essential factors in bringing the necessary or radical change in the cost of managing different operating systems in business. Due to the increase in the variation on demands by customers for organizations to meet their needs and wants, the use of ABC by different corporations has helped in determining the number of its activities that assist in supporting its clients. From work done by Gupta and Galloway (2013, p. 134), ABM has advanced mostly because of the duties of Texas-founded association for the superior process of global manufacturing among organizations. In present timers, ABM application is no longer narrow to developed companies since the values together with ideas of action founded on thinking in business relate evenly to service corporations, governmental groups, along with activities of industries (Creedy 2011, p. 91). The contraction itself has undergone through evolution from ABC to activity-based cost management (ABCM) to ABM, and the function of activities of system of ABC progressed from the manufacturing produce costing direction to the philosophy of management that deals with action administration applicable in organizations and industries other than manufacturing businesses.
Activity-based administration (ABM) remains to be the device of administration that comprises of analyzing and costing operations with the important goal that concentrated on improving efficiency along with effectiveness in business operations. It is closely linked to activity-based costing, but the two schemes vary in their essential functions in a different organization. Ruan and Zhou (2017, p. 2) state that ABC is the concern with operations with the measuring the products and services costs produced by them, ABM concentrate on activities with the objective of managing the operations in business themselves. For instance, ABC seeks to measure the cost of different setups and then assign the cost to product based on the number of configurations that each product needs. Besides, the goal of ABM in business operations remains to be the focus on approaches to consider in improving the setup process along with ways to eliminate the demand for the activity of setup, thereby reducing the cost of setup in any business operation.
Advancement in competition around the global marketplaces makes it clear that business operations understand accurately and understand different sources of the process, product, as well as costs of services within the actions of their organizations (Lebas 2013, p. 507). Action founded costing with its concern on deconstructing transparency groups as well as conveying costs to different services and commodities in the essential approach has remained to be the enormous bound ahead from ancient models of estimate where the more significant portion of the cost of operation is randomly billed to various goods. Moreover, models of costing based activity frequently concentrates at charge from the economical view point by ensuring that every charges are allocated to multiple goods office boxes exclusive of the detailed consideration of the development of business operations that underlies and defines the utilization of the resource that develops the charge.
Activity Based Accounting along with Activity-Based Management differs in their roles within operations of businesses. The ABC relates to different measurements of the charges along with the performance of several business activities, resources, and cost objects. ABC mainly concentrates on recognizing the casual relations of cost drivers to operations of businesses. Conversely, the primary focus of ABM remains to be on the management of various activities as the technique essential for improving the obtained value by the targeted and esteemed customer as well as the income earned by giving such value. Form the work done by Askarany (2011, p. 4), ABM concentrates on the needs of consumers, and it is always willing to pay for such needs. The ABM assists in the determination of the contribution of every stakeholder in the business around the marketplace. According to Liu and Gong (2011, p. 433), the determination base on the measures for charges, quality, together with time consumption for every business operations. Additionally, ABM supports Balanced Scorecard and is considered to be the foundation for redesigning process of conducting business.
Activity-based management can apply to various types of organizations that comprise of providers of services, manufacturers, non-profit corporations, schools, and governmental agencies, among other companies. ABM on the other end focuses on service delivery on the provision of cost data concerning any section of operations within the business community (Hoozze and Hansen 2014, p. 5). With the aim to improve organization profitability, the outcomes of the analysis of ABM can assist the operations of Business Company to produce more accurate budgets together with financial forecasts. Additionally, Activity Based Costing (ABC) remains to be loosely related factor within business operations. Whereas ABM concentrated on the process of business along with managerial activities that drive business goals of an organization, activity-based costing focuses on ideas that seek to identify as well as reduce cost drivers by optimizing resources. As illustrated by Creedy (2011, p. 93), the action based on costing cab remains to be the subset of Activity-Based Management. The ABC assists in improving the costing through the process of outlining the various expenses within business operations. Furthermore, both activities based costing together with activity based management remains to be essential devices that help in managing activities of action with the objective of improving the performance of the business entity or the entire services of an organization. In most cases, action that base on costing can be regarded as offshoot of action that base on management. Action base on costing assists in improving overall managerial transparency along with effectiveness through ideas of mapping business charges such as salaries, supplies, targeted clients, products, the activity of production, and leasing operations to business processes.
There are various emerging trends in the operations of ABC along with ABM. The ABM and ABC have remained to receive innovation in the management of services of cost accounting. They are rapidly being adopted by various organizations across various business environments within government and other organizations such as institutions, finance, or essential service of ABC costing and ABM management within the organization. Kang (2015, p. 3) stated that all operations of ABC and ABM models have gained increasing popularity in present days. Various divisions of information system apply these models to calculate the cost price of different services rendered along with aligning their lists of price accordingly. However, the models of ABC and ABM be refocused on their primary duties such as management and cost of business operations. The use of ABC and ABM around society has revolved by not just focusing on the calculation of costs but also focused on how to manage the performance of operations (Hoozze and Hansen 2015, p. 4). The two operation models have concentrated on how to improve on service provision to users as all IS divisions utilize resources through activities or processes. Furthermore, trends leading to ABC and ABM have been evident in the growth in the use of measurements not just on the raw number but on different standards of services, time of response, and assessment of quality techniques of business operations (Sample Employer Policy ABC Corp’s Policy on Unions 2017, p. 5). There has been a move to client-centered charges that lead to improved costing and management of business activities.
The use of Indian companies that are responsible for manufacturing or service sector such as Bajaj Auto can be essential in reviewed on ABC and ABM. The method of manufacturing industries in the studies of ABC and ABM help in understanding how these models have become vital in recognizing their activities in such a manner as to secure cost advantage over the chief competitors in the marketplaces (Kustiningsih et al., 2017, p. 12). Indian manufacturing industries are essential in the study as they can use these models so that they become cost leaders by strategic, sustained, integrated, and focused approaches for management process of the cost of operations.
Adoption of ABC remains to be a vital way of allocating costs based on the number of available resources a product or service consumes. The utilization offering customized services or products of ABC is particularly successful in business operations. The adoption of ABC has contributed to the transformation of various organizations (Nensi et al., 2015, p. 403). It has been successful in determining the cost of the product that is more precise as well as dependable since the adoption concentrates on effects with causes of relation of activities along with expenses in the perspective of creating commodities. It has been successful in fixing promotion charge for multi-good within costing based activity to be reasonable and accurate since relevant cost drivers allocate overheads. Besides, some of the otherwise on adoption of ABC remain to be the fact that its implementation needs substantial resources. Once the ABC has been adopted in operation system, it continues to be costly to maintain. According to Pokorna (2016, p. 2), some of the issues identified by the different researcher on adoption of ABC along with ABM continue to be the need for managers to manage overhead as well as to understand the profitability of targeted clients and products. Understanding and knowing marketplace operations remain to be a powerful device in the process of making decisions that help in boosting the margins of profits attained during operations by different companies.
There are various issues relating to contemporary business operations regarding adoption and implementation of ABC and ABM models in their activities. Some of these issues include importance, challenges, and opportunities that the adoption of these models does to businesses. Technical problems and opportunities on the use of ABC and ABM arise on their definitions, methods, terminologies, and usages that exist and vary in nature. As reported by Lebas (2013, p. 507), some of the possibilities of ABC are the ability of the model to assign costs by the use of arbitrary allocation percentage for overhead or the indirect costs of operations. ABC help current business to improve their operational processes as systems of ABC allocates indirect costs based on the cost driver of products that remains to be the factor that contributes to developing the costs. Additionally, the business that uses the system of ABC is always able to identify the wasteful products that affect their operations (Ruan and Zhou 2017, p. 33). The use of the system of ABC accounts for different costs same to the manner business production work performed by allowing business to improve their operations and understand overhead costs are focusing on during operations.
Some of the challenges experienced by current business on the use of ABC models remains to be the expensive process of implementation. According to opinions by Hoozze and Hansen (2017, p. 22), the method of setting up the system of BC as well as ABM remains to be costly and consumes a lot of time for their application in different business operations. Current business needs the assistance of various consultants that specialized in the setup of the system of ABC and can offer training on its application. The need to employ more workers make it tough for business operations to attain their set objectives since they need to incur extra costs in operating such experts in their operations (Topor et al., 2017, p. 36). The other challenge is the misinterpretation of data as the system of ABC along with ABM comprises of information such as product margins that always vary from the reported data for the traditional cost techniques. Different business in present society faces the challenge of the use of ABC system as ABC remains to face difficulties in evaluating cost by business activities (Kont and Jantson 2011, p. 107). Therefore, ABC system remains to be unsuitable for concern of small businesses that deal with manufacturing activities.
Conclusion
The implementation of models of ABC and ABM in different business operations varies from one country to another, as well as from one organization to another organization. ABC as well as ABM has usefulness in meeting the challenges and taking advantage of those opportunities within operations of the current business. From the study, it is evident that there exist several obstacles along with problems that relate to support system of information that might hamper the success of ABM system implementation. Some of the usefulness of ABC and ABM in meeting challenges taking advantage of addressed opportunities includes the process of implementing the division of information system that helps in tracing costs of every activity for each operation to assist in the implementation process. Besides, ABC has concentrated on the development of advanced management tools as well as techniques and management shift to improve the duration of implementing the model to recover the cost of operations among the different organization. The models provide essential data used for operations to support the planning process of various operations to improve their revenue by overcoming the decline in operations that arise through misinterpretation of data as provided by the ABM or ABC systems.
List of References
Askarany, D. (2011). Interaction between Target Costing and Activity-Based Costing: Is Target Costing a True Costing Technique?. SSRN Electronic Journal.
Creedy, K. (2011). ABC Special Illustrates Adoption’s Dichotomies. Adoption Quarterly, 5(1), pp.87-94.
Gupta, M. and Galloway, K. (2013). Activity-based costing/management and its implications for operations management. Technovation, 23(2), pp.131-138.
Hoozze, S. and Hansen, S. (2014). A Comparison of Activity-Based Costing and Time-Driven Activity-Based Costing. SSRN Electronic Journal.
Hoozze, S. and Hansen, S. (2017). A Comparison of Activity-based Costing and Time-driven Activity-based Costing. Journal of Management Accounting Research.
Kang, M. (2015). Activity-based Costing Research on Enterprise Logistics Cost Management. Business and Management Research, 4(2).
Kont, K. and Jantson, S. (2011). Activity-Based Costing (ABC) and Time-Driven Activity-Based Costing (TDABC): Applicable Methods for University Libraries?. Evidence Based Library and Information Practice, 6(4), p.107.
Kustiningsih, N., Atmadja, S. and Patmana, O. (2017). Implementation Of Activity Based Costing System In Making Affort To Determine The Tariff Of Operation Action (Case Study In Surabaya Royal Hospital). Archives of Business Research, 5(11).
Lebas, M. (2013). Which ABC? Accounting based on causality rather than activity-based costing. European Management Journal, 17(5), pp.501-511.
Liu, Y. and Gong, S. (2011). Production Management for Manufacturing Based on Activity-Based Costing. Applied Mechanics and Materials, 120, pp.432-435.
Nensi Veni Indipenrian, B., Subroto, B. and Fuad Rahman, A. (2015). Analysis of behavioral intention on ABC system adoption: Model of information systems technology and success acceptance. Journal of Economics, Business & Accountancy Ventura, 18(3), p.403.
Pokorná, J. (2016). The Expansion of Activity-Based Costing/Management in the Czech Republic. Central European Journal of Management, 2(1,2).
Ruan, Y. And Zhou, L. (2017). The Research on Management Accounting Tools—Based on the Comparison Between Activity-based Costing and Traditional Costing. DEStech Transactions on Engineering and Technology Research, (amsm).
Ruan, Y. And Zhou, L. (2017). The Research on Management Accounting Tools—Based on the Comparison Between Activity-based Costing and Traditional Costing. DEStech Transactions on Engineering and Technology Research, (amsm).
Sample Employer Policy ABC Corp’s Policy on Unions. (2017). Management Report for Nonunion Organizations, 40(5), pp.5-5.
Topor, D., Capusneanu, S., Constantin, D., Barbu, C. and Rakos, I. (2017). ABB-ABC-ABE-ABM Approach for Implementation in the Economic Entities from Energy Industry. Business and Management Horizons, 5(2), p.36.
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