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Requirement
1- Write a report on Management Accounting in 2000 words with reference to APA.
Solution
Introduction:
In the present report an effort will be made in respect of the understanding the importance of the various information that are being provided by the ABC model of costing to the management of the company for the purpose of decision making. A deeper insight will be gained in respect of the various founding principles of the entity. In addition to that understanding will also be developed in respect of the mission, vision and the objectives of the entity. This is done to establish the relevance of the method in respect of achieving the same (Hald& Thrane, 2016).
The company that has been selected for the purpose of preparation of this report is Primary Health Care Limited. The company is a listed entity in the Australian Stock Exchange. The company is currently employing more than 1500 independent general practitioners, dentists, specialists and other healthcare practitioners. The company’s employee are engaged in the treatment of both chronic and acute condition in their patients. Health and Company is the brand under which the company has been able to establish the GP practices.
ABC Model and its features:
An analysis of the various activities that have been performed by the management of the company will be undertaken. The process of the allocation fo the indirect costs that are incurred by the management of the company to the various functional areas of the operations of the entity will be understood in a better way after the analysis of the various activities that are performed by the entity have been duly analysed. The relationship that is drawn by the ABC model of costing among the various costs that have been incurred, the activities that have been performed and the products that have been produced by the entities has to be understood objectively by the management (Chiarini& Vagnoni,, 2015). The relationship that has been drawn up by the ABC model of costing helps in the allocation of the indirect cost that are being incurred by the entity in a manner that is less arbitrary in nature than the one that is executed by the traditional costing. Under this method there are several costs that are very difficult to be allocated. The costs that are difficult to be allocated under this method include the salary that is being paid to the management of the company and the various remuneration that is paid to the employee of the company.
It has been duly observed that the entities that are engaged in the manufacturing activities have made use of this method in a much better way compared to others. The reason being that the reliability of the data that is presented by this method is significantly higher than the other methods. The true costs that are being incurred by the management are also reflected by the method and this helps in the proper allocation of the costs that have been incurred.
The management make use of this method to ascertain the costs that have been incurred by the entity. Various costs that have been incurred include costs like pricing of the services, target costing, costing of the product, and the analysis in respect of the product line of the company (Larsson et al., 2016). The management of the company successfully implements this method to ensure that the strategies that have been contemplated by it are effectively implemented.
Some of the features of the ABC model of costing are as follows:
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a) The division FO the total costs of the entity into two parts i.e. variable costs and the fixed costs is undertaken under this method. The creation of the decent cost recognition system within the entity and the ability of getting the quality information by the management of the company improve significantly under this method.
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b) Cost behaviour patterns are being identified by the company under this method for the purpose of making apt decision.
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c) Volume related, diversity related, events related and tie related are the various kinds of cost behaviour patterns that have been objectively recognised by this method of ABC costing.
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d) For the purpose tracing the overhead to the particular product the various cost drivers are also being identified.
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e) The cost behaviour of the entity is being dictated by the cost drivers that are already present within the entity.
Identification of the company’s mission and objectives:
The various mission, vision and the objectives of the company are as follows:
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a) Creation of value for the shareholders of the company: As per this mission the company tries to increase the returns that are being generated in respect of the stakeholders of the company. The primary reason for which the stakeholders of the company invest money in the capital structure of the entity is that it wants to increase the return that is generated by it in the long run. If the company fails to generate value for the shareholders in the long run, it will be very difficult for it to collet revenue from them in the future. For the purpose of creation of returns for the shareholders of the company the company tries to increase the profitability of the company (Nitzl, 2016).
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b) Ensuring the safety of the patients: One of the most important factor that will guarantee the success of the entity in the near future is the care that is being taken by them in respect of the patients that are being admitted by the hospital. Hence it is one of the goals of the company to offer the customers with top notch safety that is possible.
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Place Your OrderVarious corporate strategies implemented by the company:
The various strategies that have been implemented by the company for the purpose of achieving the goals, objectives and the mission of the company are as follows:
a) The company as a corporate strategy has established multi-disciplinary medical centres, pathology laboratories and diagnostic centres. The company has engaged itself in the provision of world class facilities and support services to independent general practitioners, radiologists and other healthcare professionals. This has enabled the company to deliver superior quality of care to their patients. In pursuance of that it has entered into partnership with the Primary’s pathologists, nurses and other employees. The company has also initiated a scheme of ‘medical home’ under which it has ensured that the healthcare services become easily accessible and cost efficient. In addition to this it ensures continuity in the delivery of the supportive and coordinated quality of patient care.
The ways in which the ABC model can assist the company in achieving its goals:
It is very important that the entity ensures that the goals and the objectives that are to be fulfilled by it are properly enlisted out by the management of the company. the management of each and every entity that is carrying out business ensures that the objectives and the goals of the entity are clearly laid down and the various strategies that are going to be used for the purpose of ensuring that the same are being implemented properly by the management of the company (Yigitbasioglu, 2015). For the purpose of decision making the management of the company must make sure that it is in receipt of adequate information that is required by it. In this respect the ABC costing model provides the requisite tools for collection and the dissemination of the information to them. The management of the company needs to continuously monitor the costs that are being incurred by it for the purpose of ensuring and measuring the returns that were being generated corresponding to the costs that were incurred by it. The ABC model of costing ensures that the company is being provided with the requisite information in this respect.
The fixed costs that have been incurred by the entity irrespective of the level of production that is recorded by the entity is objectively analysed and ascertained by the ABC model of costing. The method is of very high significance in respect of the determination of the benefits that have been reported by the entity and the costs that have been incurred in respect of them (Otley, 2016).
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Recommendation regarding the implementation of the ABC model:
The recommendations that can be given to the management of the company in respect of the implementation of the ABC model of costing are as follows:
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a) The various functional areas of operations have to be identified by the entity: It is very important that the information regarding the various functional areas of operations are duly identified by the entity. Three are generally a wide number of functional areas of the company. one instance can be given of the functional areas of operations regarding the research team that is engaged in the process of determining the avenue that are capable of generating returns in favour of the entity. Some of the functional areas of operations include the human resource function of the management of the company (Angelopoulos& Pollalis, 2017).
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b) The various activities that are performed within the functional areas of operations by the entity: It is very important the key activist that are involved in the functional areas of the entity re being identified by the entity. The reason for this is that the resources that are used by the significant activities are way more than the amount that is required by the non-significant activities.
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c) For the purpose of allocation of the indirect costs that have been incurred by the entity to the functional areas of operations of the entity a suitable basis for the allocation of the indirect costs has to be found out.
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d) Two statements are required to be prepared on the part of the management of the company for the purpose of conducting a comparison between the same. The statements are termed as statement of expenditure and the statement of revenue.
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e) It must be ensured that the proper record is shipped from Las Vegas.Other management tool suitable for the management: One of the many other managerial tools that are available with the management for the purpose of decision making is the standards costing. Under this method various target performance has to be set up by the management of the company for the different functional areas of operations of the entity. The sales that is recorded by the entity and the costs that have been incurred by the entity are some of the most relevant and significant functional areas of operations of the entity. The actual performance is recorded by the company after the conclusion of the setting up of standards by the management of the company. Subsequent to the actual performance by the entity the same has to be recorded duly by the management of the company. After the measurement of the actual performance that is recorded by the entity an effortwill be made in respect of conducting a comparison between the actual performance of the entity and the standard that has been set up by the management of the company. In case the management of the company finds any sort of differences or deviation in respect of the performance that is recorded by the entity then the same has to be alleviated by it by making use of certain corrective actions (Chouhan et al., 2017).
Conclusion:
The analysis that has been conducted in the report has enabled in the formation of the view that the ABC model has enabled the management of the company to obtain significant and essential information for the purpose of decision making. The adoption of the ABC model of costing has made it possible for the company to continuously monitor the costs that have been incurred by the entity. due to the fact that the activities that have been performed by the entity is being taken as the base by the method for the purpose of allocation fo the indirect costs that have been incurred by the company the data that is reflected in respect of the same and the decision making process of the entity has improved significantly over the period of time.
Reference
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Angelopoulos, M., & Pollalis, Y. (2017). Activity Based Costing (ABC) as a tool for Lean Transformation: The Case of the Greek Power Public Corporation (PPC).
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Chiarini, A., & Vagnoni, E. (2015). World-class manufacturing by Fiat. Comparison with Toyota production system from a strategic management, management accounting, operations management and performance measurement dimension. International Journal of Production Research, 53(2), 590-606.
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Chouhan, V., Soral, G., & Chandra, B. (2017). Activity based costing model for inventory valuation. Management Science Letters, 7(3), 135-144.
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Hald, K. S., & Thrane, S. (2016). Management Accounting and Supply Chain Strategy. In 1st International Competitiveness Management Conference.
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Larsson, R. G., Shima, Y., & Kurisu, C. (2016). Management Control Systems for Lean Management in Medical Services—A Case Study at Lund and Kameda. In Lean management of global supply chain (pp. 161-187).
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Nitzl, C. (2016). The use of partial least squares structural equation modelling (PLS-SEM) in management accounting research: Directions for future theory development. Journal of Accounting Literature, 37, 19-35.
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Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62.
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Yigitbasioglu, O. (2015). Enablers of sense-making and responding and their impact on the effectiveness of management accounting practices.
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