How Management Accounting Is An Integral Part Of The Organization For Small And Medium Sized Companies ( Smes )

Activity-based costing can be defined as the managers allocate costs depending on the quantity of resources a product or service consumed in the manufacture of goods and services. The activity based

Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.

The account issue addressed in this case study was whether to continue with the existing costing method for each product line or implement a activity-based costing method. The ABC method allows for an organization to allocate direct and indirect costs to products and obtain an accurate level of costs and profit for each unit produced, thus allowing the company to improve their overall operational effectiveness. ABC does differ from the existing costing method described in the case as the old method does not account for volume related overhead costs which must be allocated to the specific ODD and TGC products.

The first item at hand is what kind of detail does activity based costing provide that is different than traditional costing?

This paper provides a brief presentation of Activity-Based Costing methodology, how is used as well as its short comings.

Activity based costing (ABC) is a cost management technique and more precisely it is a method that measures the cost and performance of process related activities and cost objects. It assigns costs to cost objects such as products or customers, based on their use of activities. Thus recognizing relationship between cost drivers and activities.(Lewis, 1995).

Activity-based costing is more accurate because it takes important factors into account before assigning a cost to a product. It's also more thorough and considers nonmanufacturing expenses as well, such as administrative and managerial costs. The ABC method is accurate, however it’s expensive to

Management accounting is about adding real value to the organization by combining accounting, finance and management with the business skills and techniques. It involves in management decision making, devising planning and performance management systems. Management accounting provides expertise in financial reporting and administer to assist management in the formulation and implementation organization's strategy.

Session 1 Date September-4 Topic Introduction, overview, group assignment, product costing systems (concepts and design) Process costing systems Managing and allocating support service costs Inventory decisions Strategic issues in investment decision Managing quality and time to create value Midterm Exam Cost management and strategy The nature of management control systems Understanding strategy Strategy, balanced score card, incentive systems Organizational design & responsibility accounting Case presentation Case presentation Case presentation Case written report is due at the beginning of session 13 Final exam Chapter 1 (H) Chapter 1 (A) Chapter 2 (A) Chapter 20 (H) Chapter 18 (H) Reading Chapter 2 (H)

3. Under the new activity-based costing (ABC) system, compute the indirect cost allocation rates for each of the three activities:

Narong, D. K. (2009). Activity-Based Costing and Management Solutions to Traditional Shortcomings of Cost Accounting. Cost Engineering, 51(8), 11-22.

Activity-based-costing (ABC) system find activities as the drive for each cost, calculate the average cost per driver’s activity, and times budgeted activities for budgeted cost. It is worth mentioning that ABC system is not used to find problems in cost records, or predict future cost based on that.

Nowadays, we know that activity based costing system assigns overhead costs to products or services products that using a two-stage process, which focuses on activities. ABC is a relatively new and very important topic in managerial accounting. ABC allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. Contents in brief, first that comparing potential advantages of ABC versus traditional costing methods. The

In fact, many of these PMS tools and technological innovations were transformed based on those traditional ones to better meet the organisation needs in the contemporary era. More than 30 popular cost and management accounting techniques have been introduced since 1950 (Refer to Table1). Abdel and Luther (2006) described that the most notable innovative management accounting techniques are Activity based costing (ABC), strategic management accounting and the BSC. Among all the modern management accounting tools and techniques, this paper focuses on BSC as a performance measurement system and will be discussed in the next section.

C. T. Horngren, A. Bhimani, S. M. Datar, G. Foster (2005), 'Activity-Based Costing', Management and Cost Accounting (Prentice Hall Europe), 345-363