New Developments in Management Accounting

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“The past 15 years have seen a series of new developments within Management Accounting to meet the ever changing needs of the organisation in the light of rapidly changing technologies”.
The following will focus on new techniques and developments used in Management Accounting over the last 15 years, by looking at their origins and apparent necessity leading to their introduction within industry. Each development will be assessed individually providing its background, initiation, impact on the business environment and numerical examples of them in action, where appropriate. The developments will be Activity Based Costing (ABC), Throughput accounting (TA) and Just in Time (JIT).
Activity Based Costing
ABC is a developed costing system
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Next the ‘cost driver’ needs to be established for each activity, commonly looked upon as the reason for the indirect cost to occur and be linked to the job, almost a variable cost of sorts, however it won’t necessarily be variable, it maybe semi-variable, either way it is seen as the major cause of the cost being incurred. Finally the finishing costs are assigned to activities based on the products demand per each activity, the higher the demand, the higher the cost.
Here is an example of ABC in action:
ABC Example COST CENTRE COSTS 250000 BROKEN DOWN INTO: VOLUME £60,000
PURCHASING £130,000
SET-UP £60,000

ADDITIONAL INFO
DIRECT LABOUR HOURS £25,000
TOTAL PURCHASE ORDERS £5,000
TOTAL NUMBER OF SET-UPS £600
TOTAL MACHINE HOURS £50,000 PER PURCHASE ORDER PLACED £26 PER SET-UP £100 PER VOLUME £1.20 Therefore with product XYZ, we can allocate the indirect overheads like this: Basic information could be:
MACHINE HOURS 100
LABOUR 150
SET-UPS 1
PURCHASE ORDERS 25 The overhead is made up of 3 aspects Purchase Order +
Set-up +
Productivity / volume Purchase order 25 X £26 = £650
Set-up 1 X £100 = £100
Productivity / volume 100 X £1.20 = £120 £870
Therefore total indirect overhead recovered
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