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ABC Technique: Wishtech Global Limited

HI5017 Managerial Accounting

Format of the Report 

1. You at least should have the following details: 

a. Assignment Cover page clearly stating your name and student number 

b. A table of contents, executive summary

c. A brief introduction or overview of what the report is about. 

d. Body of the report with sections to answer the sections required and with appropriate section headings 

e. Conclusion 

f. List of references. 

2. Diagrams and tables clearly labelled and explained. 

3. Ensure all materials are correctly referenced. Plagiarism will be severely penalized.

Background: You have been hired by the Board of Directors of your chosen company (ASX Listed) to explain how ABC model can improve the management accounting information available to its top management team (i.e. CEO and senior managers).

Required: You are required to prepare a report to recommend about ABC model for your company. The report should cover the followings: 

a) An explanation of ABC model and its features 

b) An explanation of how ABC model aligns with the current goals and strategies of the company. This explanation should include: i) An identification of the company’s mission and objectives; and ii) An identification of the company’s corporate strategies iii) An explanation of how ABC model assist in achieving the company’s strategies. 

c) Provide at least two (2) recommendations about the implementation of ABC model for your company based on your research findings. 

d) Apart from ABC model, suggest one other management accounting tool suitable for your company and justify it

Answer

INTRODUCTION

The record books of the organization, everyday exchanges and records of the organization are kept up by the administrator officer with the assistance of Management bookkeeping techniques. There is fundamentally three sorts of administration bookkeeping. These incorporate Activity Based Costing technique, time based action based costing technique and customary strategy. The report mainly lays stress on the activity based costing technique used by Wishtech Global Limited. The research paper tells how vital data is taken out from the information available through ABC technique. It considers the objectives of the organization and makes an assessment of the information (Van Dyk, Zubizarreta and Lievens, 2017). This technique will demonstrate the additional cost brought about by the Wishtech Global Limited Company and decreases the additional cost. Consequently helps in expanding the benefit of the organization. The research paper also highlight how ABC technique must to be best utilized and showcases the confinements while applying this technique. It features the significance of cost segments of the organization as when the cost of the organization augments the general gainful stature of the organization diminishes. This technique additionally helps in asset assimilation. It depicts the imperative tasks of the organization and allots the assets as per their significance. It helps in giving convenient outcomes which can additionally be utilized as a part of systems plan. This is an imperative technique for high level administration. It aids the organization to manufacture best quality item at the low cost.

ABC MODEL AND FEATURES

The technique based costing is a prominent technique amongst the other techniques of costing in bookkeeping. It evaluates the expense of the company in detail and gives the detailed data about expense per measurement. It propagates in insight regarding the settled and the variable cost. It propagates information regarding the cost rendered on the material utilized amid the operational hours, benefit cost, any expenditure and other related cost (Schutzer, Arthur and Anscher, 2016). It depicts the exact data regarding the cost. This aids in estimation of the cost beginning from acquiring the stock material to tasks in the organization to creation of merchandise and administration. It is an essential instrument to compute the backhanded cost of the organization. The action based costing technique is found to be the best costing strategy that must be adopted for cost administration of the entire organization. It partitions the cost into two sections. The first is the settled cost and the other is known to be the variable cost. The cost model is applied into the working operations of the organization with the help of settled cost and the variable cost. Activity based costing is also found useful in estimating the extent of productivity by using various segments of cost. It can also relieve to hold a connection among the time, quantity of manufactured products and cost (Malkin, International Business Machines Corp, 2017). The vital features of the everyday activities are selected by ABC model and the operating cost chooses the features of cost quantity association concerning the item. So with the assistance of activity based costing the Wishtech Global Limited chooses the vital factors of the cost and after that dispense the assets as per the significance to the company. It helps in appropriate use of assets with no wastage. Following the detail examination of the activity based costing and its advantages Wishtech Global Limited constrained chose to actualize it into the working systems of the company. Accordingly, now ABC model distributes the best possible assets to various sections of the operating system of the company based on their significance in relation to the cost of Wishtech Global Limited.

ALIGNMENT OF ABC MODEL IN CURRENT GOALS OF WISHTECH GLOBAL LIMITED

The idea, goals and mission of the Wishtech Global Limited must be examined to get a notion about the compliance of ABC model with the targets set by the company. After carrying an in-depth investigation of the key mission of the Wishtech Global Limited it was found that the company is to direct the worldwide logistics commerce in technological modernization and innovation. This will additionally help in the development of the business and increment in the intended interest group (Laviana, Tan, Hu, Weizer, Chang and Barocas, 2018). The Wishtech Global Limited vision and targets lay stress on the imparting quality services that they deliver. Hence, ABC model is the prime costing technique since it examines the conduct of workings in the operating system and after that assigns the assets. Consequently lessens the cost and creates quality services. The right distribution of assets is essential since it will lay down emphasis on reduction of wastage of the assets because of which the general cost reduces and benefit increments. The service is delivered in time with best quality provisions. The company’s functionary’s arrangement and allocation imparts a critical part in accomplishing the long term and the short-lived objectives of the company. Accomplishing the vision, mission and the objective of the organization will become easier by adoption of ABC model into the operations of the company. Wishtech Global Limited is spread into various areas and is committed to provide quality services to the customers and clients in minimal cost. 

This presents a positive image of the company in front of the customers and clients. The objectives of the Wishtech Global Limited could only be gained when the company adopts measures that are financially savvy on comparing the cost effective methods used by the other competitors. The organization is committed to give best returns to the partners and investors of the organization (Kim, Laviana, Halpern, Patel, Kasabwala, Bianco and Hu, 2018). To achieve the desired objectives of the company the company needs to earn good returns with minimum risks and provide quality services to the customers. The delivery of services on time is the main concern for the company and in doing so inappropriate exploitation of resources takes place due to which a lot of wastage is observed in the company. The company has starting using unit cost method which helps in processed estimation of the cost incurred by the company in different departments for providing quality services to the customers. The company is well aware of the sales dimensions and has linked the sales functionaries with the cost workings of the organization. 

Wishtech Global Limited is applying all possible methods to reduce the cost without making any compromises on the quality of the services. The company is adopting efficient corporate policies at every stage of operations so that the company could provide services that are cost effective. The Activity based costing model provides the divergence among the actual cost rendered and the expected cost (Kaplan, Agarwal, Setlur, Tan, Niedzwiecki, McLaughlin, Burke, Steinberg, Chamie and Saigal, 2015). The model also highlights the portions where the extra cost is made. The company is working towards reducing the cost and adopting corrective measures to lessen the wastage. By applying cost effective methods the cost incurred by the company decreases and the profit margins of the company increases. Wishtech Global Limited has incorporated the activity based model and the top management is implementing the application of the ABC model into the working operations of the company. 

The activity based costing model helps to identify the most appropriate section of the company which is working efficiently and has achieved best results in due specific time. The incorporation of activity based costing model is very easy and uncomplicated process. Before finally initializing ABC model into the working systems of the company a pilot project must be carried out to ascertain the applicability of ABC model into the operations of the organization. If any error is observed then it can be rectified at the time of final implementation of the ABC model.  For effective implementation of the ABC model the support of the high level is required by using testing and trial method. It is observed that testing and trial methods are time consuming due to which a lot of time and efforts gets wasted. The organization can also reaffirm with the previously applied techniques used by the company if they are effective or not. The incorporation of the activity based costing method must be done with the help of a specialized team who can effectively plan and coordinated their actions to implement the ABC model into the operations of company (Eberhart, Koch, Kranke, Rüsch, Torossian and Stefan Nardi-Hiebl, 2014). The team members must work accordingly to get in accord with the changes that are observed with the implementation of ABC model. Proper training must be provided to the team members in which the functionalities of the leader also gets more vital. External consultants must be appointed to provide guidance to the team members so that they could used the information revealed by the ABC model in a more appropriate manner.  

RECOMMENDATIONS

The long and short term goals of Wishtech Global Limited could be achieved by effective usage of activity based costing model. The ABC model effectively lends out relevant information which could be used by the company to formulate the strategies which would help the company to grow. The main vision of Wishtech Global Limited is to direct the worldwide logistics commerce in technological modernization and innovation which could only be achieved by using activity based cost effective methods. The application of ABC model allocates the resources properly which leads to the effective operations of everyday exchanges (de Almeida, de Assis Figueredo, Soares, Vater, Alves, da Silva Carvalho, Kritski and de Miranda, 2017). The allocation of resources is done on the priority basis which is specified by the ABC model due to which the assets are distributed timely and properly utilized. The wastage of assets is brought down to minimum because of constant review available due to ABC model. When the company is incurring more wastage the cost of the company will get increased and the profit portion of the company gets decreased. The waste management must be done in an appropriate manner as per the standards set by the company. In case if any gap is observed between the effective utilization of resources and emergence of waste t must be duly corrected so that best services could be provided at low cost.  

OTHER ACCOUNTING METHOD

The Wishtech Global Limited has adopted activity based costing technique because of which the company is able to deliver quality services at low cost. The adopted technique helps to achieve the goals of the company by reducing the time and efforts with limited financial assistance. The costing method provides accurate results about the spending of the company and the strategically depicts the cost rendering areas. The results received are exact in the real time which does not lead to the emergence of confusion among the various other types of costs. It applies a single cost technique for estimation of cost. Even the software applied to the working are economically available because of which the training required for its application is also less which is beneficial for the company (Chipko, Schutzer, Serrano and Anscher, 2017). The ABC model uses six sigma concepts which renders that the working conditions of the company constantly keeps on changing. The changes needs to be continually reviewed to keep the operating system of the company innovated and upgraded. It is necessary to acquire correct information at right time which will enable to provide correct decisions at right time keeping a watch on the changes that are observed with time. The AMC model has two parts first being spending and the other time. Overhead is the time spend by the worker do complete a particular work which is effectively analysed by ABC model. The second part is the time which depicts the time consumed to complete a particular task. The ABC model effectively compares the two parts provides strategies to improve the both aspects of the overheads and time.  

CONCLUSION

The report provides a detail examination of the significance of the costing methods that are applied by the companies. It also evaluates the vision, goals and objectives of Wishtech Global Limited and propagated the advantages of activity based costing techniques implemented by the company (Andreasen, Holm, Jørgensen, Gromov, Kjærsgaard-Andersen and Husted, 2017). The benefits provided by ABC model are unique which are not provided by any other costing techniques. The working conditions of the companies are constantly changing so such changes must also be incorporated into strategy formation time to time. The ABC model is well efficient in providing accurate information in real time which helps the company to take important decisions and increase the profitability of the company by providing quality services at low cost. 

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