Management Accounting for Strategic Decision MakingProduce a iefing note on a given managerial...

Question

Management Accounting for Strategic Decision Making
Produce a
iefing note on a given managerial accounting topic. Analyze and assess how a management accounting tool could be used within the given organization to improve their strategic decision making.
A
iefing note is meant to be
ief! For this assignment, the
iefing note should include the following section:
· Issue
· Background
· Cu
ent State
· Analysis/Implications
· Options
· Recommendations
Maximum of 1500 words/3 pages. Within these 3 pages you are encouraged to think of ways to use visualization (charts, graphs, etc.).
Standard margins, single spaced, Cali
i font size 12
Proper referencing (reference page is not included in the 3 pages limit)
Topic Proposal: The Use of Activity Based Costing (ABC) in E-commerce
The use of Activity Based Costing (ABC) for a newly started e-commerce that specializing in clothing retail.
Background: E-commerce is a fast-growing industry, especially in today’s era of technology. More and more enterprises change their traditional business to or start engaging in e-commerce. Since e-commerce generally has a low startup cost and high income potential, more and more individuals and companies are getting involved in e-commerce which leads to fierce competition in this industry. In order to survive in this competitive environment, this newly started fashion e-commerce needs to allocate its costs wisely and reach profitability as quickly as possible. To better control costs, an Activity Based Costing (ABC) method is adopted in this organization for its strategic decision making. Unlike traditional method, ABC allocates costs based on specific activities which will result in more accurate pricing decisions. This is especially important for e-commerce since its costs involved technology cost, labor cost, logistic cost, etc. which is complicated for a newcomer. The ABC method can help the decision maker learn and understand these costs quickly and make a better pricing decision.

intro-and-topic-egzhaacs.docx

Shivi · Accepted Answer

Activity based costing - Introduction
 (
Activity Based Costing
) (
Traditional
 
Method
)Activity based costing is costing system which is most difficult to apply but most accurate. It works on the phenomena that every activity level is judged separately and need to be fully sorted. The sorted activities are material management, supervision, operator training, advertisement, production planning, and market research. Activity is taken as base for allocating cost. Thus department managers need to sort out these activities to get maximum efficacy.
 (
Resource
) (
Resource
)
	                                                                                        
 (
Activities
)                                     Allocate
 (
Product/Services
) (
Product/Services
)
Issues- ABC System in clothing e-Commerce:-
There can be various issues linked with ABC system, this system gives numbers that might not match with the traditional system. It requires considerable resources. Some other major difficulties with activity based costing:-
· Not easy to chose cost drivers
· Difficult to identify activities that may impact on cost directly
· Unsuitable for micro units or small industries
· Expensive software required
· Need data from multi departments
· It is not always possible to allocate overheads to specific cost centers
Background
 (
Activity Drivers
) (
Resource Drivers
)E-Commerce has little exposure to ABC system, There is huge scope to improve the competitive performance of SME’s (Small and medium enterprises). ABC system identifies and calculates individual cost of activities and assign cost of product & services on the basis of activities undertaken in that department. It identifies gain and losses accurately. ABC system is developed in United States of America in 1970s, with the focus on activities. Activities are task of particular unit of work with specific agenda. Example – Designing Units, distribution activities, purchase unit, operating machines etc.
Implementation
Various stages Of Activity Based Costing
Various issues need to be resolved:-
· Top management should be fully committed and well versed with the process and principles of ABC system
· Managing team should be compact,

Management Accounting for Strategic Decision Making Produce a briefing note on a given managerial accounting topic. Analyze and assess how a management accounting tool could be used within the given...

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