HI5017 Managerial Accounting


The various types of costing methodology are identified in the report as the main objective to be used in an organization. The report will deal with the collection of information about the methodologies like activity-based costing in an organization. The suitability and features of the activity-based costing will be identified in the report. The managers will be able to understand the cost information for implementing activity-based costing with strategic decisions. The analysis of the article will be focused on the second part of the report. The information provided by activity-based costing use in the organization in real life consists of article analysis. The conclusion of the article analysis and activity-based costing for contemporary organizations are compared in the report.

Part A

ABC costing features

Costing category- the cost in this costing system is split into two main categories- fixed cost and variable cost. The strategic decisions are being made by managers by this cost categorization to collect and provide a framework.

Costing allocation- allocation methodology is an important feature of ABC costing. The cost drivers are responsible for the varied cost allocation in the costing system. The production and indirect activity of the cost drivers help in the development of cost units for each allocation. For instance, the machinery cost is done on the unit’s production of machines. On the other side, the distance covered by the salesperson induces the cost division through transportation of the indirect expenses (Al-Nuaimi, et. al., 2017).

Complexity- the organization faces a lot of complexion during the implementation of the costing system. The cost drivers are important for the cost allocation of the various elements in the organization. The cost drivers’ selection is dependent on the cost allocations’ accuracy for each recorded cost. The expertise on the activity-based costing is required for proper implementation in the organization (Cidav, et. al., 2020). The activity-based costing serves the organization in which the customers will be provided with various range of costs for various activities. The huge numbers will be dealt with by the organization at the time of implementation of activity-based costing. The complexity of the nature of management accounting will be allocated for cost management.

High-cost implementation- the complexity of the implementation process directly influences the cost of implementation of the activity-based cost. The traditional methodology is less costly than the activity-based costing implementation and requires experts’ help for the remuneration. The human resources will be higher for the implementation as the allocation will require time in comparison with the traditional system of costing.
Australian suitable business organizations
The service-based industry is the best suitable option for the implementation of activity-based costing which has various important features and the service-based industry will be appropriate. Mass allocation can be done in the service-based industry as the customers are provided with the varied services which are not similar. For instance, the customers are provided with a range of choices for the services of products as required and desired by the customers, the cost will be allocated according to the services used by the customers (Hada, et. al., 2016). The demand for the products is dependent on the prices of the services and products offered by the industry. The higher amounts of services will attract customers for their quality and experience. Various business organizations in Australia are using activity-based costing as suitable. Some of them are as follows-

Telstra Corporation
Telstra Corporation operates in the telecommunication industry which provides a varied range of requirements of the customers and serves appropriately with the introduction of activity-based costing in the organization. The activity-based costing is more accurate and relevant for the Telstra Corporation as the overall costing estimations are developed. The types of services being provided of the customers are a crucial point for the cost drivers in the telecommunication industry (Hilorme, et. al., 2019). For instance, the cost of the phone calls can be decided on the minutes of talk on the phone. The organization can provide a cost driver for a similar type of service for the customers.

Park Hyatt Sydney
Park Hyatt Sydney is an Australian based organization which operates in the hotel industry. The organization provides its customers with services like eating at restaurants or rent rooms. The cost of operation is different from the other services being provided by the organization to their customers as they are based on the activity of the services being provided. The cost of food and drinks will be varied from the cost of using the rooms in the hotel. This is the reason for using an activity-based costing system to charge the accurate amount of money from the customers. Based on the analysis, the service-based industries are best for the use of activity-based costing as they provide a varied range of services for the customers (Hoozée, et. al., 2018). Mass allocation will not do justice as it will be inappropriate and inaccurate for the costing system.
Potential uses of costing in decision making

The decision-making process is one of the most essential management parts which is undertaken by the managers as it influences the important part of the business organizations. The manager needs to ensure the implementation of the costing system to obtain accurate information that is relevant for making decisions. The accuracy of the information will affect the managements’ efficiency. ABC system serves with more accurate and relevant information than the traditional costing system information. The detailed identification and allocation of the cost operation are done for the various cost elements (Marques, et. al., 2019).

The ABC costing will help in the improvement of management accounting reports not in the financial reporting framework of the organization. The costing system for the activity-based system will help the organization for improving the quality of the services and accounting management as the detailed manner cost for the indirect services will be taken from the customer so the organization. The costing and selling prices will depend on the management accounting policies for efficiency.

Part B

1. Designing and execution of the Costing system

The selected article is focused on managing the company and collects accurate information regarding the operational cost structure and the profitability to assist them in the decision making procedure. This article describes a cost calculation system which is mainly used to indicate how the company has allocated its resources to supply or deliver required goods and services. The article is look towards the application of Time driven activity-based costing in Service Company. Along with this, this is focused on implementing ABC costing in the Hotel Graha Cakra of Indonesia (Meric, et. al., 2018). Recently, this hotel is adopting the traditional tool of costing and the investigation is based on a scenario that has provided a better framework through which TDABC can be implemented. The report mainly focuses on recognizing the issues that are related to the traditional costing method and execution of TDABC to reduce such issues and maintains efficiency.
The concentrate of the research was to choose the new technique of cost that can assist in reduces the issues which are related to the hotel functions and operations. In the describing scenario, this report has recognized that there are different benefits provided that is related to the time-driven activity-based costing. This will assist in improving and maintaining efficiency as per the existing management policies that are being implemented within an organization. As per the view of the article author, ABC costing is simple and rapid in measurement. This is accurate and helps in estimate cost that is used for comparing to the traditional method that is adopted by the hotel (Namazi, 2016). Along with this, cost drivers can be formulated to analyse specific features of orders, supplies and so more that may assist in formulating effective fretwork of MA systems and policies.
The research report mainly focuses on developing the TDABC framework for the company and improvement in cost drivers in a better manner. For the formulation of cost drivers, research has identified the provided rooms’ data that are related to the various services. The quality, size, form of the room provided in the hotel is a concentrate of recognizing the rental rates of a firm. Besides this, there is some other important information that involves human resources, fixed assets in rooms, stocks, overhead cost, and many more that were recognized by the researcher to form the model.
As per the above-described data and information in the scenario, it can be analysed that the implementation and designing of TDABC can be complex procedures for the business operations. The TDABC complexities enhancing for the company that is regulated in the services sector but overall reliability and accuracy formulate data that will provide advantages for long time development of an organization.

2. The satisfactorily features described in Part 1:

Category of cost –As per the feature, it is requiring in the ABC method is to allocate the total cost of the business operations into two main parts such as variable and fixed costs. this department assists in allocating costs ineffective method and technique. In the described scenario, the researcher has to divide the total cost of operations into a fixed and variable cost. In this, the main concentrate of the researcher is to formulate a framework for the division of the variable cost of business operations that includes direct labour, direct material, and overhead expenses (Narsaiah, et. al., 2016). The calculation and measurement related to such expenses are developed by researchers in which they are analyzing different rooms that are provided by the hotel. The following calculation in the research report will assist in evaluating the method where this calculation has been completed:

Direct Materials: 1,872,030,000 x 4.87% 91,167,861.00 IDR
Direct Labour: 407,550,000 x 4.87% 19,847,685.00 IDR
Overhead: Indirect Labour 5,894,579.83 IDR
Total Cost 116,910,125.83 IDR

Table 11: Room Cost Comparison Table

Room Type Room Cost (IDR)
Company Initial calculation method TDABC Method
Reservation Go show
Superior 443,836 405,764.65 406,550.28
Deluxe 590,302 430,141 430,664.77
Junior Suite 736,768 439,957.87 440,743.5
Royal Suite 1,176,166 497,976.8 498,762.44
Source : Data processed by Researchers

Room Type Room Cost (IDR)

(Riediansyaf, 2014)

The variable cost of the operation has been calculated in which each category of services is being appropriately offered to the consumer.

Allocation of cost
Based on features, a different allocation of indirect costs is based on cost drivers. It is the most essential feature of the ABC costing method that assists in formulating a relevant and correct framework for the allocation of value. As per the described data, this is focused on developing a framework for the TDABC for the hotel was to recognize cost components effectively (Ogilby, et. al., 2016). This is the main reason behind the data regarding there is various information that is essential for the company which involves inventory details, room availability, direct human resources, fixed assets, indirect HR and so more that were gathered by the researcher. Table 1 to Table 11 in this report has described information of the data that has been gathered by the researcher in developing an effective framework of the TDABC method.

From this feature, the implementation procedure of the ABC costing system can be difficult due to the recognition of various forms of cost drivers. As per table 1 to table 11, it has been analysed that information is gathered to form a cost driver which is complex in each manner. In addition to this, different types of information and data have been collected in the context of services offered to the desired consumers (Pawłyszyn, 2017). The data collection can be difficult as it is not simple for the company is to manage the internal conditions of the firm with the help of evaluating internal reporting. Along with this, such information and data are accessible in financial reports that were developed by a company. For instance, data like size and fixed assets positioned in every room that was not available in the financial statement.

The high cost of execution
As per the feature of complexity, a specific costing method is directly impacted by the execution of cost in a better manner. This report has not given any data and information concerning the total cost which may be incurred by a firm to execute the TDABC systems. This is a general sense that the gathering of such data from internal methods of an organization and it needs extra cost which will higher risk for the traditional system.

3. Useful of cost data to the Internal Users

In this, two forms of accounting are undertaken by the company such as management and financial accounting. Most of the organizations are focus on their financial accounting band they ignored the management accounting. The company requires making sure that accurate resources are being deployed in accounting departments. Management accounting is important as it has increased over time as a company is competing and based on cost efficiency. Such factors assist businesses to reach competitive benefits in the sector which has an efficient cost (Reynolds, et. al., 2018).
In this MA and cost accounting assist a company in understanding the common course of the structure of the organization so that accurate pricing strategies can be used. The data mainly concerns management accounting which is used by internal stakeholders and this is published in the public domain. The major use of collected information from the described scenario that accurately implemented the costing framework. The main concentration of the research project is to design, identify, and execute the TDABC framework which will advantageous for the business concerns. The researcher has gathered in all internal data that are available to the hotel regarding various services offered to the consumers.

4. Two key lessons that would inform the contemporary organization

The contemporary organization can be referred to as a company that is regulating and operating at the independent level. There are different division are situated in the company which has the independence to regulate their functions. This means company management has provided decision making authority to such departments (Wang, et. al., 2019). The structure of the contemporary company is differing as compared to the international companies which are control at the central level. In an organization, flexibility is limited that can affect the form of costing method which has to be implemented in a firm. In this research, a small scale hotel regulates in Indonesia named Hotel GrahaCakra which has been studied and the framework of TDABC has been formulated for the hotel. As per the researcher, the benefits of implementing the TDABC system in the hotel will be increased. Two lessons can be learned by the contemporary company through the research report that is described as under:
• The constant overall analysis of business procedures to make improvements
An organization requires altering and changes its business operations under the business environment. This is highly dynamic and competitive in each manner. Small scale businesses are not adapting well under the specific business settings that will become obsolete and they will go out of business in a given time. Various required decisions are taken by the organization and it is based on management accounting reports that will be affected due to the traditional costing method (Xing, et. al., 2019).
• Appointing new experts
This is recommended that the company need to implement ABC costing system that can be complex. Contemporary organizations are using traditional methods that should hire a specialist on activity-based costing for making accurate execution and designing of TDABC in the hotel.


The above report shows the activity-based costing methodology to be used in the organizations. The time-driven activity-based costing is complex which is concluded in the report. The report concludes the implementation of the activity costing system for contemporary organizations is concluded in the report. It has been analysed that the information will be useful for satisfying investors’ requirements and wants which is the main responsibility of CEO and other senior managers of an organisation. The goal of implementing of job methods is to reduce the cost appreciation and it is replaced by the traditional costing method along with particular system. The new costing system will helps in reaching and getting the efficiency of production and execute the best appropriate pricing strategy.


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