Management Accounting of Control Practices Free Samples to Students

Question: Discuss about the Management Accounting of Control Practices. Answer: Introduction: The company uses to add the markup on the various cost items to determine the product costs. It distributes the costs between its two types of delivered items in accordance to the numbers of carton ordered. Such overhead allocation system is stated as traditional cost allocation method, which considers any single cost driver to allocate the total overhead costs. Though, traditional cost allocation method is a very popular method, it has certain limitations. It has been observed that it does not provide appropriate outcome for multiple product trading or manufacturing units. The company delivers the products either via commercial freight or under drop-ship delivery system. The costs for the two delivery systems are different from each other. For instance, it has to pay freight for commercial freight system and for drop-ship delivery system; it has to bear delivery van expenses. Hence, it would be inappropriate to distribute the freight cost to the orders, delivered under drop-ship delivery system or delivery van expenses to orders, shipped via commercial freight (Hglund et al. 2016). It is not necessary that the data entry department would provide same time for all the orders. Moreover, the company operates at various data entry levels, which require different labor hours. All the queries, attended by the data entry department, is not converted into sales at all the time. Therefore, the number of orders, booked, cannot be the appropriate cost driver for allocating the costs for this activity (Shu et al. 2014). As per the discussions, it is clear that the number of orders does not relate with these activities. Therefore, allocation of these expenses, under traditional method, cannot ascertain the proper product cost, which results in improper pricing of products. References: DRURY, C.M., 2013.Management and cost accounting. Springer. Groot, T. and Selto, F., 2013.Advanced management accounting. Pearson Higher Ed Hglund, L., Holmgren Caicedo, M., Mrtensson, M. and Svrdsten, F., 2016. Management accounting of control practices: a matter of and for strategy. Inthe 9TH INTERNATIONAL EIASM PUBLIC SECTOR CONFERENCE, held in LISBON, PORTUGAL, SEPTEMBER 6-8, 2016. Kaplan, R. and Anderson, S.R., 2013.Time-driven activity-based costing: a simpler and more powerful path to higher profits. Harvard business press Shu, F., Weidong, Z., Zhuo, L.Z., Haibin, C. and Yaohui, Z., 2014. The application of time driven activity-based costing in fine cost management of the hospital.Jiangsu Healthcare Administration,6, p.063