HI5017 Managerial Accounting | Management Accounting Case Study Assignment

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HI5017 Managerial Accounting


HI5017 Managerial Accounting

Student’s Name

Institutional Affiliation 

APA  GroupExecutive Summary

The APA Group governance and board size is limited and subjected to the APL constitution, which provides for a maximum of twelve directors and a minimum of three directors in a specific year.  A large number of the directors are independent individuals who are guided by the Independence Policy of Directors. The Chairman is selected by the Board and automatically becomes an independent director upon resumption of office. In case of absentia from the meeting, the Board Members present select one member amongst them to be an interim chairperson for the meeting. The appointed Managing Director becomes the Chief Executive Officer for the company. The company maintains an appropriate mix of skills, expertise,andexperience within the board, which calls for regular review of the succession plan. The potential new directors are commanded to be the security holders upon appointment.

Activity-Based Costing (ABC)

Activity-based Costing is an accounting technique, which identifies the firm’s activities and later reassigns the indirect costs to the final products. As a system, it recognizes the relationship between the products and the activities and costs incurred by the company. The relationship helps to apply a less arbitrary indirect cost assignment than the traditional methods. There are some costs that cannot be assigned through this method because of their complexity and difficulty in allocating the specific contribution of the cost of the products. Some of the costs include office staff and management salaries cannot be assigned to a specific product generated in a company(Chouhan, Soral & Chandra, 2017). Therefore, the method is being applied in the manufacturing sector where it has developed a good niche in the industry.

The costs are properly classified through product and target costing, profit line profitability analysis, service pricing and customer profitability analysis. It is common among larger organizations that have a better corporate strategy an focus for its operations. The units of work, events,and specific goals and tasks are such as machinery and equipment setup, product designing, machine operation and distribution of the final products are factored because they consume some overhead resources(Hoozée& Hansen, 2017).

The ABC activity system identifies activities as an event or transaction that is a cost driver. A cost driver is the allocation base, which includes quality inspections, maintenance requests, machine setups, the power consumed, and production and purchase orders. The cost drivers are divided into two categories, which include duration and transaction drivers. The transaction drivers take into consideration the number of times in the occurrence of the activity. Similarly, the duration drivers measure the time taken by the organization to complete an activity(Hoozée& Hansen, 2017).

The Activity-based costing improves the overhead costing process in three major ways. Firstly, it increases the cost pools, which are used in the assembling of the overhead costs, contrary to the company-wide accumulation of costs. This is achieved through the understandingcost pools associated with the specific activity. Secondly, it creates a new basis of items on overhead costs with an allocation of volume and activities and other costs generated. Instead of volume the measures used in the allocation of resources it uses the direct labor costs and machine hours in the production process. Finally, the system alters the nature of the numerous indirect costs that were previously considered to be indirect in the production process such as depreciation and inspection power, which are only traced to specify activities in the organization(Chouhan, Soral & Chandra, 2017).

ABC Model Aligns With The Current Goals And Strategies Of The Company

The APA group has formulated many policies and strategies, which allows them to properly manage their resources and allocate their costs to the products effectively. They use the ABC mode to achieve the desired goal and properly apply the strategies to assure rapid growth through challenging leadership systems and remove any obstacles that may be facing the production team. The strategies ensure that the all members of the production team to exploit their strengths and by contributing to the team and steering the strong operational controls. It helps to understand the contribution of the various stakeholders and their underlying motivations, which trigger them to deliver the desired target(Hoozée& Hansen, 2017). Therefore, it is easier to maintain the needs and satisfaction of the customers through financial planning and business forecasting.

Identification of the Company’s Corporate Strategies

The Growth Strategy

The ABC model ensures that there is growth in the business activities developed by the APA group company. The top line growth helps to achieve, the more sales for the company and better returns. As a service industry, the direct link allows for the increase in the tea size, which allows more productive adventures in the long run. The company records more revenue by selling more products in the market and more people can be hired with the aim of selling more and acting as a feeding engine. The natural focus is naturally diluted after focusing on the more sales and drawing in more clients.  The Account managers help in ensuring that with every hire whom they add to the company should not affect the personality of the company(Chouhan, Soral& Chandra, 2017). When the managers employ proper management the reputation of the company changes for the better by making it paramount that the company and recruitment culture remains true to the company objective and vision.

Margin Optimization Strategy

The company applied the ABC model after realizing a top line increase with a disproportional increase in the costs. This increased the inefficiency of the company because it was fairly typical to move and align towards the expectations of a startup organization in order to reduce the costs. This helps in explaining the phenomenon that the machines eventually become stable and efficiently operational in the new scale. This reduces the management challenge, which is greatly contributed by the misleading monthly marginal figures(Hoozze& Hansen, 2014). The cost of goods and margin are separate from the operating costs in their current nature, which may not be stable during the year.

Risk management Strategy

The APA Group has laid down the desired strategies to ensure that the risks that may befall the organization is controlled at an early stage. The immediate strategies help in the justification and the acquisition of the long-term goals through sustainable vision. The past experiences through which the company has passed the growth phases and metrics and management controls in identifying the desired change.  Therefore, risk management is an important element in ensuring that the challenges and models are cautious in the stifling growth. The company easily manages the impending challenges in the business because they are ever prepared for the same(Hoozée& Hansen, 2017). There is effective management of the business controls through operational planning and structure that prioritizes the three elements of the model.

An identification of the company’s corporate strategies

APA is the leading Australian energy infrastructure that offers energy solutions to businesses in the country. It provides reliable, safe, innovative and cost-effective through interconnected infrastructure and deep and sufficient knowledge in the industry. The company management has developed mechanisms to formulate risk inherence. The company provides the confidence and the ability to achieve the company goals. It maintains the practices of risk management across all business activities. TheEnterprise Risk Management Framework maintains and governs the risks that face the company based on the ISO 31000, International Risk Standards(Hoozze & Hansen, 2014). The functional ABC model frameworks align through common language and consistency in the integral business decisions.

Company’s Mission and Objectives;

Company Mission

Aim to become a global business enabler that can meetthe needs of our customers in Australia and throughout the world(APA Group, 2018).

Company Objectives

Provide a safe, professional environmental workplace for the employees to collaboratively provide a respectful and valued network.

To provide a trustworthyact of honesty and integrity in an individual and collective responsibility for business delivery(APA Group, 2018).

To have an adaptable and continuous response that is adaptable to the changing environment that is innovative and modifying the continuous business behavior(APA Group, 2018).

To deliver consistent results through a consistent commitment to excellent delivery of results and benefits to customers, employees,and investors through perseverance and tenacity of the community(APA Group, 2018).

To be committed to offering the best high-quality services, which are achieved through understanding, listening and customer response(APA Group, 2018).

Recommendation for ABC model

Attempt for top-line growth and copewith risk and margin

This is my favored method to deal with developing business strategies and policies. Offer the work; convey it at scale and at a decent level of value without abandoning yourself at risk to potential substantial in billable expenses. This implies utilizing an independent market through trusted individual systems and handpicked scouts who comprehend the sort of individuals you search for and through solid, demonstrated conveyance instruments to guarantee consistency(Hoozze& Hansen, 2014). It does, notwithstanding, come to the detriment of working edge and the desire should be to set from the beginning of the project.

This strategy is best I the development of the best line development and makes the most extreme benefit different channels. Normally this should be done in an administration's based industry by procuring your group ahead of time and after that offering them an opportunity to exercise their powers. The work should be conveyed through individuals who are installed in the business and who put resources into over a drawn-out stretch of time. At this point the company needs to enlist that group ahead of time and unless you have a noteworthy venture and a sense of duty regarding a lot of non-billable time that essentially isn't conceivable(Hoozze& Hansen, 2014). Actually, accomplishing this model reliably is to a great degree unless the company wishes to fill a specific market gap.

Engage in Market Shifts to Manage margin and risk

It is important to deal with various business streams unavoidably moves the concentration to some degree towards maintainability and consistency. The target is usually exposed to various reliable benefit and limiting danger to the business. This level of control may be detrimental to the noteworthy development of the organization. The immediate organizational objectives encourage the selection of the business model that brings an understanding of the various model limitations in their application and description above the stated models. The financial plan increases the performance of the organizations. The monthly expectations and effective management steerthe effective management of the business detriment and the elapsing of the action to be taken in the long run(Ruan& Zhou, 2017). In the semiannual and annual report, the elapsed time allowed should have a fallback plan with the missed material objectives.

The margin is finally managed through the growth of the percentage profits and absolute profit margin. The increasing profit margin maintains its focus on the sustainable revenue derived from the company sales and operations. However, it retains the company with an increasing overall focus on the percentage profit and the operational efficiency and retains growth in the company(Ruan& Zhou, 2017). The junior employees should provide the additional work that is required to manage risks and bring larger initiatives that are capable of executing major company plans on a large scale.

Capital budgeting analysis

It is the process in which the organization should evaluate and determine the potential investments and expenses on a large scale. They should have project elements such as building a new production plant and long-term ventures in the industry. The perspective offers a continuous inflow and outflow of cash from the society to determine the potential returns with sufficient investment appraisals and benchmarks. The APA Group should pursue the opportunities and projects at their disposal and improve the shareholder value in the limited available capital(Ruan& Zhou, 2017).


The ABC method has a wide application in the manufacturing industry because it can reliably use cost data and produce similar costs incurred in the production process by the company.On the contrary, the traditional cost measurement systems greatly rely on the volume count, which includes the direct labor hours, machine hours in the allocation of the overhead or indirect costs to various products. The ABC system provides an unrelated unit of products, which are classified into five wide levels of activity. The levels include organization sustaining activity, batch-level activity, product-level activity, customer-level activity and unit-level activity.

The APA Group Board and the Executive Risk Management committee help in approving the risk policies, strategies,and frameworks. The model is after reviewing the current material actions and risks in business growth. Finally, they review the emerging material risks, insurance arrangements, crisis management plan, risk framework and strategy and development of a risk-aware culture.When development is demonstrated, you would then be able to center on balancing out and expanding operational proficiency.The capitalbudget analysis involves a thorough analysis of the internal rate of return, payback period and the net present value.

(Word count  2167) 


APA Group. (2018). Board Charter. Retrieved from https://www.apa.com.au/globalassets/documents/governance-docs/board-charter_2017-07-18.pdf

Chouhan, V., Soral, G., & Chandra, B. (2017). Activity based costing model for inventory valuation. Management Science Letters, 135-144. doi: 10.5267/j.msl.2016.12.003

Hoozée, S., & Hansen, S. (2017). A Comparison of Activity-based Costing and Time-driven Activity-based Costing. Journal Of Management Accounting Research. doi: 10.2308/jmar-51686

Hoozze, S., & Hansen, S. (2014). A Comparison of Activity-Based Costing and Time-Driven Activity-Based Costing. SSRN Electronic Journal.doi: 10.2139/ssrn.2489118

RUAN, Y., & ZHOU, L. (2017).The Research on Management Accounting Tools—Based on the Comparison Between Activity-based Costing and Traditional Costing. Destech Transactions On Engineering And Technology Research, (amsm). doi: 10.12783/dtetr/amsm2017/14848


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