This study moves around the Activity Based Costing model of the Collins Food Limited. The Collins Food Limited is a Taco Bell Franchise in Australia listed in accordance to the ASX: CKF in context to the food services. This study catered to the features of the Activity Based Costing model and analyses the model in context to the strategies and goals of the Collins Food Limited. The objective of the Collins Foods Limited is entailed in this study. The Activity based Costing is important for every organization for better understanding of the goods and costs of the services. This report catered to the identification of the objectives of the company and mission of the Company. The strategies and objectives of the Company are incorporated in this study. This study further concludes with the evaluation of the Activity Based Costing model in accordance to achieve the strategies of the Company. The management accounting tools are enlisted in this study. The budgetary control tool is evaluated and analysed in this report.
This report revolves around the ABC model of the Collins Food Limited. The Collins Foods Limited is an Australian Company listed in accordance to the ASX: CKF in context to the food services. This Company is basically a franchisee of the renowned KFC restaurant chain. This study caters to the features of the ABC model and explains the model in context to the strategies and goals of the Collins Foods Limited. The Activity based Costing is important for every organization for better understanding of the goods and costs of the services. These report further centers around the identification of the objectives of the company and mission of the Company. The strategies of the Company are entailed in this study. The ABC model is evaluated and analysed in this study in accordance to achieve the strategies of the Company. Recommendations are provided in this report in context to the development of the company.
Features of the ABC model
ABC model or the Activity based costing is basically a method that is used for assigning the costs to various services, acquisitions or the tasks. The assigning of the tasks is generally based on the resources and activities revolving around the activities. As commented by Weygandt et al. (2015, p. 20), the ABC model is generally contrasted with the traditional cost accounting model. However, the ABC model can determine cost of the goods sold and the gross margin of the goods. There are certain benefits of the ABC model as they cater for the identification of the individual products which are less profitable. As commented by Maher et al. (2012, p. 21), it improves the efficiency of the process of production. It further helps to eliminate unnecessary costs and help to price the products accurately in context to the information of the accurate cost of the products.
Features of the Activity Based Costing-
a) In this context, the total cost is divided into variable cost and the fixed cost. It is essential for providing quality information in context to the cost system.
b) The cost behaviour patterns are related to volume, diversity, event and time.
c) The distinct is reckoned between the patterns of cost behaviour.
d) The cost driver needs to b e identified in order to track overhead of the product
e) The cost behaviour pattern is determined by the cost driver.
f) There are certain objectives of the ABC model -
g) Allocation of the overheads
h) Rectification of the cost information which is not identified as accurate
i) To take qualitative decisions in context to the management
j) To make timely decisions
For the initiation of the ABC model the main areas are needed to be identified to ensure proper distribution of the sales and production. The functional areas are secreted in which the main functional activities are identified. As commented by Islam and Hu (2012, p. 5159), these include purchase of the packaging materials and raw materials. The identification of the support activities is initiated. These include maintaining power, supply, testing quality and maintenance of the machines. The collection of the data revolving around the labour, overhead and materials are identified in details. The costs of the activities are required to calculate the separate entities of the products. This model can be implemented by the identification of the areas of functioning in the Collins Food Limited, by identifying the activities of the areas of functioning, identifying the suitable cost driver and preparation of the expenditure statement.
Current goals and strategies of the Company
The mission of the Collins Foods Limited is to undergo continuous development and improve themselves in all the operating areas (collinsfoods.com, 2018). The main mission of the Company is to be one of the best leading food chain which generates premier brands.
The main objective of the Collins Foods limited is to develop their quality of the foods and improve their taco bell. This organization operates 223 stores throughout Australia which indicates to having 136 outlets in Queensland, 11 in South Wales, 5 in South Australia, 48 in Western Australia and 5 in Northern Territory.
The main acquisitions of the Collins Food Limited are mainly based in context to the metropolitan areas in Western Australia and Tasmania and South Australia. The annual depreciation of the organization was 5% of its sales.
Strategies of the Collins Foods Limited-
a) To develop and strengthen the strategy of the company, the executive management is brought Drew O'Malley as the new operating officer. He will be responsible for the operations of the food chain and expanding their network throughout the country.
b) There funding structure ensures that balance sheet of the organization is entailed without any flaw.
c) It levers the innate strength of the Collins Foods in context to the development and operating the KFC food chain.
d) It provides with an attractive entry in accordance with the South Australian markets and Tasmanian Markets.
e) Future growths are targeted by the organization in accordance to opening more outlets in around the country.
f) It proclaims to enhance the Collins Foods scale.
g) As commented by Bargate (2012, p. 4), the strategies of the company have initiated a positive and strong growth in the financial arena.
However, the Collins Foods limited have undergone several transaction specific risks which initiate the Completion risk, equity raising dilution risk, integration risk and equity raising underwriting risk. As commented by Calvert and Kurji (2012, p. 5), food safety and sanitation forms a sustainable risk factor as incidents of food poisoning can infer anytime which initiates to the loss of consumers to the food brand. Sanitation is a major concern and a vivid risk factor prevailing in the food industry. This issue can arise due to using unwashed utensils or cooking tools. Sanitation of the Cooking tools is important to ensure food safety. There are other risks involving the failure of the Collins Foods limited which states the inability to continue the good reputation and opening sufficient outlets. As commented by Tan et al. (2013, p. 375), the organization has adopted strong strategies for the development of the organization and they have implemented them prior to all the rules and regulations.
Effective corporate strategies of the organization-
a) Brand positioning
b) Packaging of the products
c) Social media marketing
d) effective offers to grab the consumers
e) Re-inventing the image of the company
f) Statement in context to the USP
g) Email marketing and advertising
The ABC model needs to be implemented to the organization as it promotes the allocation of the costs and goods sold. As commented by Warren et al. (2015, p. 397), it is recommended to use the Activity Based Costing in context to the Collins Foods limited as it provides with a methodology to assign the overhead costs of the products and the services. It is helpful in analysing the profits of the management. The true cause and effect is necessary to be determined and it is initiated by the help of the activity based costing. It is recommended to use the ABC model as it helps to carry out the profitability growth rate of the products or the services.
As commented by Krom (2012, p. 848), it is important as it caters to the operational decisions of the company in context to calculating the changes of the commodity, its cost, selling price and other components.
It is recommended to use the Activity Based Costing in the Collins Foods Limited for the identification of the cost pools in context to the operating department.
There are several methods that are needed to be implementing in accordance to the ABC model which are the direct allocation method, reciprocal allocation method and step down allocation method.
It is recommended to use the ABC model rather than the traditional model because the companies can benefit in vivid terms from this model. It is potent enough to drive the overhead of the administration and the expenses related to the selling of the products.
In this context, the Collins Foods Limited has less variation and the overheads are determined on the basis of one activity which includes using the machine hours for the allocation of the costs. Implementing the activity based costing can enhance the effectiveness of the company and efficiency of the company. The traditional system of the costing lacks in various terms which can be deciphered by using the Activity Based Costing Method. As commented by Ahmed and Duellman (2013, p. 1), the Collins Foods Limited can gain several positives benefits by using the ABC model in context t5o0 the traditional model. Being systematic and taking an approach towards costing systems can enhance the efficiency of the Company and outgrow it. The Activity Based Costing is determined by the performance and the entire system of the organization can be impactful if the Company inclines towards the ABC model.
Suggestion of management accounting tool
There are several other management accounting tools which can enhance the effectiveness of the Company. In this context, the necessary management accounting tool for the Collins Foods Limited is the budgetary control tool. This technique forecasts the financial needs of the future and controls the performances to finance related concerns. As commented by Appelbaum et al. (2017, p. 29), the tools of the management accounting system are generally based on cost accounting information, mathematics, financial accounting information, miscellaneous tools and future information.
As commented by Saadi Halbouni and Kamal Hassan (2012, p. 306), the budgetary control tool is basically a process through which the preparation of the budgets are initiated for the future time period. It is in comparison with the performances to find out the variances. The figures in the budget can help the management to determine variances and take actions accordingly. As commented by Kravet (2014, p. 218), there are certain objectives in context to the budgetary control which are determined by coordinating the activities of the departments. It provides plans for the achievement of the objectives and increases the profits by waste elimination. The advantage of budgetary control includes defining the goals, policies and plans of the company. The budgetary control enhances the management to find responsibility in context to cost production by the elimination of waste. It develops the economy and efficiency of the company. It promotes centralized control in context to the decentralized activity. As commented by Ismail and King (2014, p. 1), the planned process of the budgetary control helps to run the business in smooth and flexible terms. The problems to the management are solved without further delay. However, there are certain limitations in accordance to the budgetary control. Sometimes, it becomes difficult in context to the budget preparation in accordance to complex conditions. It is highly difficult for the small organizations as it needs high expenditure ratio.
As commented by Demerjian et al. (2012, p. 463), the budgetary control is a management accounting tool which is majorly dependent on the support from the management. For example, if sufficient support is not provided by the management than this tool will fail significantly.
There are other several management accounting tools which includes financial planning, cost accounting, financial statement analysis, cash flow analysis, fund flow analysis, marginal costing, standard costing, revaluation accounting, statistical techniques and ratio analysis.
This report centres on the Activity Based Costing model of the Collins Food Limited. The Collins Food Limited is a Taco Bell Franchise in Australia listed in accordance to the ASX: CKF in context to the food services. This organization is basically a franchisee of the renowned KFC restaurant chain. This study evaluated the features of the Activity Based Costing model and analyses the model in context to the strategies and goals of the Collins Food Limited. The objectives of the Company are entailed in this study. The Activity based Costing is important for every organization for better understanding of the goods and costs of the services. This report cantered around the identification of the objectives of the company and mission of the Company. The strategies of the Company are incorporated in this study. This report further concludes with the evaluation of the ABC model in accordance to achieve the strategies of the Company. It further provided recommendations for the adoption of the ABC model.
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