In the subject Introduction to Management Accounting, I have learnt various new things which are totally different from financial accounting which I have taken in last semester. I would say that this is not an easy subject as it is quite complicated as I am new to it.
In the middle of preparation for the assignment, I have searched a lot of information from internet and textbook. According to the question, I am asked to evaluate the pros and cons of both traditional method and activity-based costing (ABC) method for the process of cost allocation so I have visited the Chron. It stated clearly the differences, advantages and disadvantages of both methods. So far I do not face any problem in finding relevant sources because the questions are quite straight forward and all information can be obtained. Next, I have also looked for the details of the limitation of ABC method online regarding to the question as I could not find the appropriate answer in my textbook.
After attempting the individual assignment, I learnt how to apply the theories that are being taught by my lecturer into the real situation. As a producer, he or she definitely need to know what is the exact cost of each unit of product that they are producing so that the managers can have a better understanding in order to make decision for the pricing. There are 2 ways to assign the cost, that are traditional costing method and activity based costing method which is also known as ABC method. ABC method is generally preferred because it provides reliable cost information than traditional method. It is very important for managers to have accurate cost information about their products so that they can have their competitive advantage among rivals.
Next, I also being exposed to how to allocate the costs and revenues for support departments using direct method, step-down method and reciprocal method. According to the question, I need to allocate the cost back to the production departments among all support departments using reciprocal method. Reciprocal method is chosen as it is the fairest way to charge back the cost compared to direct method and step-down method. Besides, as a business man, he or she needs to analyses all the factors carefully before accepting some special deals. To take as example, Kenneth has to work out all the cost and revenues that he will get if he decides to accept the order from T-bicycle Association. If the cost exceeds the revenue, he might reject the order.
In conclusion, this subject has equipped me with a lot of knowledge that I need when I have graduate as an accounting student. I will need to work out all the costs and revenues for a certain deal before producing and offering certain products and services. I have gained precious knowledge and personal skills which that would aid me in future so that I have an edge over others when I am working later.