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.
