Management Accounting Essay Example | Topics and Well Written Essays - 750 words

Management Accounting - Essay ExampleIn the ABC approach, the costs are computed based on the activities and not on the labour or machine hours. Each activity has a cost device driver attached to it and the ABC system utilises this cost driver to distribute the costs among the products (12 Manage, 2008). When the ABC Costing approach was followed, the acquire margin per unit for Parrot was recorded as 87.09 and that for Toucan was computed as 63.88. In this case, the difference of profit per unit amounts to only 23.21.ABC system indicates that the profit from Toucan is actually higher as opposed to the absorption costing system. Also, the cost drivers indicate that the M/C setup takes up a high amount of costs as the overheads. Hence it is made evident that the number of setups has to be reduced. This will result in higher profits for Bird Gardens (Cokins, 2001). In order to analyse the efficiency and to increase the profits of the company, it is essential to follow the ABC