managerial accounting

Managerial Accounting Name: Course: Tutor: Date: Managerial Accounting Activity-Based Costing (ABC) is an accounting method used for allocating services in a company. The system deals with cost management, which involves reduction and controlling the company’s costs and at the same time offering quality services. ABC is a tool, which enables managers to identify and determine costs of various activities and services; this system is thus the most accurate accounting method and several companies have shifted to this method abandoning the traditional cost management method. The traditional cost management method was associated with several problems; the system was unable to determine accurately the company’s cost of services. Through ABC systems, costs of services dependant on this system identified and offered to the service users. In the case of service industry, ABC system becomes a valuable system owing to the level of competition and restrictions available in these industries it thus becomes the most preferred system to adopt. Service companies have difficulties in deciding the most appropriate accounting system to adopt due to the problems encountered in evaluation of costs related to direct materials and labour, as these are not the principal costs in the industry. The need for these industries to know the products, which are profitable and the ones, which need a lot of emphasis, makes the system the most appropriate for such companies. The service industries have overtime used the system effectively these companies include Microsoft Corporation. Bill Gates and Paul Allan founded Microsoft Corporation an American multinational corporation based in Redmond, Washington in 1975 (Cope, 1996). The company is the world’s largest software maker; it is specialized in the provision of a variety of services related to computing (Cope, 1996). It is acknowledged worldwide as one of the most valuable companies in software making. The corporation was developed...