ALLIED OFFICE PRODUCTS
MANAGEMENT CONTROL SYSTEM
GROUP 2:
AIRIN SETIAWAN/ NIM. 00000005038
ALEXANDER DYLAN/ NIM. 00000004962
CHUN WOO JIN/ NIM.
JENNIFER LUO/ NIM. 00000010762
MICHELLINE TAN/ NIM. 00000009843
VICO LAURENSA/ NIM/
Accounting- Business School
Pelita Harapan University
Tangerang
2016
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FOREWORD
Praise to God Almighty for His blessings and grace in abundance so that the team of
writers can complete this scientific work in accordance with what is expected. This resesarch
titlted “Management Control System: Allied Office Products” is primarily addressed to
analyze if this project is viable and to fulfill one of Investment assignments for the final
group project.
The team of writer acknowledges the guidance, help, and prayers from all parties
involved in the completing this paper. Hence, the team of writers wants to thank:
1. Mr. Dr. (Hon) Jonathan L. Parapak, M.Eng.Sc. as rector of Universitas Pelita
Harapan,
2. Dr. Antonius Herusetya N. Ak. MM. as head of Accounting Department
3. Dr. Ferdinand Butar-butar, SE., MBA. as our lecturer/advisor of Management
Control System course,
4. And other lecturers, as well as parents, writers’ friends, and various parties who could
not be mentioned one by one for his/her assistance to the writers since the phase of the
study until the completion of writing of this scientific work.
This scientific work is certainly not free from weaknesses. Therefore, the writers open
to receive constructive suggestions and criticisms with the objective to make this paper
become better. We apologize if there are words that are less pleasing. Thus, this research is
expected to provide useful and accurate information to readers.
Karawaci, June 2016,
The team of writer
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CHAPTER I
THEORY
1.1 ABC COSTING
ABC costing is created in response to simple costing system or also known as peanut
butter costing system. Managers used simple costing sytem to allocate overhead costs
broadly in an easy, inexpensive and reasonably accurate way. However, as product as well as
services diversity and indirect cost increased, broad averaging lead to inaccurate costs which
lead to the development of ABC costing system.
One of the best tools for refining a costing system is activity based costing. Activity
based costing (ABC) refines a costing system by identifying individual activities as the
fundamental cost objects. An activity is an event, task, or unit of work with a specified
purpose – for example, designing products, setting up machines, operating machines and
distributing products. More informally, activities like verbs; they are things that a firm does.
To help make strategic decisions, ABC systems identify activities in all functions of the
value chain, calculate costs of individual activities and assign cost to cost objects such as
products and services on the basis of the mix of activities needed to produce each product or
service.
Managers choose the level of detail to use in a costing system by evaluating the
expected costs of the system against the expected benefits that result from better decisions.
Here are some telltale signs of when an activity based costing (ABC) system is likely to
provide the most benefits:
• Significant amounts of indirect costs are allocated using only one or two cost pools.
• All or most indirect costs are identified as output unit level costs.
• Products or services needs diverse demands on resources because of differences in
volume, process steps, batch size or complexity.
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• Products or services that a company are well suited to make and sell show small
profits, whereas products or services that a company are less suited to make and sell
show large profits.
• Operations staff has substantial disagreement with the reported costs of
manufacturing and marketing products and services.
On the other hand, the main costs and limitations of an activity based costing (ABC)
system are the measurements necessary to implement it. Activity based costing (ABC)
systems require managers to estimate costs of activity pools and to identify and measure
cost drivers for these pools to serve as cost-allocation bases. Even basic activity based
costing (ABC) systems require many calculations to determine costs of products and
services. These measurements are costly. Activity cost rates also need to be updated
regularly.
Successfully implementing activity based costing (ABC) systems requires more than
an understanding of the technical details. Activity based costing (ABC) implementation
often represents a significant change in the costing system which requires a manager to
choose how to define activities and the level of detail. Below are some of the behavorial
issues that managers and management accountants must be sensitive to:
• Gaining support of top management and creating a sense of urgency for the ABC
effort.
• Creating a guiding coalition of managers throughout the value chain for the ABC
effort.
• Educating and training employees in ABC as a basis for employee empowerment.
• Seeking small short run successes as proof that the ABC implementation is yielding
results.
• Recognizing that ABC information is not perfect because it balances the need for
better information against the costs of creating a complex system that few managers
and employees can understand.
Global surveys of company practice suggest that ABC implementation varies among
companies. Nevertheless, its framework and ideas provide a standard for judging whether
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any simple costing system is good enough for a particular management’s purposes. ABC
thinking can help managers improve any simple costing system.
Although, many manufacturing companies use activity based costing (ABC) system,
managers also use ABC in service and merchandising companies. Companies such as USAA
Federal Savings Bank and Union Pacific in the railroad industry have implemented some
form of ABC systems to identify profitable product mixes, improve efficiency and satisfy
customers. A large number of financial services have also employed variations of ABC
systems to analyze and improve the profitability of their customer interactions.
The widespread use of ABC systems in service and merchandising companies reinforces
the idea that ABC systems are used by managers for strategic decisions rather than for
inventory valuation. Services company, in particular, find great value from ABC because a
vast majority of their cost structure is composed of indirect costs. A major benefit of ABC is
its liability to assign indirect costs to cost objects by identifying activities and cost drivers.
As a result, ABC systems provide greater insight than traditional systems into the
