BUACC5933 covers a range of important cost and management accounting topics. The main purpose of this assignment is to provide students with the opportunity to extend their knowledge, skills,...

BYP1-9
Outsourcing means to transfer an important activity of the business to other party. In simple
words it means to get the work done by someone else. The work or activity so outsourced is
usually of such nature that was earlier performed by the organization itself but now it gets it done
by others due to varied reasons. One of the most crucial reasons for outsourcing is the cost
associated with the activity. Most of the developed countries incur high labor cost and thus high
expenditure for the companies. In the age of this growing cut throat competition it is not easy to
make profits easily. Companies have to struggle day and night to reap benefits. The only way
they can ensure steady profits is by reducing their costs. Outsourcing is an important tool to reap
such profits by getting the work done from others at low rates. This way firms can reduce their
cost structure and can ensure steady profits.
When a company outsources its activities, the savings in costs helps it to divert the savings to
other important activities of the business. This way it ensures the business achieves its
economies of scale. Also when the company gets the work done at cheaper rates it usually passes
the savings to the consumer in form of cheap products and services. Thus it is ultimately the
consumer who is benefiting from outsourcing.
Since most of the developed nations have high labor cost therefore the work is usually
outsourced to developing nations. Developing nations have abundant cheap labor which helps
these developed nations to get their work done from them at cheap rates. Due to rapidly rising
population of these nations there is huge unemployment in these countries. Also most of the
manpower in the developing countries is highly educated that is sitting idle due to no jobs in
hand or is working at lower rates as compared to their skills. With the help of outsourcing these
people can utilize their talent and skill and earn good for themselves. So by outsourcing work to
these countries it helps the developing countries to solve their problems of unemployment and
poverty.
It has often been argued that outsourcing may affect the quality of services so provided. But this
may not be the case. The companies who outsource the work ensure the work is transferred only
to such companies which have the same potential and quality standards as that of the parent
company. This is an important consideration otherwise the company loses its customer base.
In the given case study the CPA firm should outsource the work to India if it wants to stand the
competition. Since outsourcing is being done only for the preparation of the basic tax returns
therefore the company’s quality of services will not be affected adversely. In fact it will be able
to save the labor costs. Also there is an evidence that since most of the other companies are
following the suit by outsourcing their activities therefore it would be correct to say that the
quality of service being so provided is at par with the standards so laid by the companies. The
company should not have any fear in mind before outsourcing. The decision will be in the best
interest of the company. The savings in labor cost will help the company to achieve economy of
scale and survive the deadly competition. It will be able to achieve higher profits which are
essential for the company’s growth. Thus in terms of the cost benefit analysis it would not be
wrong to favor outsourcing for the company’s growth and future.
BYP 4-6
Activity based Costing
Activity based costing is the method used for finding the cost of the product by assigning indirect
cost to products and services. It is a costing technique employed by firms to identify indirect
costs associated with the product and then allocating them in a more defined manner so as to get
a suitable cost of the product. Activity based costing or ABC as it is usually called helps in
allocating indirect costs to the product and services through a more defined criteria rather than
any arbitrarily method(collins, 2009).
There are numerous costs which cannot be allocated to the product or service directly. The origin
of activity based costing has helped to solve this problem by allocating them in a more defined
manner. For example it is difficult to assign costs such as management and staff salaries. But this
can be easily done in activity based costing by choosing an appropriate activity centre like
number of hours devoted by the management and the staff. This activity centre will help in
identifying the cost to be allocated to the particular product or service.
Activity based costing has proved to be a great management device for making managerial
decisions. Since the concept of activity based costing clearly relates costs to its activity therefore
it helps in establishing relationship between product demand and its costs. This is particularly
helpful to manufacturer in knowing where exactly the costs are being incurred and thus it proves
helpful in cost cutting. It helps in improving the product efficiency by identifying only the true
cost associated with the product (Marx, 2000).
It is a method to estimate the cost associated with the product whereby each product or service is
an integration of various activities undertaken for its completion. It helps in accurate estimation
of profits and losses derivable from the desired product or service by assigning costs to...