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Advanced Management Accounting


HSBC is a Hong Kong based financial institution and bank, which accepts the deposits and let those deposits to flow into lending activities through either direct means or indirect means. Thus, the major operational activities of the HSBC are to deal with the customers who are capital deficit and who are capital surplus. Additionally, HSBC is engaged in functioning as automated teller machines, customer branch, customer call center, online and telephone banking, and relationship management (Dlabay & Burrow, 2007). Assignment Service UK

Characteristics of Activity-Based Costing and Operational Activity of HSBC

Working directly with customers has been identified as major part of operational activity within the HSBC where main operational activity of the organization is to serve the customers through working on the front line with them (Coe et al., 2007). The implementation of the activity-based costing can be helpful for the organization to justify its cost, as this model signifies and identifies the activities within the organization and allocates the cost of each activity along with the resources to products and services in accordance with their consumption by each activity (Baker, 1998). Get help with education assignment writing by Assignment Service UK

Determination of Product Cost through Identification of the Activity

The significant characteristic of implementing ABC model is that it helps in determining the products cost through identifying the activity consumption. This model can be implemented within HSBC by identifying the activities of the organization, for example in the customer branch of HSBC the main activity is to deal with the customers who are coming for availing the bank services. In customer bank branch, the human resource allocated to handle customer orders, process their complaints and carry out customer credit checks are the cost drivers, for which, the organization has to allocate significant cost, while, this cost is returned in the form of satisfied customers. This activity within the branch enables the organization to gain more customers by satisfying their needs, thus this is the value added activity within the organization. Another operational activity in the HSBC is the customer call center, which aims to provide support to customers in terms of using and guiding for the services provided by the organization. For this activity, the organization’s cost can be classified according to cost of activity consumption, such as, if the HSBC allocates $260,000 resource cost to activities of call center, depending on the time percentage, the activity cost driver rates will be divided as with assigned cost, activity cost driver quantity and activity cost driver rate. In this way, the calculated activity cost driver rate of the call center to the assigned cost of activity will be estimated with activities performed for each customer. This model can be used by the managers within the HSBC to identify the cost on each activity including direct and indirect cost without applying traditional method of costing (Bradtke, 2007). Hire dissertation help online by well-versed writers

The above illustration may be used to indicate the activity based costing and activity based management for the HSBC, as it shows justification for the relationship between activities helpful for the activity-based management and activity based cost. Buy essay writing help in UK

Improved Process Efficiency and Enhanced Business Plan

The information gained by the HSBC from ABC indicates the activities possessing the highest opportunity for cost reduction. The identification of target activity enables the management to determine the effectiveness or efficiency of the activity and the emphasis of cost effectiveness over efficiency are required for the considered organization. The activity including implementation of automated teller machine, for instance, is the value-added activity for the considered organization and the management of the organization can consider the efficiency of the implementation of activity (Fu-Sheng et al., 2007). The management of the HSBC is required to determine the frequency of activity such as implementation of automated teller machine, from the perceptions of consumers and organization under consideration, by investigating the trigger of the activity. In case if the consumer causes the high frequency, then the management of HSBC is required to arrive at an agreement with the consumer to limit the activity (Mansor et al., 2012). Get cheap coursework writing service on just one click

The ABC, thus, proves to be the essential source of performance measures because the performance measures are found in the process dimension where activity costs provide the focal point for setting target and scoring of goals around process performance. The ABC further supports the enhanced business plan in the form of preparing budgets and long-term plans that are logically derived from strategic goals and consistent with the relationship between goal achievement and resource intensity (Alabbadi & Areiqat, 2010). The relationship management, and online and telephone banking, for instance, are used by the HSBC to optimize process performance. The new levels of productivity from these two activities can enable the management of the considered organization to forecast volume of transactions for the procedure for coming budget period. The management of the organization can predict the quantity of resources required to handle the forecast volume of transactions from the two activities (Fu-Sheng et al., 2007). Buy thesis writing help online

Issues Causing Organizations to Limit the Use ABC

The ABC creates a complicated costing system, which is not necessarily accurate and useful for organizations. The ABC cannot predict profits due to the change in production volumes; therefore, it is not useful for decision-making procedures. In case if organizations possess an internal capacity constraint, that is, the demand for products is greater than production capacity, then organizations are required to determine optimal product mix relating to the contribution of each product per unit of limited resource (Ahmed et al., 2011). The costs of different products are not relevant for the product mix decision and it can be said that the ABC ignores constraints due to which it does not differentiate a restricted access from resources with excess capacity.  ABC regards the relation between activities and resource consumption as linear, absolute, and certain, which means that the additional activities result in additional costs and reduced activity levels imply cost reductions (Mansor et al., 2012). Consider an airplane takes off half empty and neither the cost per passenger calculated under hypothesis of full capacity nor the cost per passenger based on actual capacity is relevant for decision-making. In this case, the ABC may cause a misleading decision-making process because most of the flight costs are fixed and the situation illustrated provides the cost per passenger is irrelevant for decision-making (Ahmed et al., 2011). Hire term paper writng help by experts




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