Page 40 - MA - May 2017

COVER ST OR Y

BLR COK 9:40 10:40 1:00 0:30 and other hand being costly, SME would reap long
term benefits of (1) to filter profitable and unprofitable
COK BLR 11:10 12:10 1:00 1:05 products/activities (2) establish cost control and (3)
ensure competitive pricing.
BLR GOI 13:15 14:30 1:15 0:25

GOI BLR 14:55 16:00 1:05 0:25 Application in Service sector
Direct material and direct labor are not the cost
BLR JAI 16:25 18:50 2:25 0:25 categories in a service industry. It is the resource
consumption that determine the charges for the services
JAI BLR 19:15 21:40 2:25 0:25
rendered. It’s tricky to implement ABC in the service
BLR COK 22:05 13:05 1:00 0:25 firms since employees work on various projects in a
day and is time-effort based for each of these projects/
COK BLR 23:30 0:30 1:00 programs. Practically, the systems are designed for the
manufacturing process are configured to be used in the
AVERAGE 13:35 0:30
service firms.
Costing in the service sector need to be forward
looking. It does not emphasize on valuing inventory and
Pattern - 1 is hard to calculate standard cost to set price for services.
Product profitability is a must and firms need to know
ORGN DEST STD STA BLK T/A AT DEST
the accurate cost associated with the services rendered.
BLR IXC 9:40 12:35 2;55 0:25 ABC and ABB has started to emerge in service sector
and will be interesting application over a period of time.
IXC BLR 13:00 16:00 3:00 0:30 Financial services including banks, Health care
providers, Medicare firms, Insurance etc shall configure
BLR MAA 16:30 17:20 0:50 0:30
and align ABC to the category of services rendered,
MAA BLR 17:50 18:40 0:50 more as a cost management tool in order to make
correct pricing decisions and to increase profitability.
AVERAGE 7:35 0:28
theflyingengineer.com/category/airline/companies/airasia- Conclusion:
india/ With globalization and technological changes,
information is made available at the tap of fingers
The airline has cancelled its Bangalore – Chennai envisaging transparency and digitalization. CMA’s have
return early morning for a long time to address two role to play and bring about cost consciousness that
problems: shortage of crew and a poorly performing impact business growth. With the cost management
route. techniques, pivoting business growth should be
only goal that every organization has to strive thus
Application in SME Sector: strengthening the global economy and making it more
SME’s are under tremendous pressure to sustain the competitive and qualitative.
competition in global economy. Thriving to achieve
world-class levels of cost savings embracing proven References:
supply chain and enhanced management systems 1. http://www.business-standard.com/article/economy-
proves costlier. Adoption of ABC has been seen slower policy/indian-railways-may-be-running-many-premium-
due to constrained capital, both financial and human trains-on-loss-115061800920_1.html
as they operate. 2. http://theflyingengineer.com/category/airline/companies/
To address the imbalance between budget and airasia-india/
actuals, adopt allocation of overheads to products based
on single cost drivers leads to inaccurate pricing. To be
competitive, ABC has to be implemented improving
cost assignment process and determine the right price
to charge. Despite complexity for SME to implement sreenigarimella@gmail.com

40 The Management Accountant l May 2017 www.icmai.in