BUS 3304 – Managerial Accounting

University of the People

Learning Journal Unit 2

 In reflecting on the implementation of an overhead cost allocation system best suited for a

company based in Myanmar, let's consider Myanmar Consumer Enterprise Ltd., a leading

manufacturing and distribution company in Myanmar. This company, recognized for its

extensive operations in the manufacturing sector, can benefit significantly from an Activity-

Based Costing (ABC) system.

As detailed by Heisinger and Hoyle (2012), an ABC system involves identifying all

activities that consume resources and create overhead. For a company like Myanmar Consumer

Enterprise, which likely involves complex operations from production to distribution, applying

ABC can provide more precise cost information for each activity, such as procurement, machine

setups, and product distribution. For example, if Myanmar Consumer Enterprise involves diverse

processes for different products, ABC would allow for a more nuanced understanding of costs

per activity rather than just per department or entire plant, leading to more informed pricing and

budgeting decisions.

Using ABC, overhead costs are not just pooled together but are assigned to specific

activities based on the use of resources. This precise allocation helps in identifying which

activities are the most resource-intensive and which products consume more overhead. For

instance, if the company spends a significant portion of its overhead on material procurement

due to diverse product lines, ABC will show exactly how much of the overhead should be

attributed to this activity, thereby aiding in deciding whether to continue, modify, or drop certain

product lines based on profitability analysis.

In sum, by implementing an activity-based costing system at Myanmar Consumer

Enterprise, I could gain a deeper insight into the specific costs associated with each segment of

the production and distribution process. This would not only enable more strategic decision-
making regarding product pricing and development but also enhance overall operational

efficiency by pinpointing areas where cost savings could be most impactful.

Reference

Heisinger, K., & Hoyle, J. B. (2012). Managerial Accounting. Creative Commons by-nc-sa 3.0.

https://saylordotorg.github.io/text_managerial-accounting/s07-how-does-an-organization-use-

a.html