Measuring efficiency by product group: Integrating DEA

with activity-based accounting in a large Mideast bank

The adoption of ABC and the improvement of
performance: the case of the central bank of Morocco

Word Count
Table of Contents
Management Summary:...............................................................................................................................2
Introduction of the companies selected:......................................................................................................2
Activity Based costing (ABC):....................................................................................................................3
Activity Based Costing and the Deficiency in the model:...........................................................................4
Features of the Activity based costing within Organisation:........................................................................4
Real Implementation of ABC in the organizations:.....................................................................................5
Benefits of the ABC System:.......................................................................................................................5
Selected Journals:........................................................................................................................................5
Measuring efficiency by product group: Integrating Data Envelopment analysis with ABC Mideast bank 6
The implication of activity based costing and the improvement of performance: the study of Morocco
central bank.................................................................................................................................................6
Purpose and the objective of the Journal and Question in the journals:.......................................................7
Similarities in the journals:..........................................................................................................................7
Dissimilarities in the journals:.....................................................................................................................7
Outcome from the selected Journals:...........................................................................................................7
Conclusion:.................................................................................................................................................8
Works Cited.................................................................................................................................................8

Management Summary:
In this paper the implementation of the Activity based costing and the study related to the
activity based costing is evaluated. The activity based costing technique is popular technique in
the costing of the product and assist many organizations. The journals in this paper are related to
the activity based costing and the impact of the activity based costing in the organization. There
are many impacts on the company that are evaluated in this paper.

Introduction of the companies selected:

The basic purpose of this paper is to evaluate the managerial accounting core areas. The Activity
based costing method is the one of the core area in the productions process. It is getting more
popular as this is more beneficial for the organisation to implement and introduce. On the other
hand the traditional method is not effective as the ABC. The impact of the Activity based costing
is also evaluated in this paper from the journals. In the first journal the implementation of the
activity based costing in the large Middle East Bank is evaluated. The other method which is
compared with the activity based costing method is the Data Envelopment analysis. These two
processes are applied in the research on the large Bank in the Middle East bank. In the second
journal the implementation of the activity based costing in the large bank in the Morocco is
evaluated and the result is driven. The impact of the activity based costing is that it helps the
organisation in making profit and activity based costing method assist them in making profit.

Activity Based costing (ABC):

From the past the process of the production was so simple and not complicated. It mostly
includes the labor hours and the direct material cost. The traditional costing method is best
approach that time which is used to calculate the product cost. But in the recent word the
production process is very complicated and it mostly includes many processes. The implication
of the traditional accounting method is not valid as it has many deficiencies in it. To overcome
such deficiencies the implication of Activity based costing important. Activity based costing
technique help in the true calculation of the profit.

So for it the most popular accounting tool that is used in the managerial accounting for the
calculation of the product cost. The reason for this popularity is that Activity Based Costing is
deal with all complexity in the production process and also deal with the cost which are not
efficient. This is the reason for many corporate failure that they were unable to deal with the
profit and also not able to meet the expenses which are incurred in the production process.
Activity based costing method help the companies in the calculation of the product true cost and
the true profit so that decision are taken more efficiently and no decision is made on the false
profit.

The basic purpose of the activity based costing is to assist the company in understanding about
the cost and the relationship with the activity which are creating such cost. The cost in this
relationship is assigned to the product which is identified in this relationship. The activity based
costing method is a systematic approach of calculating the cost of the product. This systematic
approach assists the company in the identification of the indirect and the direct cost that is
associated with every product. This kind of approach is missing in the tradition costing method
so it failed to meet the requirement of each company.

There are many production processes in producing the product but Activity Based costing
method deal with all the productivity process due to its systematic approach. The reason for the
company’s failure is that they are not able to identify the cost which is associated to the product
and the true profit figure of the product which is earned from it. In the previous accounting
method they not able to identify the cost which is associated with single product. Usually there
are many costs which are incurred in the system and increase the cost of production and
decreasing the profit, activity based costing method assist the companies in identifying such cost
and eliminating such kind of cost.

The method assist in the calculation as it assigned the cost to each product according to the usage
of the activity and the cost incurred during that activity. This seems to be logical and the cost of
the each product might be not false anymore. On the other hand, in decision making between the
two product, the most profit able product should be chosen as activity base provide best
technique, the companies now able to identify the product with maximum contribution earned.
There are many product which are not profitable the company now able to identify such product
and also able to eliminate from the production.

Basically the purpose of the Activity based costing is identifying the cost of the product,
assigning each cost to the product and eliminating the extra cost that is incurred and inefficient in
the profit maximization. On the other hand there are many other task which are associated with
the activity based costing method such as decision making and placing the labor which is
effective in the production department and also assist in the making the production department
more efficient.

Activity Based Costing and the Deficiency in the model:

Despite all such importance and feature the activity based costing method has some deficiencies
the reason is that this is only designed for the manufacturing industries. The other industries are
not able to get benefit from the activity based costing method. The service industries might not
able to get benefit as they are time based and the activity is not assigned in term of the time. This
includes the staff salary and the other such type of the activities which are not related to the
production.

Features of the Activity based costing within Organisation:

The importance of the activity based costing method wide. This is considered as the most
popular method since its implementation. This is easy to understand and easy to apply by every
manager. The main feature of the activity based costing method consist the following:

Effectiveness of the company Mission and Objectives:

Companies make profit and make money, the only reason they are running the business. For
making profit each company has its own mission and the objectives. Activity based costing
method assist the companies in effectiveness of such mission and the objectives. It also assists
the companies in implementation of the new strategies and introducing the effective production
plan. By using Activity based costing technique the company has the true figure of the cost
which is associated to the product so company can take effective decision and also take the
decisions which have more chance of success.
Corporate Strategies:

Strategies are made on the information available, if the information which are presented are true
the corporate strategies are also effective but on the other hand the organization having all false
information can make wrong decision. They chance of the failure in this way is low because the
information are true and no false data is introduced in the decision making process.

Company Strategy evaluation:

Company makes several strategies to survive in the market. ABC implementation can be
considered as one of the important and critical strategy in an organisation. The impact of the
wrong decision can make huge issue for the organisation. For such reason the company should
make right decision and effective decision which can make and assist the company in increasing
the productivity. Any wrong decision might lead toward failure. The data which is required in
making decision is right than this is effective and can assist in making strong decisions.

Real Implementation of ABC in the organizations:

The steps are different but the main purpose of the steps is same. These steps are easy and can be
understand by the managers very easily. The reason is that they have to make strong decision. ABC can
be implemented by using following steps in the calculating process:

 Identifying the main functional areas of the production department.

 Identify the main activities in the production of the product.
 Allocating the indirect cost is the third step of the activity based costing method.
 Cost driver allocation is the next step of the ABC
 Allocation of the cost is the final step of the activity based costing in the production to each of the
product.
 The final step of the activity based costing is to eliminate the cost of the product which is not
necessary and increasing the production department cost.

Benefits of the ABC System:

This system has the main features:

 Help the managers in the improvement required in the production process.

 Provide accurate information related to the product
 Help the organisation in understanding the services in accurate manners.
 The process is easy and understandable by the managers
Selected Journals:
The two journals which are selected are having common thing in them that they are both showing the
impact of the activity based costing method. This report will analyze the impact of the implementation of
ABC in the Banks. The two selected Journals are:

1) Measuring the efficiency by product group: Integrating Data envelopment analysis with ABC Mideast
large banks
2) The adoption of ABC and the improvement of performance: Study from the Morocco bank

Measuring efficiency by product group: Integrating Data Envelopment

analysis with ABC Mideast bank
In this research the benchmark is set for the company and evaluated the data by using the activity
based costing method and the data of the larger banks. From the study it is evaluated that the
result of the every large is different this is due to customer in the each of the branch are different
type and nature. If the customers are same nature and type the result might be the same. In this
journal the integrated results are produced for the 250 large banks in the Middle East and result
is produced.

In this journal the impact of the ABC and the DEA is also evaluated in combine and separate
manners and also evaluated that the result of the both shows different impact. But the result
evaluate that the implementation of the both ABC and the DEA can be produce the concrete
improvement on the evaluation process. Alone DEA show some kind of deficiency in the system
and can be proved as weak system.

The implication of activity based costing and the improvement of

performance: the study of Morocco central bank
In this paper the activity based costing impact that could play important role in the company’s
performance. This journal helps in the understanding of the areas which are being effect by the
implementation o f the activity based costing technique. This research journal put light on the
activity based costing method as confirm that this is best method in the improvement in the
organisation. The basic purpose of the paper was to evaluate the importance of the ABC and
impact of the Non financial data of the Central bank of Morocco and evaluate the data of 2007
and 2009.

In this paper many theories are presented and the results are evaluated. The data of the Central
Bank of the Morocco is evaluated and the impact of the ABC is evaluated. The result of the
company is then evaluated with the non ABC bank and evaluated that the firm with adopting
ABC are far better than the organisation not using ABC. The Activity based costing in the
organisation help in the non financial improvement as well. the activity based costing method is
help in the improvement of leverage, ROI, ROA, improving the productivity cost cycle and the
quality as well. The result of the study concludes that Activity based costing method assist the
company in financial and non financial manners.

Purpose and the objective of the Journal and Question in the journals:
The basic purpose of the two journals is show the impact of the activity based costing in the Banking
sector. The activity based costing is increasing in the popularity as it helps the organisation in making
profit in efficient manners. The journal assist in the adaptation of the Activity based accounting in the
Central bank and the large bank in the Middle East.

The basic questions which are asked in the activity based costing system are as follows:

From the first journal which is about the Measuring efficiency by product group the comparison of
DEA along with the ABC:

1) The Impact of ABC and DEA on the Middle East Bank

2) The individual impact of the ABC and DAE on the Middle East Bank
3) The Combine impact of the Activity based costing and Data envelopment analysis in the bank

From the second journals in which adoption of ABC is aligned with the performance of the
company:

1) The improvement of the ABC on the central Bank of Morocco

2) The impact of the ABC on the profitability index of the ABC

Similarities in the journals:

The evaluated journals are almost mirror images of each other as both the journal are about the
ABC and the impact of the Activity based costing in the banking sector. On the other hand they
both provide similar results and conclude that Activity based costing produce positive result in
the company. They conclude that Activity based costing method helps the increase in the non
financial as well as financial performance of the company.

Dissimilarities in the journals:

There is little difference in the journals but the main difference in the study is the data which is
evaluated. The data in the journal which is evaluated in the Morocco is the data of the central
bank for the three years on the other hand the data is evaluated in the other journal evaluate the
result of the 250 bank in the Middle East.

The second main difference is the Journal evaluates the result of the ABC with the DEA. While
the second journal only shows the result of the ABC in the banks.
Outcome from the selected Journals:
There are many outcomes of the journal which are very effective and important to know. These
are as follows:

 The implication impact of the activity based costing method and the impact on the
company critical ratio improvement such as ROA, ROE and the leverage of the
organisation.
 Full understanding of the Activity based costing and its impact on the financial and the
non financial performance of the banks, the reason of the increase and comparing the data
with actual also with the traditional costing method
 The activity based costing and the impact of the DEA on the banking sector individual
and combined, the impact of the individual and the impact of the both is evaluated and
concluded that both shows great impact on the company performance.
 The activity based costing result on the every branch and the bank of the country and data
is evaluated according to the branch.

Conclusion:
Activity based costing method is considered as the most important and the most critical part in
the costing method in any organisation. Activity based costing method is popular in the country
the reason for the popularity is its favorable impact. The implication of the activity based costing
in the Australian industry will increase the productivity as well as the performance of the
organisations. The results are then evaluated in the combination of the research and evaluated
that activity based costing method is improving the company results in positive manners. The
research also concludes that ABC helps every manufacturing organisation and produce results
that are very effective for the company.

Works Cited
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https://www.accountingtools.com/articles/2017/5/14/activity-based-costing

Activity based costing system. (2017). Retrieved from Business analysis: https://www.business-case-
analysis.com/activity-based-costing.html

Activity based costing2. (2015). Retrieved from https://www.12manage.com/methods_abc.html

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THE CASE OF THE CENTRAL BANK OF MOROCCO, 4.

Jeffrey, K. (1999). Measuring efficiency by product group: Integrating DEA with activity-based
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