The Chairman of BT group has told their shareholders that they will continue to concentrate on managing the debt and further reducing costs to pursuit a profitable growth. For BT's division or middle mangers, some supportable method modern management accounting for satisfying the Group's requirement is very important. (Appendix)
This assignment is written to critically evaluate the how these methods can be used to support managers depended on the financial characteristic of BT.
3. Evaluate different methods for managing the cost
In recent years, BT should have witnessed major changes in the business world. Such as deregulation, privatization, globalization the growing expectations of shareholders and the impact of new technology have led to a much competitive environment. Considering these impacts, some cost control approaches should be used to keep the best position in UK
3.1. Activity-based costing approach
This is a new approaches, which has a basic philosophical different from traditional approach.
(Artrill 2002) "ABC sees overheads as being caused by cost units, and those cost units must be charged with the costs that they cause." To use ABC, an overhead cost pool can be established for each type of cost than can be lined to a cost driving activity. As BT is mainly a service-based company, the company's total costs are likely to be particularly heavily affected by overheads except their fixed cost. The benefit of use this approach is that it is fairer and more accurate to identify product costs. So, costs can be controlled more effectively. As a world-class, BT's corporate structure is complex, which has many division in different countries or focusing on different products and services. The overheads are then charge into units of output, through an activity cost driver rates. Comparing with the traditional approach, it solves the problems that the size...