Financial Performance in Telecom Sector

Feasibility between ABC and financial performance in Telecom sector

The main motive of this paper is to analyse the effect of ABC costing on Telecom industry. To understand this relationship few surveys along with questionnaire were floated amongst the personnel related to the industry and was finally found that this method of costing gels in well with the industry of telecommunication but at the same time holds some hindrances as well.

1. Introduction

The chief motive of accounting today is not only to record the financial transactions but also record or measure the financial performance of an industry.

With the edge to edge competition today it is very important that the company’s financial system provide accurate measurement and aptly judged information to the management so that decisions are taken accordingly. The traditional based costing system has many flaws into it and do not serve the purpose effectively which I fulfilled well but the ABC.So there are few questions raise in the paper to understand and judge these aspects:

1) Is the telecom industry empowered by the ABC to increase profits and optimise expense?

2) Are the telecom industry equipped with necessary infrastructure to support the implementation of ABC?

3) What may the obstacle in this industry towards applying ABC?

2. The importance of study

The telecom industry is considered to be very important for national economy and contribute a significant factor in the country’s GDP.It is trailing amongst one of the leading industry in terms of its contribution for the same. Its significance cannot be dared to ignore as far as financial viability is considered.

3. Activity Based Costing-Theory

Cooper and Kaplan, in the 1990s developed ABC costing, which turned out be a very effective method of costing problems.

It helps very effectively in analysing the activites which adds value to the organisation and at the same time identifying and eliminating those which adds less value to the industry.

Indirect and support expenses are traced effectively by ABC costing for individual product, customers and services. The spending on product and services delivered to customer and produced are effectively tracked and analysed by ABC costing methodology. Cost bearing activities can be effectively identified by ABC techniques and assigned to related product. The ultimate aim is to relate cost to activities rather than products.

Generally, cost centres or department were used for cost allocation in traditional techniques but in ABC cost is assigned to specific activities.

 Non-Manufacturing sector