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DECLARATION
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confirming that the work is their own.

Student name: Nguyen Thi Thu Phuong Assessor name: Dr Bich Ngoc Nguyen

Issue date: Submission date: Submitted on:

25th September 2024 29th October 2024 LMS

Programme: Pearson BTEC Level 5 Higher National Diploma in Business

Unit 22 : Management Accounting

Assignment number and title: MA1 : Management Accounting Principles (1of 2)

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Student signature: Phuong Date:29/10/2024

BTEC HN Student Submission and Declaration Form

Issue Date: June 2021 Owner: HN QD
DCL1 Public (Unclassified) Version 1.0
Introduction

As a new member of FPT Corporation's accounting department,I am tasked with

presenting on management accounting's critical role in decision-making,performance
measurement,and strategic planning.In this report,I will analyze FPT's financial statements to
assess current performance and provide recommendations to improve financial and
operational results.

1. The different ways that an organization will use accounting information to meet
organizational objectives.

Decision making

Financial accounting reports provide a comprehensive overview of a business's

performance and position over a specific period, primarily for external stakeholders like
investors, creditors, and regulatory bodies.These reports help them make informed decisions
regarding investments, loans and compliance with regulations (Drury, 2018; Atrill &
McLaney,2019).Key financial ratios like Return on Equity and Current Ratio help evaluate
profitability,liquidity and solvency, highlighting a company's efficiency and ability to meet
short-term obligations.However,financial accounting often aggregates data, which can
obscure detailed insights necessary for specific analyses (Atrill & McLa2019).Thus, while
financial reports are crucial for high-level decision-making,they may not provide the
comprehensive details required for all types of evaluations.

Management accounting reports differ from financial reports by not only reflecting
past performance but also providing forward-looking information (Atrill & McLaney,
2019).Management accounting reports provide essential data to internal stakeholders to
enhance decision-making and operational efficiency(Drury, 2018).They differ from financial
reports,which are based on a fixed schedule. Management accounting reports are generated as
frequently as needed by managers, such as daily, weekly, or monthly sales reports.Special-
purpose reports can be created to address specific decisions.These reports are detailed and
tailored to meet specific operational needs,providing managers with in-depth information that
guides crucial business decisions (Atrill & McLaney,2019).This targeted approach enables
managers to respond swiftly and make informed choices that directly influence operational
efficiency and effectiveness.

Compliance regulation
Financial accounting statements must adhere to legal requirements and Generally Accepted
Accounting Principles (GAAP) established by regulatory bodies like the Financial
Accounting Standards Board (FASB) in the US, the Accounting Standards Board (ASB) in
the UK, and the International Accounting Standards Board (IASB). These standards ensure
uniform financial reporting, serving external users like investors, creditors, and regulatory
authorities (Drury,2018).Management accounting, on the other hand, focuses on providing
managers with useful information for internal decision-making, planning, and control,
addressing individual stakeholder demands and promoting usability over conventional
standards (Drury,2018).

Performance measurement
In performance measurement,management accounting extends beyond financial results to
encompass non-financial indicators such as employee productivity, customer satisfaction, and
process efficiency.These metrics are essential for assessing how effectively an organization is
achieving its internal performance objectives. For instance,variance analysis can identify gaps
between budgeted and actual performance, enabling management to implement corrective
measures (Horngren et al., 2015).Besides,management accounting use cost efficiency metrics
and the balanced scorecard to provide a holistic perspective on operational efficiency,
resource allocation, and strategic alignment.About financial accounting, financial
performance refers to a company's efficient resource management, measured by factors like
capital adequacy,liquidity,solvency,leverage and profitability (Fatihudin et al.,2018).Key
financial documents like cash flow statements, balance sheets, and income statements provide
crucial data for decision-making.Financial ratios play an essential role in measuring company
performance like Current Ratio and Debt to Equity Ratio assess liquidity and solvency,while
Return on Equity evaluates profitability.These ratios provide valuable insights for
performance assessment,aligning company goals with profitability, liquidity,and
solvency,ensuring transparency,accountability and investor trust.
 Strategy objective
Management accounting is vital for organizations to achieve strategic
objectives,focusing on three key elements:quality,cost and time.This strategic triangle varies
by organization and product.Quality encompasses the overall customer experience,including
product features and after-sales service.Cost includes all resources used in production and
post-sales support.Time pertains to the speed of delivery and production.By collecting and
disseminating information on these elements, management accounting aids managers in
gaining competitive advantages and meeting the needs of customers and stakeholders
(Ghanbari & Vaseli,2015). Financial accounting aids businesses in strategic planning by
offering historical data that inform long-term decisions,such as investments in new
markets,product development or merger.
2.The purpose of management accounting information.
Management accounting's purpose is to help management make decisions.
Management choices may be divided into three major categories:Planning, control decisions,
and "one-time" decisions.Planning involves setting objectives and creating formal plans, such
as budgets and production schedules, based on accurate forecasts. Control focuses on
monitoring actual performance against these objectives,allowing for corrective actions
through routine performance reports.Additionally, management accounting supports
managers in making one-off decisions by providing necessary data and insights,enabling
organizations to remain agile and responsive to changing conditions while enhancing overall
effectiveness and strategic decision-making ( Emile Woolf International Limited,2022).

Sophisticated management accounting systems (MAS) significantly improve

enterprise risk management practices,leading to improved financial and non-financial
performance in financial institutions (Rasid et al.,2014).MAS provides valuable data for
effective risk management, enhancing planning and control capabilities. Managers value
aspects like scope,timeliness,aggregation and integration.Effective management accounting
practices,including financial statement analysis,budgetary control and strategic planning,are
crucial for managing risks (Rasid et al., 2011).Integrating MAS with risk management is a
vital component of corporate performance management systems,fostering competitive
advantages and regulatory compliance(Rasid et al.,2014).
3. The main stakeholders of an organization

Creditors
Creditors,individuals or entities that lend money to businesses,assess a company's
financial stability before extending credit.They evaluate the company's growth and
prosperity,as it directly impacts its credit security and future credit extension.Financial
statements help creditors evaluate a company's financial health and ability to meet obligations
(Dalwadi,2018).Key financial indicators for creditors include the Current Ratio, Debt to
Equity Ratio, Interest Coverage Ratio.These metrics help creditors make informed decisions
about extending credit and ensuring secure investments.For example,the current ratio
increased from 3.68 in 2022 to 4.84 in 2023,indicating that the company has improved its
short-term liquidity, which boosts creditor’s confidence in its ability to repay debts.Creditors
may offer easier credit,reduce interest rates on loans and monitor the company's financial
situation to ensure stability.
Shareholders
A shareholder is an individual, company,or institution that owns at least one share of a
company's stock or mutual fund.They have the right to participate in the company's profits
(Hayes,2024).Besides, using accounting information to evaluate its financial health, focusing
on profitability,stability and dividend potential through key metrics like net income,earnings
per share and cash flows (Elliott and Elliott,2009).They also need periodic information to
assess management's performance and predict future performance, often relying on past data
due to limited access to detailed forecasts.For example,FPT Online's annual dividends
reached a peak of 200% in 2020,but then declined to 80% in 2021,50% in 2022 and 20% in
2023.This reduced dividend policy has led shareholders to reassess their investment
portfolio,participate in shareholder meetings and seek other investment opportunities with
more attractive dividend yields.They also adjust their expectations regarding dividend income
as the company focuses on sustainable growth.
 Government

The government,the group of people who officially control a country,is responsible for
ensuring that a company's accounting information is disclosed in compliance with
regulations,protecting stakeholders' interests and promoting fair practices and
accountability.Key accounting metrics like sales revenue and net profit are used to categorize
businesses by size, ensuring they adhere to employee management, consumer protection and
safety standards (Dalwadi,2018).Key financial metrics include Tax Expense, Revenue,Net
Profit Margin,Debt to Equity Ratio is used to evaluate financial stability and influence
government policies on industry regulation or economic intervention.Capital Expenditures
are also used to gauge investment in growth and infrastructure.
For example, the government may closely monitor FPT's Debt-to-Equity Ratio, which
provides insights into the company's financial leverage and risk profile.In 2023, FPT reported
a Debt-to-Equity Ratio of 0.00039,indicating that the company has a very low level of debt
compared to its equity.This minimal reliance on debt suggests a strong financial position and
a lower level of financial risk.By analyzing this ratio, the government can assess the overall
financial stability of FPT,ensuring that the company remains resilient and capable of
fulfilling its obligations to stakeholders, including employees, customers,and the broader
economy.Furthermore, healthy Debt-to-Equity Ratio signals to the government that FPT is
well-positioned to invest in infrastructure and development projects that contribute to
national economic growth.
Supplier

Suppliers,as sellers of goods and services,utilize accounting information to assess the

credibility of their customers by evaluating their repayment ability.This evaluation is
essential for establishing appropriate credit limits and payment terms,ensuring that suppliers
can manage their risk while maintaining positive relationships with their clients (Accounting
capital,2024).Key indicators include the current ratio,quick ratio,which assesses the
company's ability to pay short-term debts without inventory.Accounts Payable Turnover and
Days Payable Outstanding show the company's ability to pay suppliers quickly,while the
Debt to Equity Ratio and Operating Cash reveals financial stability.These indicators help
suppliers determine the risk involved in extending credit to FPT.For example,a supplier to
FPT who wishes to assess the company’s ability to cover immediate obligations might focus
on the Quick Ratio.FPT's quick ratio of 4.8 in 2023 indicates a substantial liquidity,allowing
the company to meet short-term debts with readily available resources without relying on
inventory sales.This high ratio is a positive indicator for suppliers,indicating FPT's financial
stability and reliability in fulfilling payment obligations on time.By examining this
ratio,suppliers can make informed decisions about extending credit terms to the
company,ensuring FPT's ability to meet its immediate obligations.

Manager
Management who have responsibilities for making judgements and decision within
organization (Weetman,2011).Management utilizes accounting information to assess and
analyze the company’s financial performance and position,enabling them to make critical
decisions and take appropriate actions to improve business performance in areas such as
profitability,financial stability and cash flows.Their primary responsibility is to establish rules
and processes to achieve the organization's objectives, relying on accounting information
from both financial and managerial accounting systems.This ensures informed decision-
making and effective strategic planning (Elliott,2009;Dalwadi,2018).Managers use financial
metrics like profitability and liquidity ratios to make informed decisions.They prioritize ROE
and Current Ratio to assess a company's ability to generate profits and meet short-term
obligations.Debt to Equity Ratio provide insights into long-term financial stability, guiding
strategic planning and resource allocation.For example,FPT's 2023 Quick Ratio of 4.8
indicates strong financial stability and effective cash management.This ratio allows managers
to cover short-term liabilities without relying on inventory sales,ensuring immediate
obligations and maintaining supplier relationships.It also allows flexibility to invest in new
opportunities or navigate unexpected expenses without compromising financial stability.By
monitoring this ratio,managers can ensure the company maintains adequate liquidity and
explore growth initiatives,ensuring the company's long-term financial health.

4.The role and significance of management accounting information in supporting

decision making and meeting or even exceeding stakeholder expectations.
 Management accounting, which initially centered around resource consumption and
productivity during the Industrial Revolution (Williams, 2020), has evolved to provide both
financial and non-financial insights that support strategic alignment. At FPT, this function is
integral in managing and analyzing diverse business segments, including
telecommunications, software, and digital services. It helps the company make informed
decisions on product design, production, and marketing, ensuring that operational
performance aligns with overall strategic goals for optimized effectiveness.

Management accounting plays a pivotal role in the technology and

telecommunications sectors by supporting profitability and long-term sustainability. At
FPT,management accounting systems deliver detailed insights into project costs, enabling
managers to assess the profitability of software projects and digital services effectively.This
financial analysis aids in risk management and enhances operational
efficiency.Additionally,management accounting information supports strategic decision-
making, such as evaluating market demand and competitive positioning.By focusing on data-
driven insights,management accounting becomes essential for FPT to maintain its
competitive edge and improve overall organizational performance.

In FPT's competitive technology landscape,management accounting is crucial for

tracking costs and shaping effective pricing strategies,which are essential for sustainable
profitability.Project-specific cost analyses allow managers to accurately evaluate the financial
viability of software initiatives, ensuring that resources are allocated efficiently and budgets
are maintained.This proactive cost management aligns with FPT's focus on staying
competitive while controlling operational expenses. Integrating management accounting
strategically not only boosts organizational performance but also strengthens stakeholder trust
in FPT's capacity to thrive in the rapidly changing tech industry.

Furthermore,management accounting fosters a culture of accountability at FPT by

supporting goal-setting and transparency across departments.Sharing performance metrics
openly enables employees to see how their contributions align with company objectives,
enhancing motivation and driving performance toward FPT’s strategic goals.This dual
impact,strengthening external trust and internal accountability,reinforces FPT's commitment
to sustainable growth and instills confidence among stakeholders.

Management accounting data at FPT plays a crucial role in informing external

stakeholders, such as investors and creditors,about the company's financial health and growth
potential. Investors rely on metrics like revenue forecasts,profit margins,and cash flow trends
to assess FPT's ability to sustain and expand its operations, while creditors use detailed
reports on cash flow and working capital management to make informed lending decisions
(Kaplan & Atkinson,1998).Reliable management accounting data fosters trust and
transparency, which are essential for maintaining positive relationships with these
stakeholders.

In contrast, outdated or inaccurate information can lead to misguided decisions and

harm stakeholder trust.To mitigate such risks,FPT integrates management accounting with
strategic frameworks,adapting to external factors like economic shifts to ensure timely and
relevant data.This integration enhances FPT's organizational performance and reinforces
stakeholder confidence,enabling FPT to remain competitive in a dynamic business
environment.

5. The different management accounting approaches to measuring and monitoring

performance.The strengths and weakness of financial performance and non-financial
performance measures.

Financial indicators have strengths such as providing a short-term overview of

projected outcomes within a brief period (Mashovic,2018) and offering a solid foundation for
understanding a company's financial position, considered the best quantitative metrics for
evaluating organizational performance (Bogićevi et al.,2016). However,a weakness of
financial indicators is that managers may overlook or reject positive NPV investments if they
have a negative impact in the initial stages, despite the potential for high returns later
(Mashovic,2018).
Non-financial performance indicators are useful for long-term strategies, predicting
financial outcomes and measuring intangible assets (Kotane & Kuzmina-
Merlino,2012).However,their assessment is complicated by time and cost requirements for
employee training and data collection, and measuring and comparing these indicators is
challenging,especially when expressed in different formats. Additionally,these indicators
often lack statistical reliability due to limited survey data (Ittner & Larcker, 2003).

Financial performance indicators :

 Profitability

The gross profit margin measures the percentage of revenue left after deducting the cost of
sales.It shows how much of each sales dollar is available to cover a company’s operating
expenses (Morris, 2024).

Net profit margin is the percentage of revenue remaining after deducting all expenses,
including goods sold,operating costs,interest, and taxes, providing a broader view of a
company's profitability(Morris, 2024).
.

 Liquidity ratio

The current ratio is a liquidity measure that indicates if a business can meet its short-term
obligations using its current asset (Morris, 2024).
.
The quick ratio (the acid-test ratio) measures a company's ability to meet its short-term
obligations using its most liquid assets (Morris, 2024).
.
 Leverage ratio

The debt-to-equity ratio is a measure of a company's solvency, indicating its ability to cover
all debt, indicating its ability to faces economic downturns(Morris, 2024).
.

 Operational ratio

Inventory turnover is an efficiency ratio that indicates a company's excess inventory

compared to its sales levels, indicating how often it is sold per accounting period (Morris,
2024).

Trade payable turnover in days is a financial metric that shows the average number of days a
company takes to pay its suppliers. It’s an important indicator of how well a company
manages its cash flow and working capital (Morris, 2024).

Trade receivable turnover in days measures the average time a company takes to collect
payments from its customers after a sale (Morris, 2024).
Non-financial indicators
Balanced scorecard:The balanced scorecard is a performance measurement framework that
helps companies set, track,and achieve their key business strategies and objectives,
encompassing four perspectives:financial,customer,internal business process,learning and
growth (Mashovic,2018).For example,customer retention and customer
satisfaction (Customer perspective),performance measures include cycle time and number of
defects (Internal business process perspective).
Benchmarking:The process of comparing a company's performance to that of other
companies in the same industry or of similar size.There are four main types of benchmarking
that organizations use to evaluate and improve performance: performance benchmarking
(quantitative data comparison to identify gaps), practice benchmarking (qualitative
assessment of processes to find best practices), internal benchmarking (comparing metrics
within different areas of the same organization),and external benchmarking (comparing with
other organizations to set improvement goals) (Harper,2019).Each type provides unique
insights that help organizations enhance efficiency and competitiveness.For
example,comparing customer satisfaction scores to other retail companies and employee
engagement scores to other retail companies.
6. Analysis and interpretation of the quantitative performance data

Vietnam's telecommunications sector is crucial for the economy, with a 0.41%

increase in 2023.However,this growth rate is the lowest in recent years,indicating a saturation
point in traditional services.Emerging sectors like digital transformation and IoT are
promising but currently make up a small portion of overall revenue ( Thuy Dieu,2024).The
sector has strong growth potential in the next 2-3 years, with 63.6% of businesses optimistic
about the future ( Elecom,2023).

The performance of FPT in the most updated financial year in comparison with
previous years and competitors
Profitability ratio

FPT experienced a significant decline in gross profit margin from 60% in 2022 to
43% in 2023, while Viettel showed slight improvement from 8% to 9%. FPT's net profit
margin also dropped significantly,possibly due to reduced cost management efficiency or
external factors affecting profitability.Viettel maintained a stable net profit margin of 6%.

Viettel showed slight improvement in Gross Profit Margin and a stable Net Profit
Margin, suggesting a stable cost environment, while FPT experienced a sharp decline in
profitability might stem from several reason.

According to Phong Thanh (2024),the significant increase in capital costs has led to a
decline in gross profit from sales and services compared to the same period last year.This is a
primary reason for the decrease in overall profits.Specifically,the 2023 financial report,note
21,indicates that the cost of advertising services in 2023 was approximately 340 billion
VND,a substantial increase from around 296 billion VND in 2022.Furthermore,FPT ONL's
annual report (2023) highlights that the year presented challenges for businesses in general
and the advertising industry in particular.Additionally,Vietnam's GDP growth reached only
5.05%—the lowest in over a decade—while domestic consumer demand remained low.The
stagnation in production and business activities across most companies significantly impacted
FPT ONL's financial performance (Khoi Minh,2023).

Operational ratio
 FPT's trade receivable turnover increased significantly in 2023 from 44.4043 days to
61.3402 days, while Viettel's turnover also slightly increased from 58.5542 days to 65.7703
days, suggesting greater challenges in receivable collection.

The significant increase at FPT can be reflected through several factors.Firstly,

according to the notes in item 8 and item 19,the write-off of uncollectible debts and
provisions for short-term receivables can significantly impact FPT's trade receivable
turnover.When bad debts are written off, such as those from clients like 'Tạp chí Vi tính,' the
overall receivables balance decreases,indicating lower collection efficiency. This may lead to
difficulties in collecting payments from certain customers.Besides,FPT is dealing with high-
risk receivables,with provisions for overdue accounts for more than a year.These receivables
have low recovery likelihood, causing longer collection periods and increased turnover days
(Financial report,2023).Uncollectible debts and risky accounts contribute to inefficiency in
FPT's cash flow and working capital management,as it takes longer to recover payments and
inflates trade receivable turnover.FPT may be impacted by the global economic downturn,
causing delayed payments and longer debt collection periods.Post-COVID recovery has been
slow, with many companies extending credit to support growth,leading to increased trade
receivable days.Companies with better cash flow strategies,like FPT,may reduce payable
days to build stronger supplier relationships.Inflation and rising interest rates may have also
affected customer payments,resulting in slower receivable turnover.

FPT ONL's inventory turnover in 2023 was approximately 1.46 days,a slight decrease
from 1.54 days in 2022.Similarly,Viettel Construction made a significant improvement,
reducing the time from 25.15 days to 23.11 days.FPT's inventory turnover is lower than
Viettel's due to their different business models and inventory structures.FPT focuses on
software,IT services and digital solutions,requiring less physical inventory,resulting in faster
turnover.Viettel,a major telecommunications provider, manages a larger inventory of
hardware and telecommunications equipment.

FPT ONL improved its payables management by reducing payment time to suppliers
from 30.79 days to 26.41 days in 2023, while Viettel experienced a slight increase in payment
time from 20.80 days to 21.72 days.
 FPT ONL has shown improvement in managing payables,benefiting from advanced
warehouse and inventory management systems as a subsidiary of FPT Corporation, which is
well-known for providing comprehensive inventory management solutions
(Aegona,2024).This allows them to manage payables more effectively and optimize
inventory turnover.Viettel Construction has made progress in managing its inventory, despite
needing to optimize debt collection time.

Liquidity ratio

Between 2022 and 2023, FPT experienced significant growth in its liquidity
ratios,indicating improved financial health.The current asset ratio increased from 3.6803 to
4.8477, indicating short-term assets outweigh liabilities.The quick ratio also increased from
3.6643 to 4.8253,indicating strong liquidity even without inventory. This improved liquidity
management reduces payment failure risk and enhances operational flexibility, demonstrating
financial stability and resilience.
 FPT and Viettel Construction have different short-term asset management
capabilities.FPT has a higher current asset ratio (4.8477),four times higher than Viettel
Construction's 1.2422,and quick ratio (4.8253),four times higher than Viettel Construction's
1.1161,indicating better management of short-term assets and greater ability to convert assets
into cash.This demonstrates FPT's larger asset base and superior financial management
efficiency.

Investment ratio

The chart comparing EPS between FPT and Viettel Construction from 2019 to 2023
reveals a stark contrast in the trends of the two companies.FPT's EPS started at a high level in
2019 (approximately 17,000),saw a slight decline in 2020, stabilized until 2022,but then
dropped sharply in 2023 (around 6,000).This decrease may stem from economic
difficulties,including the possibility of a global recession in 2023,which has become a central
topic in current global discussions.The prolonged effects of the Covid-19 pandemic and the
war in Ukraine have led many economists to predict a downturn in the global economy. For a
risk-prone economy like Vietnam,the impact of the global economy is significant (Huynh,
2023).Economic factors and the recession influence Vietnamese businesses, suggesting that
in challenging economic conditions, consumer purchasing power decreases,directly affecting
FPT Online's revenue and profits.In contrast,Viettel Construction's EPS has shown more
stability,rising slightly from below 4,000 in 2019 to just under 5,000 in 2023.
 The P/E ratio chart between FPT and Viettel Construction shows a significant
difference between the two companies.FPT's P/E ratio has remained stable, starting at 7 in
2019 and increasing to 9 by 2023,indicating a stable profitability outlook and consistent
market expectations for future earnings.

In contrast,Viettel Construction's P/E ratio has shown greater volatility.It began at 12

in 2019, surged to nearly 18 in 2021,then dropped sharply in 2022,only to rise again to 20 in
2023.This fluctuation may stem from market expectations regarding growth potential or
sudden changes in earnings,influenced by external factors such as new business strategies or
shifts within the construction industry.
Overall,Viettel Construction's higher and more erratic P/E ratio suggests that the
market holds higher but less stable expectations for its future profits compared to FPT, which
demonstrates a more consistent and stable trend.
Leverage ratio

The chart compares FPT's debt-to-equity ratios for 2022 and 2023, showing a low
leverage ratio of 0.00039, indicating a cautious financing approach primarily based on equity,
reducing financial risk, while Viettel's leverage ratio increases from 0.17 in 2022 to 0.20 in
2023.

FPT Online's Q3 2022 financial report shows strong performance, with revenue
reaching 214 billion VND (up 63.5%) and after-tax profit at 84 billion VND (up 51.8% year-
over-year).Over the first nine months of 2022, cumulative revenue and profit rose by 37.7%
and 32%,respectively,demonstrating FPT Online’s effective cash flow management and self-
financing ability,allowing high dividend payouts without heavy reliance on debt
(Ho,2022).FPT Online maintained its competitive edge during COVID-19 by adopting
flexible strategies and focusing on Industry 4.0, securing a spot among the top 50 most
competitive listed companies in 2021 (Huyen Anh,2021).Its minimal debt dependency
ensures stability and reinforces investor confidence in its sustainable growth trend.

Viettel Construction and FPT Online both operate in the technology and
telecommunications sector,but Viettel requires a larger capital investment due to its business
model and financial strategy.The company not only provides telecommunications services
but also is responsible for building telecommunications infrastructure (broadcast towers and
fiber optic systems),which requires borrowing funds for large construction projects.As a
state-owned enterprise,Viettel Construction can easily access government loans for national
projects, resulting in a higher debt ratio.FPT Online,with its digital business model and stable
revenue from online advertising,can self-finance its operations without debt.

7. Recommendations of how FPT might adjust management accounting approaches to

support performance measurement and monitoring in complex operational
environments.

FPT Online,a digital service provider,faces a struggle in accurately allocating

overhead costs due to the unique nature of its services,such as online advertising, content
creation and media distribution,which require distinct resources and technical support.To
effectively address the challenges of accurately allocating overhead costs in its diverse
service offerings,FPT Online should consider implementing Activity-Based Costing.The
system is an accounting method that assigns expenses incurred throughout a company's
activity of supplying goods and services to consumers(Kaplan et al.,2014).

Activity-Based Costing (ABC) is particularly advantageous for organizations with

diverse product offerings and varying resource consumption,as it allows for precise allocation
of overhead costs based on defined activities (Tippett & Hoekstra, 1993; Themido et
al.,2000).For a company like FPT,which provides a wide range of services such as software
development,IT infrastructure and consulting,ABC facilitates accurate cost allocation and the
development of effective pricing strategies.Furthermore,ABC enhances visibility into
overhead costs,making it especially beneficial for firms with a high ratio of overhead to direct
costs (Roztocki, 2001).This method is crucial for e-businesses and manufacturing companies
facing substantial administrative expenses, as it improves the reliability of cost information
and supports informed decision-making (Roztocki,2001;Maelah & Ibrahim,2006).In
competitive markets, effective pricing strategies are essential for profitability and market
positioning (Bourdon,1992).By providing accurate cost information,ABC becomes an
invaluable tool for organizations aiming for cost leadership.Thus, by adopting Activity-Based
Costing,FPT can enhance its strategic positioning,drive operational efficiency, and ultimately
improve its financial performance.

Activity-Based Costing has demonstrated varying levels of success and adoption

across different countries and industries.In Australia, organizations that fully implemented
ABC reported it as a more successful method compared to traditional costing systems (Byrne
et al.,2007).Similarly,In Riyadh Province,Saudi Arabia,research conducted among
manufacturing companies revealed differences in the use,benefits and satisfaction levels of
ABC adopters.With 75 responses from companies using ABC,the findings indicated that the
success of ABC implementation significantly influences the extent of its use, the scale of
benefits achieved, and overall user satisfaction.This study emphasized that how ABC is
implemented is crucial in determining its effectiveness and benefits,regardless of company
characteristics or the system's features (Al-Dhubaibi,2021).
Another study analyzed the application of ABC in higher education
institutions,showing that it can enhance operations and better meet the needs of university
customers in a cost-effective manner (Krishnan,2007).Additionally,ABC was successfully
applied at AIRCO,an industrial air conditioner manufacturing company,providing more
accurate cost information than the traditional cost accounting (TCA) system.The
implementation of ABC revealed that AIRCO's products did not incur overhead costs based
on volume, as previously indicated by the TCA system.The ABC analysis offered valuable
insights into product and process costs that were unavailable under the traditional
method,leading to a clearer understanding of overhead allocation and cost management
(Nachtmann & Al-Rifai, 2004).Implementing Activity-Based Costing at FPT Online could
enhance overhead cost allocation and improve cost management.By utilizing insights from
ABC,FPT Online can align its operations with the unique resource demands of its diverse
services,resulting in greater efficiency and effectiveness in meeting customer needs.
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