Activity Based Budgeting And Budgeting

By managing the budget the organization will be better prepared for the financial forecasts, which are the company’s future expenses. Some strategies and tools that will assist with managing the budget are zero based, activity based, performance based, cost

The budget process is a powerful planning tool for government to make important resource decisions. According the Carney and Schoenfeld‘s article on How to read a Budget, an operating budget is a reflection of government’s financial plans. When a budget is

Activity-based costing can be defined as the managers allocate costs depending on the quantity of resources a product or service consumed in the manufacture of goods and services. The activity based

There are different types of budgeting that businesses typically use and those include Operating budgets, Capital Budgets and there are many subtypes that exist because a budget can also be created for special events, the recruitment and retention of new staff, and to manage the advertising expenses and return on investments for a business (Demand Media, 1999-2012). According to Demand Media (1999-2012), "An operating budget outlines the total operating expenses and income for the organization, typically for the period of a fiscal year. Capital budgets evaluate the investments and assets of the business, and a cash budget shows the predicted cash flow in and out of the business over a period of time” (para.2 ). According to the Cost-Benefit Analysis (2012), “Capital budgeting has at its core the tool of cost-benefit analysis; it merely extends the basic form into a multi-period analysis, with consideration of the time value of money. In this context, a new product, venture, or investment is evaluated on a start-to-finish basis, with care taken to capture all the impacts on the company, both cost and benefits. When these inputs and outputs are quantified by year, they can then be discounted to present value to determine the net present value of the opportunity at the time of the decision” ("Cost-Benefit Analysis," 2012).

This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).

Activity-based costing is a system of accounting that puts emphases on activities performed to produce products or services (Schneider, 2012). In this costing system every activity is assigned a cost (Schneider, 2012). The goal of activity-based costing is not to allot common costs to products but to measure and then price out all the resources used for activities that sustain the production and delivery of products and services to customers (Mazumder, 2007). Activity-based costing is a cost system that is useful in business because of the fact that it does account for the cost of the products, resources used to produce the product and delivery of the product.

In outlining a budget there are two phases that must be determined to create a budget, an operating phase and a financial phase. “Developing a new operating budget starts with examining budgets from previous years and identifying what components are going to change, by how much and if any new components need to be added or existing ones reduced or cut” (Budget Challenges, 2012). In the first phase of the budget it needs to be determined how much money is going to be needed to operate the day to day activities of the business.

This paper provides a brief presentation of Activity-Based Costing methodology, how is used as well as its short comings.

A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.

The methodology I used to arrive at my budgeted numbers is concentrating on the activity-based budgeting, with the supplementary of incremental budgeting. Because of changing location, living environments and social identity, the living cost since work will be quite different from before. Instead of using the past budget categories in the college, I make a new list of activities which will mostly affect my life, ranging from moving, commuting to necessary living needs, and then assign specific value to each activity. For expense with valid source, such as rent, moving cost, internet, health insurance and car maintenance, I use information on the company’s website directly. For fuel expense which requires calculation, I figure out the daily

The activity based costing system enables the business for allocates related overhead and costs depending on the participated activities. it also establishes a reasonable product pricing without overpricing or underpricing the product, furthermore, its consider the divers customer groups and the product competitive cost to

Budgeting is crucial in the well-being of a company especially the financial health status of a company. In fact, no professionally managed firm would fail to budget, since the budget establishes what is authorized, how to plan for purchasing contracts and hiring, and indicates how much financing is needed to support planned activity. It is routine for a company to budget for its expenses. Expense budgets act as a guideline of how much revenue a company would require keeping the activities running. It is used to set the company’s targets for a certain period.

Nowadays, we know that activity based costing system assigns overhead costs to products or services products that using a two-stage process, which focuses on activities. ABC is a relatively new and very important topic in managerial accounting. ABC allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. Contents in brief, first that comparing potential advantages of ABC versus traditional costing methods. The

Activity Based Costing is a method whereby costs are assigned to products or services based on the resource that they consume, it is an alternative of traditional accounting where business overheads, indirect costs such as lighting, heating, and market are allocated in proportion to an activity direct cost.

Manufacturing is one of the company 's core processes, while accounting is the key impact for enterprise to produce good products. Activity-Based Costing (ABC) is a new method of costing system. This method can help a company to allocate costs more accurately in today 's complex business world. In contrast to traditional cost system which is not suited to new manufacturing environment situation, ABC has taken the place of tradition system and been widely used in some countries,