Executive summary: Application of appropriate cost performance strategy is a vital tool for the organizational objective. Budgeting procedure & its implementation is an important element of the cost accounting practice. The organization that has a substantial history of efficient budgeting methods can easily read the market. The total costing system is a basic of all small and independent cost measurement technique. An organization must have an accounting fit to the infrastructure and management development team. Any kind of variance in the performance must be dealt with due diligence. Cost has a relationship with the whole production process. Whenever this kind of fit is well suited to the performance of the company, there is a strong possibility that the company will improve. Table of Contents Introduction 3 1.1 Different Types of Cost: 3 1.2 Different costing method 3 D1: Evaluation of cost measurement techniques: 4 1.3 Calculation of inventory costing 4 1.4 Analysis of cost data 4 2.1 Preparation of cost report 5 2.2 Utilization of performance indicator: 6 M1 Strategies for performance indicator 7 2.3 Improvement of Cost Performance: 7 D3: Cost Reduction Steps: 8 3.1 Purpose and Nature of Budgeting Process in the business. 8 3.2 Appropriate budgeting methods 8 3.3 Preparation of appropriate budgeting method: 9 3.4 Preparation of cash budget 9 M2 Designing appropriate methods of budgeting 10 4.1 Variance of budgeted data: 11 4.2 Operating Statement
Assuming that the company’s goal is to maximize profits, the current cost system is not an appropriate tool for strategic planning. The ambiguity of the overhead costs per product makes it difficult to accurately analyze the cause and effect relationships of changes and/or improvements to specific product line.
According to Epstein and Buhovac, (2014), costing system is a process designed to monitor the costs incurred in a certain business. Costing systems are meant to advise the management on how to choose the most appropriate course of action with cost efficiency and capability. According to Cardinaels and Labro (2009) costing system provides detailed cost information needed by management needs to control current operations with the aim of improving the future. Below are some of the costing systems that are common to many organizations (Epstein & Buhovac, 2014).
Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.
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.
By linking cost management efforts to budgeting, companies improve the quality of information available for managers to use in developing their budgets. Accurate cost information is fundamental to budgeting. Companies that use accurate cost management techniques and provide budget developers with ready access to cost information improve both the accuracy and the speed of their budget process.
As a supervisor in the U.S. Navy, I have always taken the initiative to evaluate workplace processes and procedures that can be improved for optimal effectiveness and efficiency in accomplishing organizational objectives. For example, as the work center supervisor in a military hospital pharmacy, I recognized pharmacy workload data used to capture medical expense & performance reporting was absent or incorrectly counted. I implemented quality management procedures to identify deficient system codes which were corrected. This action increased the capture of pharmacy workload data by 269%, enabling expense reporting and product cost management to be properly reported for Military Health System decision-making and performance
An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx,
Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.
From the aspect of cost center[1], tracking information of cost expenses would facilitate management to figure out the productivity by an unbiased measurement. In operations, company units such as the human resources department or marketing department, except sales department, are not engaging in market share or generating revenues. In contrast, these departments contribute their capabilities for internal supports and help sales department turn profits to the company. Those efforts are a part of product costs and also are a norm for performance evaluation.
INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to
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
The Following involves the analysis of the costing techniques followed by the company along with its Budgeting system. It also involves the Investment appraisal analysis for the given data.
The purpose of this paper is to answer a few important questions: Why do companies allocate costs? How do companies allocate costs? And how this cost allocation can affect the decision making of the company. It is important for the companies to find the proper method to allocate the costs. Cost allocation is an important issue in many companies because many of the costs associated with designing, producing and distributing products and services are not easily identified with the products and services that are created. It would have been easier for companies to allocate cost if costs were directly traceable with the products and the cost allocation would have been minor issue for the company. The decision-making
The focus of this study was to examine activity based costing from the perspective of competitive advantage. ABC can support the strategic management process and provide significant benefit to organizations. This examination utilized the contingency theory as a theoretical basis for the study. Descriptive survey design was adopted. The data gathering instrument employed for this study is a structured questionnaire. Data are analyzed through SPSS version 16. Reliability analysis using Cronbach’s alpha value was applied on data collected. Factor analysis was employed using principal component method followed by Varimax with Kaiser Normalization, to find the factors or dimensions that explain variances by the data set. The factor analysis is based on four dimensions, namely, overall performance, strategic cost allocation method, increased efficiency and increased effectiveness having the factor loadings of over ±0.3. The regression results are positive and significant at the 5% level. Findings reveal that there is no statistically significant difference in cost reduction attained by ABC over Traditional costing, though ABC tended to have higher effect.
The keen competition requires companies to consider the cost variable. But traditional budgeting method separates the cost into variable and fixed, put the emphasis on the variable cost and consider the fixed cost implacable.