what the master budget is and explain its benefits 2. Describe the advantages of budgets 3. Prepare the operating budget and its supporting schedules 4. Use computer-based financial planning models in sensitivity analysis 5. Explain kaizen budgeting and how it is used for cost management 6. Prepare an activity-based budget 7. Describe responsibility centers and responsibility accounting 8. Explain how controllability relates to responsibility accounting II. CHAPTER SYNOPSIS
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redesigned the components of motors. However, as the strategy implementing, the traditional cost system seemed to be inappropriate. Before, a departmental method was used for overhead allocation, which could not reflect accurate information on customized motors. Overhead costs were simply separated into three groups. While materials related and support related categories were allocated to products based on different drivers, production related overhead was traced to cost centers directly. In order
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observing the existing costing allocation, we found out there is an issue on the existing costing report that the manager could not be able to see the real situation. In light of this, there will be brought to the discussion on the feasibility of using an alternative costing method – Activity based costing (ABC) in the latter paragraphs. The issue of misallocation cost With the use of Traditional Absorption Costing (TAC) which means Wilkerson Company is now only put the costing of direct labor and material
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- focuses on the activities inside the organization - many companies call it finance or corporate finance - no required rules and regulations such as Generally Accepted Accounting Principles or Financial Reporting Standards - can and does use projections about the future - managerial accounting information must meet a cost-benefit test or the benefit from providing information must exceed the cost of obtaining the information - new initiatives such as activity-based costing and the balanced
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lots of time on purchasing and scheduling and management activities as well as money. In order to come up with a management decision under this situation, the controller is considering of using the activity-based costing (ACB) system to create the financial statement instead of using the traditional, job order costing system. Unlike the job order costing which maintains records and allocate cost on top of direct labor, ABC focuses on activities. Therefore, it leads more cost pools to be used to assign
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control the flow of the activity within the company. Another strategy that Super Bakery, Inc. decided to implement was the ABC System within the company. With various clients it was hard for management to keep up with the exact amount of outsourcing activities. Some companies may have been paying a cheaper or a higher price for the product. ABC System will keep track of this information so it can be accurate and up to date. ABC System (Activities Based Costing) ABC System is known to be a most
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IDEAL CANDIDATES FOR ABC SYSTEMS Traditional (GAAP) costing methods are best suited to "situations with secure markets, large scale production with unchanging specifications, and little pressure for a highly flexible response to changing market demands". In the absence of any need for flexibility, its simplicity and the inexpensive collection of data make traditional costing methods ideal but this setting for a management accounting system, of which the costing system is a part, is becoming
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limitations of cost accounting. 27.1 MEANING AND SCOPE OF COST ACCOUNTING Cost accounting is the process of determining and accumulating the cost of product or activity. It is a process of accounting for the incurrence and the control of cost. It also covers classification, analysis, and interpretation of cost. In other words, it is a system of accounting, which provides the information about the ascertainment, and control of costs of products, or services. It measures the operating efficiency of the
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increased volume. Ridderstrale hoped to achieve this by transforming the existing cost system to gain better information on their manufacturing cost structure, as well as SG&A costs tied to servicing individual customers and orders. This will enable them to direct their resources better to customers with hidden profits and reduce efforts to service customers with hidden losses. Under the existing cost system, most sales, marketing and administrative costs were treated as a period expenses and remained
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Activity Based Costing Analysis Critically discuss: a) Why Cambridge Hospital Community Health Network embarked on the ABC study? There are two main reasons why the Cambridge Hospital Community Health Network (the Network) embarked on the Activity Based Costing (ABC) study. Firstly, the Network needed to gain a better understanding of its unit-of-service costs, which had been rising at a rate of 10% per year. In fact it had recently been rated the third-highest cost hospital in the
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