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Assigment for Strategic management accounting - Essay Example
Finance & Accounting
Pages 12 (3012 words)
Strategic Management Accounting Author Institution Strategic management accounting Introduction The mobile phone industry is characterized by an environment in which market and technological changes occur at an ever-accelerating pace. Pear Ltd faces potential challenges in the form of rising margin pressure and decreasing return on invested capital, quality and cost reduction pressures, and increasing expectations on customers centring on quality…
The business functions within Pear Ltd’s value chain encompass aspects such as research and development, design of products, services, and processes, production, marketing, distribution, and customer service. As such, cost management is critical component to the company’s operation in integrating and coordinating activities in all spheres of business function. Alternative Methods of Budgeting The traditional budgeting employs the incremental approach whereby the previous year’s budget is used a basis, subsequent to adjustments up and down, from that budget to mirror the changing assumptions for a new year. This incorporates employing the previous year’s budget, adjusted to accommodate known factors such as anticipated price inflation. Although, incremental budgets are crucial for planning, they may be less useful for control. The incremental approach to budgeting has the effect of incorporating last year’s inefficiencies into the present budget (Bhimani and Bromwich, 2010). This necessitates the consideration of alternative methods of budgeting. Zero Based Budgeting Zero-based budgeting avails a better approach to dealing with the drawbacks associated with incremental budgeting. ...
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