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Preliminary Analysis of Cost and Budgetary Information Systems - Essay Example

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Preliminary Analysis of Cost and Budgetary Information Systems

Outline of Product Cost and Budgetary Control Methodologies and Systems • Product costs include the cost estimates that are based on material, labor and machine process that influence decisions made by management. It is either based on activity based costing or traditional based costing (Kaplan & Anderson, 2007). • Activity based costing is adopted from the conventional costing system and it assumes that activities act as fundamental cost objects because, cause costs and cost objects are known to create demand for activities. • Traditional based costing utilizes costs based on a single, volume-based cost driver, it assumes that product causes cost because; it assigns the overhead costs to products based on relative usage of direct labor. • Budgetary control is a tool used by management in maximizing profits through minimization of costs involved in operation forecasts using management and accounting control. • Budgetary control systems are classified according to time, function and flexibility to ensure controls are made based on the estimates that are compared with actual budget outcome (Lucey, 2003). • It is recommendable for the management of Worplestrop Partnership to adopt the activity based costing control method because it ensures efficient maximization of profits as it allocates costs to key cost drives (Kaplan & Anderson, 2007). • It is also decisive for the management to prepare budgetary control tools ranging from long term to short term, all functional budget estimates and both functional and flexible budget to control costs used in products (Weygandt, Kimmel & Kieso, 2009). Levels of Management Decision-Making More than often, the levels of decision-making are classified as operational, tactical and strategic levels. Nonetheless, decisions made at each level play an important role in product costing and budgetary control, as relevant information is transmitted in order to make an organization successful. More so, successful management decision-making ensures that managers remain responsible as they set up decisive decisions based on effective planning, controlling, staffing and organization as a way of achieving set objectives. As a result, decision making at every level of management remain as an integral part of management within the organizational structure. Considerably, managers at various levels of management have the ability to analyze and make appropriate recommendations based on decisions made in relation to the budget according to set down hierarchical structure of management (Koontz & Weihrich, 2007). Strategic Level of Management More significantly, the strategic level of management is made up of top-level management who are involved in developing long-term plans that are of high-level qualitative nature as it affects the daily running of company’s cost and budgeting activities. As the highest level of management, its output focuses on requests for the performance levels of the organization. The strategic level has yearly production quotas that identify best product mix, and policies on cost and budgetary information system replacement and modernization. Noticeably, the strategic ...Show more


Preliminary analysis of cost and budgetary information systems Name Here Name of Institution Date Class Name Date Report on Preliminary analysis of cost and budgetary information systems May 9, 2012 Worplestrop Partnership Partners Prepared by XXXXX Accountant (Signature) More than often, organizations ensure that an analysis of varied product cost and budgetary control methodologies and systems are carried out…
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