Course : Managerial Accounting_Discussion4

Module 4 Discussion Forum

Discussion: Activity-Based Costing (ABC) and Master Budgeting

Read at least 2 academically reviewed articles on ABC and 2 articles on Master Budgeting and complete the following:

A. Write an annotated bibliography of each article.

B. Based on the articles you reviewed, discuss what you learned

C. In addition, discuss how a manager would use the concepts in the articles you reviewed in managerial decisions.

Instructions:

Completed the assignment by over 550 words and references.

- Read and respond to at least 3 of your classmates' posts .(Below posted my classmate discussions) Read a selection of your colleagues' postings. Respond to at least 3 of your classmates’ posts. (Each response should be 150 words, It should include the stuff like supporting their discussion and  

Study Materials Link:

TextBook: https://saylordotorg.github.io/text_managerial-accounting/index.html

· Lesson Lecture

· Video-1: Cost-Volume-Profit AnalysisURL

· Video-2: Cost-Volume-Profit AnalysisURL

· Video: Relevant Costs in Decision MakingURL

· Video: Relevant Costs (Make or Buy Decisions)URL

· Video: Relevant Cost (Special Order)URL

Assigned Reading/Study Materials

Use the following links to study Module 4 topics

Cost-Volume-Profit Analysis:

https://saylordotorg.github.io/text_managerial-accounting/s10-how-is-cost-volume-profit-anal.html

Relevant Cost Analysis:

https://saylordotorg.github.io/text_managerial-accounting/s11-how-are-relevant-revenues-and-.html

3-Clasmate discussion

Discussion1:

by Bindiya Marneni - Wednesday, 22 April 2020, 12:27 PM

 

Durana, M. (2019). Research Review on Activity-Based Costing System (ABC): ABC's Development, Applications, Challenges, and Benefits. SSRN Electronic Journal.

The above article focuses on the various aspects involving the Activity-Based costing, including its history, challenges, applications, and other factors (Durana, 2019). The authors put it that the ABC system was developed to help small and all organizations at large have reliable and robust methods of allocating costs. The method is very accurate and reliable since it provides a manager with authentic and all costs involved in the production process. Additionally, through the ABC model, an organization gets relevant insights about how to price their products since they know of all their costs, including the overhead costs which are not included in other methods. The challenges presented by the author are that the organization faces the problem of having the real figures in some activities, and this makes them assume hence arriving at wrong estimates and calculation altogether. Another problem of this method is that it gives real costs, thus reduces the chances of overpricing which organizations do not want since they want to manipulate their customers. However, one of the critical applications of the ABC system is ascertaining costs in the production process for the organization to have the prices of their products set.

Babu, M., and Masum, M. (2019). Crucial Factors for the Implementation of Activity-Based Costing System: A Comprehensive Study of Bangladesh. ABC Research Alert, 7(1).

The above article by Babu and Masum looks at the fundamental factors involved while implementing the activity-based costing system in organizations based in Bangladesh (Babu and Masum, 2019). The authors found out that the process of implementation varies from one organization to another and that the whole process is influenced by a wide array of factors depending on the size of the organization. In Bangladesh, the economy is made up of much-growing businesses or the small and medium enterprises that are hugely relying on activity-based accounting to ensure that they ascertain direct costs and overhead costs appropriately. The authors found out that the whole process of implementation is made of three main factors which are initiation, design, and finally, the real implementation phase. These three phases help an organization to adopt a stepwise process of implementing the ABC model hence be able to use it appropriately. The authors, therefore, concluded that it is vital for organizations to have a transparent and straightforward process of implementing the ABC system for it to work well.

Jena, P. (2016). Reform Initiatives in the Budgeting System in India. Public Budgeting & Finance, 36(1), pp.106-124.

The above article looks at the budgeting reforms made in India and how they helped in improving the whole process (Jena, 2016). The authors focus on the economic problems facing India before proceeding to highlight the reform process. India is one of the fast-developing counties in the world but faces a wide array of the problem, including, misappropriation of funds, looting of public find and corruption. The country has had corrupt finance minister that has been over budgeting about government projects so that they can loot federal funds. However, the budgeting reforms saw the country change its budgeting process to a systematic and straightforward process where the allocation of funds and resources was done in the most transparent and accountable way. India adopted the use of computerized and automated financial reporting systems to help know about the country's taxes and how to equitably distribute resources without any significant challenges as they faced before. 

Tenzer, I. (2016). Five Ways to Master the Art and Science of Budgeting. AORN Journal, 84(6), pp.S47-S48.

The above articles highlight the essential skills and competencies that can be exhibited by individuals to become budgeting gurus (Tenzer, 2016). Today budgeting is everything, and it is applied in almost all sectors starting from governments, business organizations, and individuals. The author presents key factors and knowledge that people aiming at becoming financial officers can use to master the art of budgeting. First is that the author stresses the importance of business knowledge and competence. To become a competent budgeter, then the individual must be well conversant with financial issues and theories. Secondly is that an individual must be able to know the appropriate methods to be used to ensure that money and resources are used in the right way without any losses. The third key factor is that the individual must be straight forward, genuine, and accountable. This helps the individual to be focused and avoid any shortcuts for self-gain or any other agendas.

Classmate-2 Discussion: by Lakshmana Kumar Kilari - Wednesday, 22 April 2020, 3:46 PM

 

Activity-Based Costing and Master Budgeting

A.   Write an annotated bibliography of each article.

·      Articles on ABC

Cannavacciuolo, L., Illario, M., Ippolito, A., & Ponsiglione, C. (2015). An activity-based costing approach for detecting inefficiencies of healthcare processes. Business Process Management Journal, 21(1), 55–79. doi:10.1108/bpmj-11-2013-0144

This article details a practical context that investigates the ways in which the incorporation of an activity-based costing approach, abbreviated ABC, into the current bookkeeping scheme aids medical institutions in determining the shortfalls linked to their analytical curative courses and associated re-structuring involvements. Specifically, the authors applied the Business Process Management (BPM)-ABC organizational context to the paradigm of a particular treatment center avenue, which is the orthopedic unit of an Italian campus hospital. For data collection, Cannavacciuolo, et al. (2015) used both unstructured interviews and field surveillance techniques. Consequently, the study revealed that the BPM-ABC style is capable of generating substantial data regarding the utilized assets and the expenditures of the endeavors useful in emphasizing prospects for the enhancement of diagnostic therapeutic pathways. Moreover, the probe also exposed the obstacles connected to a prevailing method of accounting centered on expense midpoints that could obstruct the execution of the BPM-ABC approach.

Almeida, A., & Cunha, J. (2017). The implementation of an Activity-Based Costing (ABC) system in a manufacturing company. Procedia Manufacturing, 13, 932–939. doi:10.1016/j.promfg.2017.09.162 

This paper illustrates the main results obtained from implementing an industrial cost model based on the principles of Activity-Based Costing (ABC), in a Portuguese coffee production company. Particularly, Almeida & Cunha (2017) focused on the manufacture of coffee in capsule by identifying all the undertakings and used up assets encompassed in the process. Essentially, the first phase included allocating the recognized resources across formerly distinguished expense drivers. Secondly, the researchers credited the actions to the goods over the outlay drivers of the events that mirror their intake, both linearly and directly. Ultimately, they then assessed the overall commodity price, as per the used up actions and the corresponding cost of resources. Consequently, the study depicted that the enactment of the ABC approach caused the acquisition of an extensive array of data, with great element, significance and effectiveness, which in turn indicated that the method acclimatized to the prerequisites of this firm.

·      Articles on Master Budgeting

Bužinskienė, R. (2019). MASTER BUDGET FORMATION IN PRIVATE COMPANIES. Professional Studies: Theory & Practice/Profesines Studijos: Teorija ir Praktika, (21).

This study aims at analyzing the context of financial planning, as well as to formulate the master monetary plan in a selected private organization. In particular, the article strives to illustrate the significance of the financial practice in Snaige Company.  According to Bužinskienė (2019), master budgets pertain to devices used to measure the enterprise performance of the fiscal regulation in business entities and to attain the harmonization of several business roles. For the research methods, the author used qualitative content analysis, data visualization, literature analysis, business fiscal primary records and methodical assessment techniques. Consequently, the outcomes showed that Snaige would experience positive consequences in terms of profit, at the conclusion of the financial period. In addition, the cash budget also indicated that the organization would not only have to look for new sources of funding, but also require the preparation of fresh contract provisions to clients for the obtained deposits.

OBI, J. N. (2015). Budgeting and budgetary control as the metric for corporate performance. International Journal of Sustainable development, 3(1), 1-33.

This article assesses the process of financial planning and regulation in companies and its advantage as a forecaster of business performance, on the notion that contemporary firms are gradually valuing its importance towards realizing their goals. For the method, the author used a descriptive technique comprising the analysis of financial planning and control undertakings in 30 companies chosen from Anambra, Lagos and Delta States. In particular, OBI (2015) scanned and integrated the most suitable practices of monetary planning and regulation in these firms, to develop the fundamental information for the paper. Consequently, the results showed that most firms normally prepare preliminary financial plans only to exceed the thresholds in the enactment phases because of deprived fiscal methods of control. Nevertheless, progressive establishments are currently determined to achieve more, by means of attaining viable competitive edges in their markets and displaying great revenue numbers, through adopting noble measures of planning and controlling their finances.

B.    Based on the articles you reviewed, discuss what you learned

From the ABC articles it is evident that book keeping data, especially expense statistics on processes and assets, is an administrative element to be considered for re-structuring measures (Cannavacciuolo, et al. 2015). Largely, ABC distinguishes the crucial regions where corporate practice executives could intercede, through associating the expenses to procedures. Nevertheless, the outlay data ought to be combined with the vital enactment pointers of the procedure, in order to comprehend the most suitable techniques of re-structuring. In particular, assets are linked to undertakings via asset drivers and processes are subsequently catalogued to price items by means of process drivers. With regard to the process, Activity-Based Costing  is normally permitted to examine the origins of the outlays related to the undertakings, along with the rate of their enactment. Furthermore, it also signifies an extra importance from the administrative perspective (Almeida & Cunha , 2017).

On the other hand, the master budgeting articles illustrate that these monetary plans are basically alienated into either operational or financial statements (Bužinskienė, 2019). Specifically, the former mainly comprises the plans on transactions, manufacture, managerial, and direct resources and employment expenses, whereas the latter includes the budget balance sheets and income statements, and money financial plans. In addition, it is also clear that financial planning entails establishing goals and observing performances compared to those specific objectives. For this reason, it is extremely vital for firms to strategize their monetary undertakings properly beforehand, via the establishment of operational financial planning and regulation processes in order to succeed (OBI, 2015).

C.   In addition, discuss how a manager would use the concepts in the articles you reviewed in managerial decisions.

To begin with, Cannavacciuolo, et al. (2015) emphasize the function of Activity-Based Costing as an administrative implement for facilitating policymaking procedures, in that it permits deducing data for several reasons. Initially, this system encourages a process of controlling expenses, due to the fact that it mainly draws attention to the most expense-expending undertakings and assets. Secondly, the approach also enables the identification of re-structuring courses, through differentiating between the additional and essential ones. Likewise, Almeida & Cunha (2017) also contend that the ABC method offers pertinent and beneficial data for the administrative procedure in several areas. Among others, they include the delineation of the costs of goods, the recognition of practices that necessitate more work to either advance or adjust them to the fresh certainties and requirements, and the reformation of certain parts of the business division.

Similarly, but a different measure, Bužinskienė (2019) asserts that his article is extremely significant to organizational heads and hired bookkeepers since it could assist them towards the well-organized creation of their financial strategies for the upcoming years. Correspondingly, OBI (2015) also recommends the highest managerial executives of contemporary companies to put in serious efforts in matters relating to financial planning and regulation, because it is impossible to attain any considerable realization with disorganized processes for managing their finances. In other words, this means that putting in any efforts towards accomplishing functioning aims and purposes, devoid of operational methods of controlling and strategizing finances, would be equivalent to spearheading a visionless chase of organizational aims.

 

 

 

 

References

Almeida, A., & Cunha, J. (2017). The implementation of an Activity-Based Costing (ABC) system in a manufacturing company. Procedia Manufacturing, 13, 932–939. doi:10.1016/j.promfg.2017.09.162 

Bužinskienė, R. (2019). MASTER BUDGET FORMATION IN PRIVATE COMPANIES. Professional Studies: Theory & Practice/Profesines Studijos: Teorija ir Praktika, (21).

Cannavacciuolo, L., Illario, M., Ippolito, A., & Ponsiglione, C. (2015). An activity-based costing approach for detecting inefficiencies of healthcare processes. Business Process Management Journal, 21(1), 55–79. doi:10.1108/bpmj-11-2013-0144 

OBI, J. N. (2015). Budgeting and budgetary control as the metric for corporate performance. International Journal of Sustainable development, 3(1), 1-33.

Classmate3 Discussion---by Sukesh Anapati - Wednesday, 22 April 2020, 8:57 PM

 

A.Maha, I.,(2015). Activity-based costing (ABC) – an effective tool for better management. Research Journal of Finance and Accounting, 6(4), 66

According to Maha & Hossain (2015), Activity-based costing (ABC) is a powerful tool for a business to cost its product accurately and efficiently, preventing cost deflation that can lead to maintainable growth and development that is necessary to be inexpensive in a globalized and dynamic market setting. The article includes a brief overview of ABC's foreign journals. The author has strained to bring up the main essence of these journals. The above publications cover a wide variety of subjects from ABC's theoretical dimensions to its implementation. The author has discussed some particular cases in different countries. Some of our newspapers illustrate the effect of ABC on European companies where, like some others, the American meaning of ABC has been addressed. The research incorporates some data on the ABC-maintaining Nestle Bangladesh Ltd. Activity-based costing has been developed and promoted as a way to address the structural biases of conventional cost accounting and to restore validity to managerial accounting. A conventional method records what money is spent on and by whom, but the costs of operations and procedures are not reported (Maha & Hossain, 2015, p. 66).

Wegmann, G. (2009). The activity-based costing method: development and applications. The IUP Journal of Accounting Research and Audit Practices, 8(1), 1-2.

Wegmann defined that, in this, the paper analyzes accounting software systems that aim to enhance the costing system based on performance. In the first part, we describe them using the Strategic Accounting Administration stream. The Activity-based Costing (now ABC) approach is the most well-known accounting software breakthrough in the last 20 years. In France, Activity-based Management (ABM) is very popular for the ABC method and its key managerial growth. But the other inventions that are based on the ABC approach are not very well known and discussed (Wegmann, 2009, pp. 1-2).

The medium-sized industrial enterprise is the important component of our national economy, its development is ne or

not, representing the rise and decline of our national economy, the research focal point of the standard lies in what utilizes the west to

manage in the theory budgets for the financial administration which strengthens enterprises in The Master Budgeting

Wang, C. (2017). A brief discussion of the comprehensive budget of industrial enterprises. Industrial Economics Research, 1(1), 45-46.

The medium-sized industrial enterprise is the important component of our national economy, its development is ne or

not, representing the rise and decline of our national economy, the research focal point of the standard lies in what utilizes the west to

manage in the theory budgets for the financial administration which strengthens enterprises in The Master Budgeting

Wang (2017), explained that the medium-sized industrial enterprise is an important component of the national economy, its growth is good or not, reflecting the rise and decline of our national economy, the focal point of the research norm lies in what the West uses to handle the financial management theory budgets that improve the enterprises in the Master Budget. Extensive budget management is a new model of financial management for the enterprise, which relocates the budget to financial management for the enterprise. It is a strategic security system compliant with the business development plan, which is a transparent operating index system with the specifications of the market process, capital flow, information flow and human resources of the entire company (Wang, 2017, pp. 45-46).

Saeed, M. Z., (2016). The Effect of budgets in the implementation of operational activities in private and public corporations. International Journal of Management Science and Business Research, 5(3), 11-12

According to Saeed & Jalloh (2016), Budgets are typically set for all divisions and major segments within the organization. They have to be thorough for all interrelated divisions. All departments should contribute to the budget process so that there is cohesion within the firm; for example, when marketing, ordering, staffing, and finance departments collaborate, operations will improve. Coordination includes the procurement and coordination of the required staff, equipment and materials for carrying out the company. A budget helps organize different units of operations to ensure that all areas of the organization are in contact with each other and know how they fit together. The importance of budgets in the operations of the activities of companies acts as an action plan to ensure continuity or pave the way to successful implementation. This research looks at the impact of budgets on the execution of operating operations in private and public companies (Saeed & Jalloh, 2016, pp. 11-12).

B.

I have learned more information about master budgets and activity-based costs. Budget is a management mechanism that business managers can use to meet defined goals by alerting and constructively motivating available resources. Without a budget, it would be difficult to calculate success because the target for benchmarking activities will not be available. On the other hand, Activity-based costing (ABC) is a way to determine true costs; that has become an important element of manufacturing/service organizations and can be characterized by way of a procedure that procedures the cost and presentation of doings, resources, and cost artifacts. This can be used as an alternative to conventional cost accounting systems.

C

As a manager, activity-based costing and master budgets used efficiently. It uses multiple expense pools to distribute operating costs, arranged by the operation. (Remember that the large allocation of plants usages one cost pool for the complete plant and the distribution of departments uses one cost pool for all section.) The concept is that tasks are needed to manufacture goods tasks such as buying materials, setting up equipment, assembling goods and inspecting finished products.

References

Maha, I., & Hossain, M. A. (2015). Activity-based costing (ABC) – an effective tool for better management. Research Journal of Finance and Accounting, 6(4), 66. Retrieved from https://www.researchgate.net/publication/309398925_Activity-Based_Costing_ABC_-_An_Effective_Tool_for_Better_Management

Saeed, M. Z., & Jalloh, A. A. (2016). The Effect of budgets in the implementation of operational activities in a private and public corporation. International Journal of Management Science and Business Research, 5(3), 11-12. Retrieved from http://www.ijmsbr.com/Volume%205%20Issue%203%20Paper%202.pdf

Wang, C. (2017). A brief discussion of the comprehensive budget of industrial enterprises. Industrial Economics Research, 1(1), 45-46. Retrieved from https://www.researchgate.net/publication/324510855_A_Brief_Discussion_on_the_Comprehensive_Budget_of_Industrial_Enterprises

Wegmann, G. (2009). The activity-based costing method: development and applications. The IUP Journal of Accounting Research and Audit Practices, 8(1), 1-2. Retrieved from https://www.researchgate.net/publication/23779100_The_Activity-Based_Costing_Method_Development_and_Applications