Question

Questions
1. What are the 3 problems that might arise from the application of ABC costing?
2. Describe and explain the evolution of a management control system, including how
budgets became a major feature of that system.
3. What is an accounting tool and why is budgeting described as an accounting tool?

4. Define kaizen budgeting and its importance for cost management. How would you
incorporate kaizen budgeting in your organization? Give example.

Answer 1

1. PROBLEMS ARISING FROM THE APPLICATION OF ABC COSTING:

Let’s Firstly discuss about ABC application. ABC is applied to the particular cost is incurred.

Find out cost factors and apply the cost factors to the various costs related types.

Now there is few problems while application of abc:

1. Abc mainly based on choice of expenses and it may be sometimes biased. That cost drivers may be not properly selected.

2. There is various different types of allocation of overheads. It cannot be assured that all overheads costs are divided to specific costs.

3. It has very limited benefit where main basis are volume related costs but overall overheads are cost very less or can say very small proportion.

2. Management Control system :

Previously entrepreneurial skills were considered to run out the business. But with advancement of technology there is involvement of new methods and innovations. So there is recently used management in the various controls. Management is the doing of the particular task. And it is an art of getting things done through others.

Traditional costing system is used in completion of organizational strategies, but not in the fulfillment of strategic innovation. That is main in today’s area. With the help of management control system it can achieve the desired results.

preparation of budgets are very important part of costing system. Because with help of predictions of costs, further business policies are formulated. So budgets preparation is now doing through various methods of latest control systems.

Now easily can compare the figures with previous stored data.

3. accounting tool is the tool where accounting data can be used and stroed for future reference. Providing financial information and recording of financial transactions.

basically in accounting tools are used recording, summarizing and classifying of entries and various types of posting of transactions. Budgeting is the accounting tool. because budgeting provides the estimation of various overheads and costs. thus business know their financial postion and know about the which area is very important for the development. Different types of budgets are prepared, like purchase budget, sale budget, production budget, raw material budget.

with the help of these budgets business know about the various kinds of sources and that where excess overheads are used that are easily identified.

4. KAIZEN BUDGETING:

It is the techinque where the continuous improvement of products or seevices. setting of goals about the future plans for costing rather than emphasis on existing cost structure.

it is mainly japanase techinque. for continuous improvement. always go for innvoations in this techinque.

suppose in our company there is very low production, due to old machinery.

then there is new machinery should be purchased or repair the old ones. and there is also possible errors that can be used for further improvement.