Question

How do manufacturing companies incorporate the potential cost increases into the next operating budget process? Who are the responsible parties for unexpected changes in costs during performance evaluation?

Answer 1

STEP1:Generally potential cost increases due to as follows ;

1.Over volume of production cost,

2.Increasing operating cost to maintain efficiency in the product making,

3.Unexpected wastage of material,

4.Over supply of labour,

5.unavoidable losses,

6.Ignoring pre-determined cost process,rtf

STEP2: Based on the above reasons coat potential increases it can be operated in next process of budget

In the next budget process efficiency may be increased by making effective decisions on unexpected changes in the cost of each operating activities by the Top managers who are responsible for planning over making good product with the effective competitive product line,technology,cost,customer services.

STEP3:Based on the above discussion if there is any unexpected changes in the cost with pre analysed budget process ,following parties are responsible ;

1.Top managers (Budget planners),

2.Market analyst ,

3.Accounting manager,

4.Operational Analyst,

5.Cost Controller ,

6.Organizational performance evaluator,

6.