Question

I need summaries to the following topics from the subject of "Accounting for Decision making and control".

When summarizing, there must be an outline of the topic, and what are the key/important points ideas that fall under the topic.

The topics are:

1) Organizational Architecture

2) Budgeting

3) Cost Allocation: Practices

4) Absorption Cost Systems

5) Standard Costs: Direct Labor and Materials

Answer 1

Organizational structure:

The organizational structure is one of the most important aspects of running an organization as the system of running the day to day affairs of an organization will be very much dependent on the organizational structure. The functioning of a corporation or a company will be significantly different from the functioning of a sole proprietorship or partnership business. A corporation has separate legal identity of its own different from its owners whereas it is not so in case of a sole proprietorship or partnership business. Thus, the decision making process in an organization will be significantly affected due to the organizational structure.   

Budgeting:

Budgeting is the process of preparing the forecasting statements to help the management to manage an organization and its resources effectively. Budgeting helps the management to take important decisions correctly. For example a production budget would be helpful to the procurement department to take important decisions about the quantum of procurement to be made to achieve a particular level of production as forecasted in the budget.

Cost allocation practices:

Cost allocation practices is very helpful for an organization to manage the overall cost of operations. The management by allocating costs to different cost centres will be able to make effective use of the resources and the wastages can also be reduced significantly if the method is used effectively.

Absorption cost system:

Absorption cost system is one of the costing system which is used to ascertain the cost of production. Apart from absorption costing many organizations also prefer to use variable costing also to ascertain the cost of production. Under absorption costing apart from the variable cost of production the fixed costs are also considered to ascertain the cost of production or cost of goods sold unlike variable costing where nly the variable costs are considered for ascertaining the cost of production.       

Standard cost: Direct labour and materials:

Under standard cost direct labour and materials are the two most important elements of overall cost of production. Both are variable costs thus, expected to rise with the rise of production thus, these are directly move in line with the movement of quantity of production. Standard costing helps us to ascertain the total cost of direct labour and material for production of certain quantity of goods.