Fluent Essays

I have attached the document with 3 discussions and I need to reply to each one of them on 150 words each. APA format and refernces are important. keerthi_replies.docx Unformatted Attachment Preview Yiming Cai - Thursday, January 9, 2020, 5:51 PM Flexible Budget Flexible budget is a budget that is mostly used as a static budget and basically changes with the changes occurring in the volume or activity held in production, also helpful for increasing the managers efficiency and effectiveness because it is set to benchmark for the actual performance of the company. Standard Costs Standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the should be cost. Flexible Budget important in planning First of all, a flexible budget is very useful for purposes of budgetary control because it corresponds with changes in the level of activity. Whats more, flexible budget reckons operational realities and streamlines control function and profit planning. It gives balanced perspective on comparison. When flexible budget is prepared, actual cost at actual activity is compared with budgeted cost at actual activity. Last but not the least, flexible budget is helpful in assessing the performance of department heads because their performance can be judged in relation to the level of activity attained by the organization. Standard Costs important in planning Standard costs can improve cost control, provide more useful information for managerial planning and decision making, more reasonable and easier inventory measurements, cost saving in recording-keeping, possible reductions in production costs. Flexible Budget numerical example ABC company determines that its cost of electricity and supplies will vary by approximately $10 for each machine hour (MH) used. It also knows that other costs are fixed costs of approximately $40,000 per month. Typically, the machine hours are between 4,000 and 7,000 hours per month. Based on this information, the flexible budget for each month would be $40,000 + $10 per MH. Now lets illustrate the flexible budget by using different of volume. If 5,000 machine hours were necessary for the month of January, the flexible budget for January will be $90,000 ($40,000 fixed +$10*5,000 MH). If the machine hours in February are 6,300 hours, the flexible budget for February will be $103,000 ($40,000 fixed +$10 *6,300 MH). Standard Costs numerical example Company XYZ makes widgets. Based on historical data, a cost analyst determines that producing one widget typically requires 1 pound of raw material costing $2 dollars and 1 hour of labor costing $20 dollars. These are the standard amounts and costs for material and labor (Jim Wilkinson, 2013). Direct Materials Standard Cost. Numerical example: 5 blue widgets are needed to produce a unit of Product A. Based past experience, the company has determined a standard cost of $2.50 per blue widget. Hence, the standard cost of direct material per unit of the product is 5 units*$2.5=$12.5 Direct Labor Standard Cost. Numerical example: 1.5 labor hour are needed to produce a unit of Product A. The standard cost per labor hour is $8. Hence, the standard cost of direct labor is 1.5 hours *$8=$12. Flexible Budget in managerial decisions Flexible budget can bring managers flexibility in managerial decisions as flexible budgets get modified during the year for actual sales levels, changes in cost of production and virtually and other change in business operating conditions. This flexibility to adapt to change is useful to owners and managers (Jim Woodruff, 2019). Standard Costs in managerial decisions Almost most of the companies have budgets and use standard cost calculations to derive product prices. Standard costs not only can use for the foreseeable future, but also provides a benchmark again which management can compare actual performance. In managerial decisions, a standard cost can also be developed and used for pricing decisions and cost control even if a budgets is not prepared by managers or CFO. References: Standard Costing Example, Jim Wilkinson, 2013. Retrieved from https://strategiccfo.com/standardcosting-example/ The Advantages of a Flexible Budget, 2019. Retrieved from https://smallbusiness.chron.com/advantages-flexible-budget-57105.html Tripura Kalasapudi - Saturday, January 11, 2020, 11:43 PM Flexible Budget: A flexible budget adjusts to changes in actual revenue levels. Actual revenues or other activity measures are entered into the flexible budget once an accounting period has been completed, and it generates a budget that is specific to the inputs. The budget is then compared to actual expenses for control purposes. Standard costs: Standard costs can be used in a flexible budgeting system to enable management to better understand the reasons for variances • Standard costs are – Based on carefully predetermined amounts. – Used for planning materials, labor, and overhead requirements. – The expected level of performance. – Benchmarks for measuring performance. Standard costs are costing that management expects to incur to provide a good or service. They serve as the “standard” by which performance will be evaluated. For example, fast-food restaurants have a standard for the length of time it should take to serve a drive-through-window customer. Phone directory operators have a standard length of time it should take to provide a phone number to a customer. Manufacturing companies have a standard quantity of direct materials to be used to produce one unit of product. A flexible budget performance report compares actual performance and budgeted performance based on actual sales. Importance-Performance Analysis (IPA) is a popular, low-cost, easily understood way to organize information about the attributes of a product or service and provide intuitively appealing strategies for a business to set priorities for potential change. A variety of criticisms have been aimed at IPA and several extensions and modifications have been suggested to deal with these; but, to our knowledge, there has been no attempt to evaluate its overall usefulness as an economic planning tool. This paper investigates linkages between IPA and the economic principles underlying several stages in the strategic planning process to determine the appropriate role for IPA and to provide recommendations for its use. Reference: Oyadomari, J., Afonso, P., Dultra-de-Lima, R., Mendonça Neto, O. and Righetti, M. (2018), Flexible budgeting influence on organizational inertia and flexibility, International Journal of Productivity and Performance Management, Vol. 67 No. 9, pp. 1640-1656. https://doi.org/10.1108/IJPPM-06-20170153. Surendra Medisetty - Tuesday, January 7, 2020, 1:37 PM Performance Analysis: Performance analysis is a method used for studying and evaluating the execution of a process in comparison to the target which is initially set by the organization. Generally performance analysis makes use of one or more techniques to raise the performance of a process to achieve the target which is already fixed (Howell & Soucy, 2018). Its Importance To rectify the non-functioning or errors in the machine. Used to communicate the progressed work to stakeholders. Flexible Budget: Flexible budget is a special type of budget that keeps on changing or flexes according to the changes made in the activities to produce a product by the organization. It is also known as a variable or fluctuating budget. The production or output of any business activity can be predicted by using a flexible budget. It helps in estimating both the factory cost and operating cost. The growth of the organization depends mostly on a flexible budget than that of a static budget (The ethics of Managerial Accounting, 2018). Its importance For any range of activities the budgeted cost can be established using a flexible budget. In terms of means of control, it provides the logical comparison of expenditure with the actual expenditure occurred. Price fixation can be done using a flexible budget. It can be easily changed based upon the variations in product or sales levels. Standard cost: Standard cost is used in the manufacture of the product. The inventories and the cost of goods sold will record the standard cost of the manufacturing activities. It is completely different from the actual cost (Warren, Reeve & Duchac, 2017). Its importance Used for motivating staff and management. Easy inventory measurements can be taken. Efficiency can be increased using a standard cost system. Preparation of budget, planning is made easy. Productivity can be increased. Standard cost plays a key role in both planning and decision making. Basis for estimation can be done using standard costs. References: Howell, R. A., & Soucy, S. (2018). Factory 2000: management accountings changing role. Montvale, NJ: National Association of Accountants. The Ethics of Managerial Accounting. (2018). Accounting Ethics, 135–149. Warren, C. S., Reeve, J. M., & Duchac, J. (2017). Financial and managerial accounting. Mason, OH: South-Western Cengage Learning. ... Purchase answer to see full attachment