110 BUACC5933, Assignment, Sem1-2019 BUACC5933, Assignment, Sem1-2019 BUACC5933 Cost and Management Accounting Semester 1, 2019 Assignment Contribution to overall assessment: 25% Due Date: 23/05/2019...

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Answered Same DayMay 17, 2021BUACC5933

Answer To: 110 BUACC5933, Assignment, Sem1-2019 BUACC5933, Assignment, Sem1-2019 BUACC5933 Cost and Management...

Preeta answered on May 21 2021
159 Votes
TRADITIONAL UDGETING AND STANDARD COSTING
TRADITIONAL UDGETING AND STANDARD COSTING
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EXECUTIVE SUMMARY:
    This essay is regarding traditional budgeting and standard costing and its importance and effect on business organization. The essay has not been made on a particular company but on the general business environment. At first an introduction has been given on the problems to be discussed in the essay. Then discussi
on has been made on traditional budgeting that is what it actually means and its techniques and ways. Then the discussion has been made on how traditional budgeting is relevant in the business environment which is of contemporary nature.
    Next the discussion has been made on standard costing that is what it actually means and its techniques and methods. Then the discussion has been made on how standard costing is relevant in the business environment which is of contemporary nature. In the end conclusions have been drawn based on the whole study and a few recommendations have been made along with.
INTRODUCTION:
    Currently corporate budgeting has become like a joke and in the present day almost everyone knows that. But corporate budgeting is very time consuming compelling the executives to indulge in a lot of boring meetings and tense negotiations. Often it has been noticed that managers lie and cheat only because of budgeting. Often unrealistic targets lead them to show the results escalated since otherwise they will be penalized for showing the real result and being unable to attain the target. Business decisions often become a thing of game.
    It has been found that corporate budgeting create drift among the colleagues when they start to distrust each other and start to have ill will against each other. In order to get the promised incentive for the achievement of the target the mangers and other employees start to behave in such a way which is against the interest of the company.
    Several academics were of the opinion that variance analysis and standard costing were not enough for controlling cost and analyzing the performance of the company since the competitive environment keeps on changing. The process of budgeting has evolved over time and there is clear demarcation between traditional budgeting and modern budgeting methods like incremental budgeting and zero based budgeting.
TRADITIONAL BUDGETING:
    Traditional budgeting is a method in which the current year budget is prepared by taking the base of previous year’s budget. Only some changes are made based on the scenario and change in the circumstances. Only the expenses are adjusted from the past year based on the inflation rate, demand of the consumers (Wildavsky, 2017). The revenue and the cost figures are also taken from the past year. The reason is given only for those items which are increased in the current year. This form of budgeting is very different from other modern form of budgeting.
    There are certain advantages as well as certain disadvantages of traditional budgeting, which have been discussed below in details.
ADVANTAGES OF TRADITIONAL BUDGETING:
    Following are the advantages of traditional form of budgeting (Heyns et al., 2011):
· Execution – The execution of this form of budgeting is very easy since all the managers can easily make the budgeting this way. Separate knowledge is not required for traditional budgeting, only the past year figure are to be adjusted. A lot of time and the efforts of the managers are saved.
· Solidity – This is a very old form of budgeting, so almost everyone in an organization is aware of the method. So, in a way this budgeting method solidify the financial aspect of an organization since every staff is well aware regarding what has to be done further. So, in a way it improves coordination among staffs and managers.
· Decentralize: This budgeting technique promote decentralization. A company can have different branches not only all across the city or country but all across the world. But almost every manager at every branch is well aware regarding the traditional budgeting, so they can easily make their own budget and send that to the headquarter.
· Consolidate – This form of budgeting actually help an organization to club its various projects together to make it in a single big form, so that all the projects can be understood at a glance. This can actually help the underperforming projects to perform in a better way.
DISADVANTAGES OF TRAITIONAL BUDGETING:
    Traditional budgeting ahs several disadvantages as well, some of which have been listed below (Brusca & Labrador, 2016):
· Rigidity – This form of budget is rigid and cannot be changed constantly based on the changing surrounding and environment of the business. It is inflexible and cannot be easily changed once prepared.
· De-motivation – Traditional budget is prepared by top management normally so there is no role played b the other staffs of the organization. So, they feel neglected, unimportant and de-motivated. This is not good for the spirit of the organization.
· Dependency on Past – This form of budget is hugely depend on...
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