Cost Accounting

Cost Accounting

BA in Business Management

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Introduction

Business organizations compete in highly evolving and changing marketplaces . In to be ahead , or at least to survive these businesses develop , sustain , and gain competitive advantage . Companies continually look within and outside their organizations for opportunities to exploit for competitive advantages . These companies use budgeting as one method to sustain the competitive advantages they gained from their internal processes

Budgeting comes largely into play in the planning function of management . The five basic management functions are

planning , leading organizing , controlling , and staffing . Anthony , Hawkins and Merchant defined budgeting as the process of planning the overall activities of the organization for a specified period of time , usually a year (2003 br

. 4

Question 1

Contrary to the statement , strategy , plans and budgets are related and dependent on each other . Without a strategy , any plan will be ineffective . Without a plan , a budget is useless

First , [a] corporation 's strategy forms a comprehensive plan stating how the corporation will achieve its mission and objectives (Hunger Wheelen 1996 ,

. 12 . In other words , a strategy states how a company decides to compete effectively and efficiently in its chosen market

Second , whereas a strategy is formulated for the organization as a whole , a plan , on the other hand , may be made for any segment of the organization (Anthony , Hawkins Merchant 2006 ,

. 4 ) but it is more detailed than a corporation 's strategy . The plan of a company is actually dependent on that company 's strategy however , the strategy comes first before the plan

Third , a budget is defined as a statement of a corporation 's programs in dollar terms , listing in detail the cost of each program , that management uses in both planning and control . The budget thus not only serves as a detailed plan of the new strategy in action , but it also specifies through pro-forma financial statements the expected impact on the firm 's financial condition (Hunger Wheelen , 1996 ,

. 14 Schlissel said that The budget should clearly relate to the planned performance of work policy objectives of the organization , the expense of reaching those aims , and management 's time schedule . The budget should , in addition , link past , present , and future plans in a continuum (1979 ,

. 21

Lastly , from the definitions presented it is clear that strategy , plans and budgets are related to each other . As a matter of fact , plans and budgets are the output of one of the three management functions planning , implementation , and control

Steps in Preparing an Operating Budget

As Anthony , Hawkins and Merchant said Budgeting , like strategic planning , is a planning process (2006 ,

. 735 , as such , has several procedures . An operating budget is just one of several types of budgets There is a cash budget and a capital expenditure budget , too . An operating budget shows a corporation 's planned operations for the coming year including revenues , expenses , and changes in inventory and other working capital (Anthony , Hawkins Merchant 2006 ,

. 776

The steps...