Right now, there is no formal budgetary control system in place. Upper management has asked you to research the budgeting process (including the potential use of activity-based costing), in order to advise them if it is a good idea to institute a budgetary control system for the entire organization. They have asked that you address the following questions:
- Are there any advantages/disadvantages to using activity-based costing vs. conventional cost-value-profit analysis?
- Are both methods equally applicable to manufacturing and sales activities, and if not, why?
- What factors should be considered when deciding what method(s) to use for control and evaluation?
Are there any elements that are essential to success in using a budgetary control system? If so, what are some of these elements?
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.The activity based costing method is considered to provide better cost estimates than the traditional cost-value-profit analysis. The biggest advantage is that it identifies the various activities which are performed to produce a product and allocates the overhead costs to those activities on the basis of the cost drivers. While material costs are...