P1 Exam Dumps : Management Accounting

It avoids the complacency inherent in the traditional incremental approach where it is assumed that future activities will be very similar to current ones.

It discourages a questioning approach by focusing attention not only on the cost of the activity but on the benefits it provides. The charity managers will not articulate the benefits encouraging them to think clearly about the activities.

Preparation of the decision packages will normally require the environment of many employees. This environment may produce useful ideas and promote job satisfaction.

The creation of decision packages and their subsequent ranking by top management is very time consuming and costly. The charity will need to assess whether the benefits of the system outweigh the costs involved.

In an organization like a charity, the decision packages are not very disparate and difficult t compare.

In applying traditional budgeting, ‘activities’ may result in functional departments rather than cross functional activities and thus distract attention from the real cost-reduction issues.

The total budgeted production overhead cost was $ 1 285 000

The total budgeted production overhead cost was $ 1 305 000

The total budgeted production overhead cost was $ 2 195 000

The total budgeted production overhead cost was $ 1 188 000

The total budgeted production overhead cost was $ 1 258 000

Activity based budgeting allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.

Activity based budgeting provides a clear framework for understanding the link between turnover and the level of activity.

Activity based budgeting is useful for the review of quality systems utilization.

Activity based budgeting allows the identification of value added and non-value added activity and ensures that any budget cuts are made to non-value added activities.