P1 Exam Dumps : Management Accounting

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

Co-ordination

Communication

Profit maximisation

Diversification

Authorization

Consolidation

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.