A huge difference exists in the Great Pyramid of Giza’s construction at the time of its establishment, which was done almost 4500 years before. The pyramid establishment, during that time also, used conventional methods, involving different stages as that of planning, initiation, designing, execution and that of closing. There were several limitations that were faced in the construction of the pyramid, which included the cost managements, resources and the mechanism of execution of the entire process. New process of cost management accounting, if implemented, would lead to differences in the aspect of technique that were used for construction purposes, including the limitation’s termination which has been discussed previously (Ward, 2012).
In the above aspect, in the construction mechanism, the process costing implementation would be actually appropriate as that will be beneficial for cost segregation, which would in its turn help in handling of the construction costs. The per unit cost of products has seen to be estimated as the cost which has similarity to that cost which is seen in processed costing (Warren, Reeve & Duchac, 2013). The latter in its turn depends on standard cost, which seems beneficial in the scenarios of manufacture of a varied product range. Without the explanation of the real cost associated with the construction process, the same would become very difficult to gauge. The processed costing, if introduced, would prove to be efficient in the allocation of the real product cost.
Calculation of equivalent units
Per unit cost of equivalent units
Cost of the finished goods and the closing stock
Creation of normal profit under normal circumstances are computed as below –
As the selling price for the product A will be $ 2 per kg at the split-off, the operational outcome will be as follows –
It is distinguished from above figuring that the organization will endure huge loss under the new condition. Hence, it might keep delivering the item A as opposed to offering the item outside.
Material price variance
Material usage variance
Actual direct labor rate per hour
The variance analysis process refers to the identification and the recognition of the variance cases in the expenses and income of values, which are budgeted from present year values. The factors contributing to the fluctuations in the amount, which is budgeted, can be found out with the help of this analysis. The method also helps in making the budgeting operations effective with time. The potential of the mechanism of control can be gauged with the help of those assessments, which helps the management to find ideas augmenting in the restriction of divergences. The same also assists in the responsibilities allocation, that in turn implements control methods in the department.
One of the crucial business management tools which is pertinent in the method of management accounting is that of the variance evaluation. With the help of this analysis, the reasons of deviations between the real and the anticipated values can be understood and the efficiency can also be increased. This in turn helps in controlling the expenditures associated with the project with the help of robust supervision of planned vis-à-vis real expenses. The method also helps in analyzing the issues, patterns and opportunities in the long term as well as the short term accomplishments of the company’s ventures and helps in understanding the cost and revenue variances also (McLaren, Appleyard & Mitchell, 2016).
In various aspects like that of the performance assessment, organizational pattern, department of human resources and others, there are immense significances of the quantitative examinations. This helps in facilitating open communications with regards to expectations of the feedback and department-wise performances. The performance of the human resource sector directly impacts on the end result of the financial health of any enterprise and the assessment of variances creates relationships between the inter-department dynamics. This also contributes in response evaluation of the employees in the aspects, which in turn achieves the required feedback. The managers of different departments use this method in order to facilitate the introduction of mechanisms which are efficient in cost managements as the intention of the managers is to maximize the benefits (Harris & McCaffer, 2013).
Budgeted statement for income
Budgeted statement for retained earnings
Working schedule for cost of goods sold
A company needs to construct its budget to ensure that it is inserted into the government’s policies and regulatory frameworks. During the budget construction, the cost efficient variants are to be mandatorily chosen. In the budget formulation process, four important proportions are found to be associated. In the budget, there is integration of the resource assignment in a strategic framework and the expenses in the budget are aggregately managed. For revenue estimations enhancements, the political demand means are to be applied appropriately which in turn can aid in strengthening the policy and expenses connections. Certain political aspects need to be taken into account at the time of the execution of the budget. The core venture budget preparation is found to be linked and depending upon the improved political assistance, which the company enjoys. As financial and political aspects are linked to each other, therefore, the enterprises are answerable in both the aspects. In preparing, the budget there may occur several flaws, which are mostly associated to the political, and government related factors and therefore the budget preparation is rightly taken to be a political process. The government constructs the budget evaluating procedures taking into account the monetary as well as the fiscal policies.
The proposal of any budget is nothing but a communalist type of a program, which can be seen from the above figure. In the construction of the budget of any kind of enterprise, the various sectors and departments of the organizations are involved. Therefore, in this context, there may remain the possibilities that there can occur several changes in the figures of the budget, which have been previously anticipated, and the changes can be mostly for the personal interests of the various different departments individually. This in turn, therefore, may not serve the purpose of the organization collectively. The most important factors which is related to the construction of the budget of any company are therefore robustly associated with that of the power of decision-making of the enterprise itself (Collier, 2015).
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.
Harris, F., & McCaffer, R. (2013). Modern construction management. John Wiley & Sons.
McLaren, J., Appleyard, T., & Mitchell, F. (2016). The rise and fall of management accounting systems: A case study investigation of EVA™. The British Accounting Review, 48(3), 341-358.
Ward, K. (2012). Strategic management accounting. Routledge.
Warren, C. S., Reeve, J. M., & Duchac, J. (2013). Financial & managerial accounting. Cengage Learning.