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The budgeting process is sequential in structure, and it comprises a number of budgets that are loosely classified according to an organization’s processes and procedures for earning and spending money. The recommended budgeting type for ABC Temp Devices is the sales budget. Sales budgets help managers identify the number of units that an organization produces (Bybordi et al., 2019). Basically, the sales budget is very important because it initiates a series of events that often lead to the growth and development of other budgets.
The sales budget type was recommended for ABC because a sales budget is a detailed schedule showing the expected sales for a particular period. Planning for this period is often described in terms of total sales volume and selling price for each category of goods or services (Bybordi et al., 2019). Since ABC has faced skyrocketed demand on the market, it is important to forecast and plan sales for the near future. By using a sales budget, the production budget could be formed, which will navigate a company on the required scales of production.
CEO of ABC Temp Devices should emphasize several financial benchmarks. First, to contribute to a project’s success, the accuracy with which improvement guidelines are selected should be highlighted. Next, a set of criteria and measurements that define a model management accounting system should be taken into account. Financial benchmarks should include both quantitative and qualitative measurements. Qualitative measures are emphasized when it comes to the core issue of management accounting, that is, improving the quality of management reports. Benchmarking is an ongoing activity, so it is desirable to monitor the operation of the company’s management accounting system.
The recommended costing system is the absorption costing system, which is an approach of allocating overhead based on a rate of pre-determined absorption rate. The pre-determined rate could be found by dividing the planned overhead by the activity level (Bybordi et al., 2019). Cost allocation criteria are subjective and difficult to justify; however, the full cost accounting system calculates the total cost of the product. The absorption costing system can be used for long-term product pricing. The costing system is recommended for ABC because it has to plan the sales, purchase, and production rates not only for the current period of increased demand but also to consider the possible outcomes and consequences of decisions on the future of the company’s costs.
Reference
Bybordi, N., Ousama, A. A., & Shreim, O. S. (2019). Analysis of the Budgeting System: A Case Study of a Manufacturing Company.Asian Journal of Accounting Perspectives, 12(2), 82-100. Web.
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