Preliminary Analysis of Cost and Budgetary Information Systems Essay - 1

Preliminary Analysis of Cost and Budgetary Information Systems - Essay Example More than often, organizations ensure that an analysis of varied product cost and budgetary control methodologies and systems are carried out. This is because, the introduction of a suitable cost and budgetary information systems allows for effective planning for the future, controlling of present activities, and an evaluation of the past performance within an organization. Considerably, the choice of a suitable cost and budgetary information systems allows for planned action, coordination, and optimum use of resources as it defines responsibilities. †¢ Product costs include the cost estimates that are based on material, labor and machine process that influence decisions made by management. It is either based on activity-based costing or traditional based costing (Kaplan & Anderson, 2007). †¢ Activity-based costing is adopted from the conventional costing system and it assumes that activities act as fundamental cost objects because cause costs and cost objects are known to create demand for activities. †¢ Traditional based costing utilizes costs based on a single, volume-based cost driver, it assumes that product causes cost because; it assigns the overhead costs to products based on relative usage of direct labor. †¢ It is recommendable for the management of Worplestrop Partnership to adopt the activity-based costing control method because it ensures efficient maximization of profits as it allocates costs to key cost drives (Kaplan & Anderson, 2007). †¢ It is also decisive for the management to prepare budgetary control tools ranging from long-term to short-term, all functional budget estimates and both functional and flexible budget to control costs used in products (Weygandt, Kimmel & Kieso, 2009). More than often, the levels of decision-making are classified as operational, tactical and strategic levels. Nonetheless, decisions made at each level play an important role in product costing and budgetary control, as relevant information is transmitted in order to make an organization successful.