Ha2011 Managerial Accounting For Orbital Assessment Answers
Questions:
b) A description of the ABB and its features
c) In what ways ABB is different from traditional budgeting systems
d) A discussion on whether the ABB is suitable to your firm’s client
Answer:
Overview of Orbital Corporation Limited
The Orbital Corporation Limited was hitherto known as Orbital Engine Corporation Limited when it was founded. It changed its name in October in the year 2014 to Orbital Corporation Limited. The company was established in the year 1972 and is being based in Balcatta in Australia. Although, in recent years the business as expanded it based to other continents in the globe, such continents are Africa, Asia and Europe (Charest & Picky 2016, p.143).
On the other hand, Orbital Corporation can also be described as an industrial technology limited company has stated by (Burton 2017, pp. 12-15). It engages in several activities including examination and research, enterprise, manufacturing and development. The company also take part in manufacturing of technological products of unmanned inflight vehicles, and in productivity and safety. It as well provides manufacturing services in consumers industries in different parts of the globe such as Europe, Africa and Australia (El-Masry 2017, pp.347-389). The firm develops and deliveries engines, propulsion systems, fuel components systems and propulsion for the original components equipment developers and the in the automobiles after marketing services. Similarly, the company deals in the manufacturing of LPG, which is known as liquid propane gas system for various companies such as Ford Eco-LPi Falcon, where it handles a large range of passenger vehicles and utilities (Creghan 2013, pp. 214-237). Orbital Corporation Limited Company also trade in importation, assembling and in distribution of several LPG structures for the aftermarket LPG installers and automatic factories.
Correspondingly, OCL offers consultation services including embedded, engine managing, controlling systems, automobile and engine trail or testing, development of products and certification of the same product it has develop (Fellahin & Gasman 2014, p. 46). It has also extended its consulting services to monitoring and acquisition of data, and in prompt prototyping clarifications. In designing the company is mandated to develop CAD and CAM, and statistical analyses of solutions for power-train and in engineering solicitations. Moreover, the firm is licenses the following systems, FlexDI which is a marine technology, and scooter or motorcycle market systems (Fellahin & Gasman 2014, p. 46). The company can be describe has the one that particularly operates in the aviation, automobiles, naval, motorbike and unmanned flying machine system engine marketing.
Description of ABB and its Features
According to Marcy and Demotte (2014, pp. 102-472) is that ABB is a system which carry out automatic recording, research and analysing of the activities that result to cost for the organization. Marcy and Demotte (2014, pp. 412-452) added that these systems are not merely of the adjustments of the former budgets of accounts because of inflation or because of business expansion but because of the proficiency in the organization operations and developments needed in budgeting based on various activities of the same firm. On the other hand, Creghan (2013, pp. 214-237) highlighted that ABB or Activity Based Budgeting is termed as a planning system in which costs are connected with the activities and expenditures budgeted for are being complied has based on the expected level of activities.
The concept of ABB is more different from traditional budgeting where costs existing level were adjusted to the inflation and main revenues costs for the purpose of deriving the budget annual or yearly. The budgeting system permits a high degree of refinement when it comes to cost planning by focusing on the attention of the volume and kind of activities opening in within the business or organization (Fellahin & Gasman 2014, p. 46). The result of using ABB system is seen in the management planning because it play main role in reduction of level the activities required to engender revenue, which in return improves profits generation to the firm as explained by (Huang 2017, pp.21-40). By using, the system the managers will be enforced to have a more detailed knowledge of the organization procedures if they need to improve the cost schemes of the firm. The activity based budgeting is likely to be used by new organization which do not have historical information of their budget that they can rely on. It is also useful to firms that are undergoing materialistic changes. For examples, these changes can be new subsidiaries, significant clients, change in the location of the business, or change in the location of the business (Huang 2017, pp.21-40).
The activity based budgeting procedures can be broken down into a three-phase process. The three-step will be help an organization to identify pertinent activities that leads to cost driving. Cost driving or drivers are the things that responsible for the cost being incurred by the company in its revenue and expenses (Massa & Afuah 2017, pp.71-104). The three-phase procedure of the ABB include; the determining of the number of the units connected to every activity. The number is normally the baseline of the cost calculations. Second phase, is delineating the cost of each unit of the activity and then multiplying the result by the level of the activity. The third phase, is the giving various instance of the ABB. Example of last step can be, when a company expects to receive 40,000 orders of sales in the future and cost to process one order is $ 1. Thus, the ABB for the expenditures connecting to processing of sales orders for the next year will be $ 40,000 (Massa & Afuah 2017, pp.71-104).
Features of Activity-Based Budgeting
Some of the features of activity based budgeting include the following as discussed by (Maxcy & Demette 2014, pp.102-372); (Robbersmz 201, pp.67-78).
Permits control of the budgeting procedures
The activity-based budgeting allow organizations to be more concerning and regulates the budgeting process within the firm. In this system the planning of revenues and expenses take place at the precise glassy to provide useful information and details regarding budget projections (Saebi 2012, p.201). In addition, it allows the administrative organ of the company to have more control of the budgeting processes as well as in alignment of the budget with all company objectives.
Expensive nature of the ABB
The activity-based budgeting is considered to be more expensive than the traditional budgeting systems. It both requires a large amount of funds and time to be developed. For instance, if the management of a company need to develop ABB they will need more information and time for its establishment (Maxcy & Demette 2014, pp.102-372). They also requisite additional expectations and managerial insight that results into potential of various opportunities for the budgeting erroneousness. In terms of maintenance, the ABB requires analysis and ongoing looking after of the budget variances that needs more resources compared to other budgeting techniques and methods.
Provides useful information
The activity based budgeting provides significant information in the total quality management or TQM environment (Saebi 2012, pp.201-202). These useful data is enables the managerial of the organization to relate the cost of any activity with level of the service being provided. From this relationship, it will be easy from the company to make wise decision concerning several activities.
It is evaluative
The activity based budgeting is evaluative because it evaluates every cost driver in the company. It takes into regard all phases involved in any business activity. With this evaluate characteristic, ABB eliminates irrelevant activities and only keep those activities which are necessary for the business prosperity
Economical edge of the business
Activity based budgeting is a system that eliminates all sorts of irrelevant and unnecessary activities that help the company to lower its costs (Robbersmz 201, pp.67-78). The lowered costs results into the production of products and services of lowest prices compared to those of competitors. Hence, helping the company to gain a competitive or economical edge.
Ways in ABB is different from Traditional Budgeting System
Srinivasan and Dobbs (2017, p.220) suggested various ways in which activity based budgeting differ from the traditional budgeting systems and they are discussed below in details.
Activity based budgeting insights permits a better production procedures and in making of decision as well as better allocation of resources to support various priorities (Williams & Rycroft-Malone 2018, p.45). By allowing balancing of operational needs the ABB tries to avoid summation of the financial impacts on the operational infeasible related to unnecessary planning. Its means that the traditional budgeting system was not avoiding the calculation or summation of negative financial operations, thus resulting to unnecessary plans in the budget.
In ABB low-level managers and workers can discuss the operational conditions and terms while in traditional budgeting system lower-level managers and workers can discuss the financial conditions and terms. It provides a vividly and clear way of how the company resources and activities are connected it help managers and workers to understand as well as to communicate the information of the budget among themselves. This help workers to understand what can be done best to improve their jobs and how they can improve their job performance as well.
It enhances traceability and limpidity to allow balancing in capacity. ABB constitutes of a complex and sophisticated operating model that enable avail various set of tools for the balancing of the budget capacity compared to traditional budgeting system which lack cultured and complex operating prototypical.
Activity based budgeting is different with the traditional budgeting system or TBS because it integrates budgets with other management initiatives. It attempts let out the vertical orientation of traditional budgeting system, by endeavoring of horizontal orientation which is able to cut all over the organizations boundaries. Hence, permitting the integration of the budget with initiatives such as KPI.
Discuss on whether ABB is suitable for Orbital Corporation Limited
The activity based budgeting is suitable for the Orbital Corporation Limited as explained in the following points.
First, ABB is suitable to the OCL because the cost of the budgeting is can be divided into two potion. The division of the cost can either be in fixed or variable cost. By dividing costs into two division ABB will provides Orbital Corporation with quality data of how to design a suitable and flexible cost system when it comes in its consulting services and manufacturing apprehensions.
Secondly, the suitability of ABB to the client firm which is OCL is in the properly distinction of the made on the cost patterns and behaviors. Because activity based budgeting system indicates the cost patterns and how these cost behaves over a given time the organization will find it more suitable in its varies costs activities.
Third point concerning the suitability of the ABB to Orbital Corporation Limited is the relationship between behaviour patterns and volume, diversity relationships, and events and time associations (Yudhoatmojo, Sandhya & Yohans 2014, pp. 811-866). The firm will find it easy to budget by considering all the associations related to the ABB. For instance, by considering time and event associations the organization will determine and establish which event to budget on more compared to other events as well as the time of the events.
Appropriateness of cost driver can be identified when using the ABB. Thus, it appropriate and suitable for Orbital Corporation Limited has it will enable the company to identify and overhead the traces of product being produce by the organization. The appropriate cost driver will the firm determine which cost to incur and which one to be in gored at what time during budgeting procedures.
According to Alex and Miller (2017, p.687) description is that activity based budgeting or ABB can be suitable for a company has it comprises cost drivers. Therefore, the Orbital Corporation Limited finds ABB seemly because of it constitutes of cost drivers which turns as dictates of the cost behaviour patterns within the organization departmental.
Finally, the activity based budgeting is suitable for OCL because it helps the organization to develop a based costing structures within the organization formulation (Al-Salty, Gharaibeh & Elias 2016, pp.610-813). Developing of activity based costing in condition with ABB has three phases according to (Bernice, Berezina & Cobanoglu 2015, p. 988). The first phase is the identification of the functional sections with the departments such as production and distribution. Second phase, is the separation of functional activities. The third phases, identification of the supporting activities and aspects that impacts main activities. Consequently, ABC will help the organization to trace its cost from resources to company activities and then to particular products.
Reference List
Alex, M. & Miller, L., (2017). ABB system operation and implementation in large organizations. Journal of Creativity Information Administration, 31(4), p.687.
Al-Salty, Z., Gharaibeh, X. & Elias, T., (2016). The relationship between activities based budgeting and traditional budgeting system: A theoretical perspectives of management. International Journal of Business Management and Financial Research, 47(4), pp.610-813.
Bernice, H., Berezina, K. & Cobanoglu, F., (2015). Suitability of activity based budgeting to large scale firms in Europe. International Journal of Modern Economical Management, pp.988-997.
Burton, C., (2017). Managerial Accounting Informants. In accounting practice in European financial management (pp. 12-15). Routledge.
Charest, T., & Picky, M., (2016). Description of the first Australian Company- Orbital Corporation Limited, p.143. [Retrieved On 18th September, 2018 Online]
Creghan, S. H. (2013). Main Feature of Activity Based Budgeting. Journal of Management Trends. (2) 2. (pp. 214-237). Concordia University Press.
El-Masry, A., (2017). Why do consumers companies trust ABB? Journal of Managerial Accounting 55(4), pp.347-389.
Fellahin, S., & Gasman, O., (2014). Adapting and striving with numerous operational models in BUSINESS. Innovation Management Journal, p. 46
Huang, M., (2017).Evaluation of ABB and ZBB suitability to organizations. Journal of Marketing and Economic Research, 81(3), pp.21-40.
Massa, L., & Afuah, A., (2017). A critical assessment and evaluation of various features ABB. Academy of Management Accountings, 111(2), pp.71-104.
Maxcy, S., & Demette, E., (2014). Fundamentals of accounting in higher education and business strategies. Page Press, pp.102-372.
Robbersmz, F.G., (2017). A review of diagnostics and prognostics of low-speed machinery towards wind turbine farm-level health management. Managerial Accounting Reviews Jouranal, 55, pp.67-78.
Saebi, S., (2012). Business and operational model in ABB and ZBB: the features of budgeting systems. Journal of Management Accounting, pp.201-202.
Srinivasan, R.S. & Dobbs, C., (2017).What is activity based budgeting? Smart Cities Businesses: Basics, Philosophies, and Solicitations in Management, pp.219-221.
Williams, L., & Rycroft-Malone, D., (2018). Exploring the use of traditional budgeting system and activity based budgeting: Evaluation Aspect of Modern Accounting, pp.41-78
Yudhoatmojo, M.B., Sandhya, O.I. & Yohans, A.Y.., (2014) Examples of activity based budgeting relationships and association: In Informatics and Computing (ICIC) pp. 811-866. IEEE.
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