Critical requirements for accurate capital budgeting
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1. How full costing is applied and used by managers to make good business decisions?
2. How are standards determined? Also, how are they used to manage resources?
3. What benefits could be realized by implementing decentralized budgeting and defend with examples?
4. What are two critical requirements for accurate capital budgeting estimation? Also, give an example of applying one capital budgeting tool?
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1.How full costing is applied and used by managers to make good business decisions?
Full cost accounting (FCA) generally "refers to the process of collecting and presenting information, about environmental, social, and economic costs and benefits/advantages (collectively known as the "triple bottom line") - for each proposed alternative when a decision is necessary." 1
Usefulness of full costing
1) External reporting should be done under absorption costing method as it is as per accounting standards.
2) It helps in understanding the performance of the organization.
3) It assists in calculating the full cost of the product.
4) It helps in waste management.
5) It considers fixed costs into the production.
2. How are standards determined? Also, how are they used to manage resources?
Standard "is a predetermined measurable quantity set in defined conditions."4 "Standards are determined by analyzing the process and doing time and motion studies. Standard cost is a scientifically predetermined cost, which is arrived at assuming a particular level of efficiency
in utilization of material, labour, and ...
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