Oriented Normative Model Cost A Accounting â€Myassignmenthelp.Com

Question: Discuss About The Oriented Normative Model Cost A Accounting? Answer: Introducation Flexible budgets adjust in accordance with the volume of activity. It is preferred than static budget as it remains to one amount even though the change in volume of activity. In accordance with the study of Tukhvatullin, Pratchenko (2014 ), budgets are prepared at the end of the period so that they can be compared with actual performance and the objective behind the same is performance can be improved in accordance with variance derived. For example, in case cost of electricity and supplies to a manufacturing company is ascertained $10 per machine hour. Further, an approximate has been estimated that each month 4000- 7000 hours will be operated by the labourers. Now, in case the actual rate determined in less than $10 than it will be in favour which means that efficiency has increased and in case rate is more than $10 than same requires being improved. Budgets which are necessarily required to be prepared before cash budget are: Expense Budget: Expenses budget is required to be prepared as it comprises details regarding the operating expenses which have been incurred during the year. The amount which has been paid in cash will be reduced as cash outflow relating to operating expenses and will provide the amount remaining for financing and capital expenditure (Otley, 2015). Sales Budget: Sales Budget provides detail relating to sales occurred during the period. The same details are provided in cash inflow which is added to existing cash balance. The total amount specifies the amount available for operations and other expenditure. Capital Expenditure Budget: The budget provides detail relating to capital expenses incurred during the year. The same is specified reduced from net cash available after reducing operating expenses during the year. Operating cycle specifies the time required for producing as well as selling the product. On the other hand, cash cycle specifies the manner in which company is managing cash. A long cash cycle represents the unhealthy condition of the firm and vice versa short cash cycle represents the efficient performance of the firm. Working capital ratio and Inventory turnover ratio are the two main variants of this cycle as the first specifies whether working capital obligations are accomplished or not and the other specifies the no. of times organizations sell their stock within a specified period. Another essential variant of this cycle is collection ratio which represents regarding the efficiency of the organization in recovering their money from creditors. No, I do not agree with the statement that accounting is not necessary for government organization as it is for the private organization as it is not having worries regarding profit. The fact that no economic activity can attain victory without accounting specifies the reason behind same. Although government sector organizations are not having main aim of earning profit, they are required to record transactions in an appropriate manner and required to ascertain whether the money is applied in appropriate manner. In accordance with Libby and et al. (2015), the same cannot be accomplished without the assistance of accounting. Thus, accounting is a necessary requirement for both governments as well as private sector. The foremost objective of costing system is ascertainment of the selling price of a product and makes efforts to reduce the cost of the product. Determinations of cost assist manager in ascertaining the amount that is required to be charged from buyers. Further costing system assesses the manner in which resources is applied by each department so that if any case of misuse of available resources exists that same can be improved. It plays major role in developing financial system as the details provided by costing system in eventually applied by accountants Manufacturing overhead allocation rate = Total manufacturing overhead / total machine hours = $ 598080/7000 = $85.44 / machine hour. Administrative overhead allocation rate = Total administrative overhead / total direct labour hours =$695520 / 14000 = $85.44 / machine hour Price = (Total material + Overhead + Labour)/100*140 = ($19000+$66060+$34176) / 100*140 = $166930 The main reason for which allocation of overhead while quoting jobs or determining price is that expenses work as a base for determination of price and other activities such as purchase of raw material is not provided in direct material and direct labour thus the same is reflected in allocation of overhead (Abernethy, Bouwens and Lent, 2013). The main reason behind the application of predetermined overhead allocation overhead rather than actual rate is that actual rates are not available every time. Moreover, predetermined rates are more reasonable as actual rates vary in accordance with dependable external circumstances (DRURY, 2013). References Abernethy, M.A., Bouwens, J. and Lent, L. 2013. The role of performance measures in the intertemporal decisions of business unit managers. Contemporary accounting research,30(3), Pp.925-961. DRURY, C. M. 2013.Management and cost accounting. Springer. Libby, R., Rennekamp, K.M. and Seybert, N., 2015. Regulation and the interdependent roles of managers, auditors, and directors in earnings management and accounting choice.Accounting, Organizations and Society,47. Pp.25-42. Otley, D., 2015. Management Control.Critical Perspectives in Management Control. P.27. Tukhvatullin, R. S., Pratchenko, O. V. 2014. Budgeting system in construction organizations in conditions of a process-oriented normative model of cost accounting. Mediterranean Journal of Social Sciences, 5(24), 56.