Budgeting and Production Cost
Money is a scarce commodity, and every organization aims at proper utilization of the available resources. Budgeting acts as a basis for evaluating the appropriation of funds according to the needs of each department or stage of production. The nature of ABC Temp Devices’ business operation requires the evaluation of the rate of demand against the cost of production and the expected market trend. An operational budget is efficient in this case to determine the cost of labor deployable and the amount of raw materials necessary forecasted based on current production expenses and margins (Armitage, Lane, & Webb, 2020). This is a top-down approach to budgeting, such that the input determines the targeted output. The evaluation of budget performance is conducted on a weekly, biweekly, quarterly, or yearly. All the data between the periods can provide an analysis of the company’s growing sales. However, for comprehensive and effective management and future sales prediction, a quarterly evaluation will provide substantial data for effective analysis.
In most, if not all, industries, some form of competition exists. Competition is healthy for keeping a corporation innovative and thriving to gain a share in the market. A corporation always attempts to stay ahead of the competition by identifying its core values that the competing firms do not possess. Considering ABC’s nature of business operations, the most appropriate benchmark is the quality of the product. A false temperature reading creates an interpretation inconsistent with the actual status quo. This is a major error that is set to ruin the corporation’s reputation. Therefore, a comparison with 123 Engineering Laboratories, a company involved in the production of similar goods, is a substantial basis for comparing the quality of goods produced. The comparison also serves as a method of quality control and learning how to improve the products while minimizing cost.
In the endeavor of production, a company must minimize the cost of production while increasing the profit margin. The process involves the assessment of fixed and variable costs incurred as the cost of production of goods and services. The cost system is beneficial to the top management to adjust their production expenses as required to increase dividends to the shareholders and provide quality products to the market without compromising quality (Ertek, Sevinc, Ulus, Kose, & Sahin, 2014). The process of producing temperature monitors is a procedure that can be fully automated with a few employees to ensure that production is continuous as desired. The operational cost that varies can be minimized to improve the efficiency of production. It may be daunting to alter the fixed cost of production, but the corporation can incorporate an environmentally friendly production mechanism. This is perceived as a positive collective social responsibility in production. As a result, the cost of production can be reduced by using renewable energy sources or obtaining tax incentives for thoughtful business practices.
A budget should cover the most striking procedures in the production of goods and creating value. Taking an observation of the current business operations is the best metric to evaluate the ability of a business to perpetuate and meet its short-term obligations. An operational budget will provide all the information necessary to determine the business performance on current production. Quality goods are usually associated with a high cost of production. This may not always be true in the case of ABC production. The use of renewable sources in the manufacture of temperature monitors will maintain quality and reduce the cost of production. Tracking the necessary costs in production and calculating those that can be substituted or combined with other production mechanisms potentially reduces operational costs, benefiting the investors.
References
Armitage, H. M., Lane, D., & Webb, A. (2020). Budget Development and Use in Small‐and Medium‐Sized Enterprises: A Field Investigation. Accounting Perspectives, 205-240.
Ertek, G., Sevinc, M., Ulus, F., Kose , O., & Sahin, G. (2014). A New Framework for Industrial Benchmarking. Handbook of Research on Strategic Performance Management and Measurement Using Data Envelopment Analysis, 510-526.
ORDER A PLAGIARISM-FREE PAPER HERE
We’ll write everything from scratch
Question 
Budgeting and Production Cost
For this assignment, you will review the following scenario and prepare a written summary of your recommendations.
ABC Temp Devices is a domestic and global producer of temperature monitors. Based upon the influx of domestic and global companies wanting to purchase their temperature monitors, demand has recently skyrocketed. The importance of the managerial accounting department has been brought to the forefront, as they are being asked to provide preliminary information on new business developments. ABC’s major competitor is 123 Engineering Laboratories, located in Pullman, Washington.
Imagine that you are the head of ABC’s managerial accounting department. The CEO has asked you to recommend an operating budget and financial benchmarks compared to the leading competitor in the market, as well as a cost system appropriate for the product.
Prepare a 2–3 page summary of your recommendations. Be sure to include suitable sources to justify your decisions.
Recommend a budget type.
Recommend at least one financial benchmark you think the CEO of ABC should consider. Provide a rationale for your response.
Recommend a cost system appropriate for the product.
Provide an explanation of the budgeting rationale you proposed and why you believe your suggestions will put the company in a better position than the leading competitors. Remember to reference the financial benchmark, budget type, and cost system in your explanation.
Use one source to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source slide at least one time within your assignment. For help with research, writing, and citation, access the library or review library guides.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course.
The specific course learning outcome associated with this assignment is:
Recommend a budget type, benchmarks, and a cost system implementation plan for an organization.