Strategic management accounting Assignment Example | Topics and Well Written Essays - 3000 words

Strategic management accounting - Assignment Example Furthermore, to increase the range of profitability, to ensure the resources, which are available, are used in the most required and desired way for the purpose of attaining and maintaining the short term and long term goals of the organisation, budgets are mostly used with this intention as well. After this part, a more critical discussion will be done on the traditional concept of standard costing. The uses and purposes of standard costing would be highlighted and discussed in the most appropriate way. The main purpose of standard costing is to provide a planned unit cost of a product. On the other hand, the main uses of standard costing are to provide a standard to measure the performance measurement, stock valuation, control and the establishment of selling price of different products. Standard cost is self-assumed and planned cost given to a product for the purpose of comparing it with the actual cost and cost price of the product. This actual and planned comparison of the cost and price is greatly required and used by the management. There are different uses offered and given by this comparison. The original and true efficiency and effectiveness of the organisations can easily be compared with the given set of the standard cost. This comparison would clearly highlight whether the required level of organisational short term and long term goals and objectives are achieved or the management has failed to achieve the required level of organisational objectives in the most required way and most required manner. There are different types of budgets: Zero based budgeting and activity based budgeting. Zero based budgeting is totally a new approach towards the understanding of the concept of budgeting. Traditionally, budgeting is made by adding some additional percentage to the previous year budgeting and implementing it in this added budget in the current year. But, this is not done as far as zero based budgeting is concerned. Here, the activity of budgeting gets started from scratch. Additionally, the budget maker is required to give and produce a statement authenticating the true and valid reasons and causes to justify any additions or to justify any reductions in the zero based budgeting. Also, it is very much expected of the budget manager to prioritise the entire set of activities by also providing and giving a reasonable explanation for prioritising any set of activities. On the other hand, activity based budgeting provides an additional source that can be used for the purpose of doing the activity of budgeting. In this budgeting, first certain targets are determined and highlighted. After determining the certain targets, then activities are highlighted and determined for the purpose of attaining and meeting those targets with the help of these activities. Afterwards, only those available and required resources are used that help and ensure the attainment of these targets. The activity based budgeting facilitates the identification of such opportunities that help to reduce cost and eliminate those factors that are wasteful. Activity based budgeting highlights and helps management to constantly pursue the areas that have improvements. Budget is defined as ‘a quantitative statement for a defined period of time,