AB costing

1. Purpose of capital budgeting
Capital budgeting is used by companies to evaluate major projects and investments, such as
new plants or equipment. The process involves analyzing a project's cash inflows and outflows to
determine whether the expected return meets a set benchmark.
Steps to follow while making decision about major purchase:
There are four steps while making decision about the major purchase:
1. Problem recognition
The first step of the consumer decision-making process is recognizing the need for a service
or product. Need recognition, whether prompted internally or externally, results in the same
response: a want. Once consumers recognize a want, they need to gather information to
understand how they can fulfill that want, which leads to step 2.
2. Information search
When researching their options, consumers again rely on internal and external factors, as
well as past interactions with a product or brand, both positive and negative. In the
information stage, they may browse through options at a physical location or consult online
resources, such as Google or customer reviews.
3. Alternative evaluation
At this point in the consumer decision-making process, prospective buyers have developed
criteria for what they want in a product. Now they weigh their prospective choices against
comparable alternatives. Alternatives may present themselves in the form of lower prices,
additional product benefits, product availability, or something as personal as color or style
options.
4. Purchase decision
This is the moment the consumer has been waiting for: the actual purchase. Once they have
gathered all the facts, including feedback from previous customers, consumers should arrive
at a logical conclusion on the product or service to purchase.

2. Benefits to consider while making major purchase
Quality and price are the two major benefits a customer should consider while purchasing
something. A customer always purchases a product which is well-known for its quality.
Quality and prices are interlinked as well. If a company is offering a desired quality to the
customer, he will be willing to pay higher price as well.
Benefits of purchasing new delivery truck
The new distribution truck that will be utilized in the company is a long-term resource. Long-
term property changes are indicated in the investment activities part of the cash flow
statement. The acquisition of a delivery truck will result in a reduction in cash from
investment activities. Depreciation is utilized to share the money of the truck over its
estimated useful life.
Impact of delivery service on fixed and variable cost:
Delivery services will not affect the fixed cost however; it will have a direct impact on
variable cost. These are variable cost ties to the sales and production volume. No, the cost of
truck will not be relevant for the setting delivery charges. To make changes in deliver
charges, one should consider the number of sales and purchase.
How activity based capital budget differs from conventional capital budget:
Activity-based budgeting (ABB) is a planning approach that fully analyses activities to
anticipate expenses. When developing a strategy, ABB doesn't really consider previous costs.
While conventional planning strategies alter past costs listed to swelling or varieties in
business movement, activity based planning is an undeniably more complete way to deal
with cost investigation. ABB separates expenses more dynamically than a conventional
budgeting, which just raises or decreases anticipated expenses relying upon past qualities.
ABB lets you to see the real costs associated among each work action. It additionally
supports much more separating these uses to find what might be influencing an organization's
monetary presentation.
Impact of activity based costing:

3. The main goal of using the activity-based costing method is to increase the profitability and
overall performance of an organization. The ABC method does this by identifying accurate
overhead costs and cost drivers leading to more streamlined business processes. When all
direct and indirect costs are allocated to a product, managers begin to get an idea of which
business processes are performing well and which are inefficient. They can then streamline
these processes by allocating more resources to profitable activities and eliminating practices
that are costly and wasteful. As a result of the ABC process, companies are better able to
manage manufacturing performance and improve the quality of products and services.
Key performance indicators:
Learning and growth of England's cricket team will be analyzed through their training
investigation and how much resources they have including cricket kits etc. Information
should be gathered in the most effective way. We can gather information by interviewing the
cricketers and learn about their performances.
Business process will be evaluated by gaining information about the products and how well
they are manufactured. The performance of cricket team directly dependent of the products
they are using.
Customer perspective can be collected by the satisfaction of players with the quality and
availability of the product.
Financial data includes the expenditures and incomes are used to know about the financial
performance. This may include the salaries of players, expenses of resources and training