Module 4 PracticeReview ProblemsApplicationsModule 4 ReviewP.docx

Module 4: Practice/Review Problems/Applications
Module 4 Review/Practice Problems
In addition to the review problems in the assigned reading
material, review the following problems to help you understand
the application of the concepts covered in Module 4. To
maximize the benefit of your practice, solve the problems with
as much details as you can provide. Check your answer after
you complete all the problems. You are encouraged to complete
this review before you start the related quiz.
Cost-Volume-Profit Analysis
Review 1: Effect of Changing Variables on Operating Profit
Hamiel Corporation produces and sells a single product. Data
concerning that product appear
below:
Per Unit
Percent of Sales
Selling price......................
$240
100%
Variable expenses..............
168
70%
Contribution margin..........
$72

30%
Fixed expenses are $301,000 per month. The company
is currently selling 5,000 units per month.
Required:
The marketing manager would like to introduce sales
commissions as an incentive for the sales staff. The marketing
manager has proposed a commission of $16 per unit. In
exchange, the sales staff would accept an overall decrease in
their salaries of $68,000 per month. The marketing manager
predicts that introducing this sales incentive would increase
monthly sales by 200 units. What should be the overall effect on
the company's monthly net operating income of this change?
Show your work!
Review 2: Breakeven, Margin of Safety, and Operating Profit.
Belli-Pitt, Inc, produces a single product. The results of the
company's operations for a typical
month are summarized in contribution format as follows:
Sales................................
$540,000
Variable expenses...........
360,000
Contribution margin.......
180,000
Fixed expenses................

120,000
Net operating income......
$ 60,000
The company produced and sold 120,000 kilograms of
product during the month. There were no beginning or ending
inventories.
Required:
a. Given the present situation, compute
1. The break-even sales in kilograms.
2. The break-even sales in dollars.
3. The sales in kilograms that would be required to produce
net operating income of $90,000.
4. The margin of safety in dollars.
b. An important part of processing is performed by a machine
that is currently being leased for $20,000 per month. Belli-Pitt
has been offered an arrangement whereby it would pay $0.10
royalty per kilogram processed by the machine rather than the
monthly lease.
1. Should the company choose the lease or the royalty plan?
2. Under the royalty plan compute break-even point in
kilograms.
3. Under the royalty plan compute break-even point in
dollars.
4. Under the royalty plan determine the sales in kilograms
that would be required to produce net operating income of
$90,000.
Review 3: Breakeven, Margin of Safety, Target Profit, and

Degree of Operating Leverage
The following is Arkadia Corporation's contribution format
income statement for last month:
Sales..........................................
$1,200,000
Variable expenses.....................
800,000
Contribution margin.................
400,000
Fixed expenses..........................
300,000
Net operating income................
$ 100,000
The company has no beginning or ending inventories
and produced and sold 20,000 units during the month.
Required:
a. What is the company's contribution margin ratio?
b. What is the company's break-even in units?
c. If sales increase by 100 units, by how much should net
operating income increase?
d. How many units would the company have to sell to attain
target profits of $125,000?
e. What is the company's margin of safety in dollars?
f. What is the company's degree of operating leverage?
Review 4: How Does Degree of Operating Leverage Affect

Operating Profit.
Lubke Corporation's contribution format income statement for
the most recent month follows:
Sales................................
$506,000
Variable expenses...........
236,500
269,500
Fixed expenses................
241,700
Net operating income......
$ 27,800
Required:
a. Compute the degree of operating leverage to two decimal
places.
b. Using the degree of operating leverage, estimate the
percentage change in net operating income that should result
from a 3% increase in sales.
Relevant Cost for Decisions

Review 5: Make or Buy Decision
Recher Corporation uses part Q89 in one of its products. The
company's Accounting Department
reports the following costs of producing the 8,000 units of the
part that are needed every year.
Per Unit
Direct materials..........................
$8.10
Direct labor................................
$4.40
Variable overhead......................
$8.60
Supervisor’s salary.....................
$3.20
Depreciation of special equipment...............................
$2.60
Allocated general overhead.......
$1.30
An outside supplier has offered to make the part and
sell it to the company for $27.60 each. If this offer is accepted,
the supervisor's salary and all of the variable costs, including
direct labor, can be avoided. The special equipment used to
make the part was purchased many years ago and has no salvage
value or other use. The allocated general overhead represents
fixed costs of the entire company. If the outside supplier's offer
were accepted, only $3,000 of these allocated general overhead

costs would be avoided. In addition, the space used to produce
part Q89 could be used to make more of one of the company's
other products, generating an additional segment margin of
$16,000 per year for that product.
Required:
a. Prepare a report that shows the effect on the company's
total net operating income of buying part Q89 from the supplier
rather than continuing to make it inside the company.
b. Which alternative should the company choose?
Review 6: Special Order
Anglen Co. manufactures and sells trophies for winners of
athletic and other events. Its
manufacturing plant has the capacity to produce 18,000 trophies
each month; current monthly
production is 14,400 trophies. The company normally charges
$103 per trophy. Cost data for the
current level of production are shown below:
Variable costs:
Direct materials...........
$460,800
Direct labor..................
$316,800
Selling and administrative..........
$15,840

Fixed costs:
Manufacturing.............
$404,640
Selling and administrative..........
$74,880
The company has just received a special one-time order
for 900 trophies at $48 each. For this particular order, no
variable selling and administrative costs would be incurred.
This order would also have no effect on fixed costs.
Required:
Should the company accept this special order? Why?
Ans:
Only the direct materials and direct labor costs are relevant in
this decision. To make the decision, we must compute the
average direct materials and direct labor cost per unit.
Direct materials..........................................................
$460,800
Direct labor................................................................
316,800
Total...........................................................................
$777,600
Current monthly production......................................

14,400
Average direct materials and direct labor cost per
unit.........................................................................
$54
Because price on the special order is $48 per trophy and the
relevant cost is $54, the company would suffer a loss of $6 per
trophy. Therefore, the special order should not be accepted.
Review 7A: Sell or Process Further
Prosner Corp. manufactures three products from a common
input in a joint processing operation. Joint processing costs up
to the split-off point total $500,000 per year. The company
allocates these costs to the joint products on the basis of their
total sales value at the split-off point.
Each product may be sold at the split-off point or
processed further. The additional processing costs and sales
value after further processing for each product (on an annual
basis) are:
Sales Value at Split-Off
Further Processing Costs
Sales Value After Further Processing
Product D......
$300,000
$125,000
$534,000
Product F......
$275,000

$210,000
$450,000
Product G......
$195,000
$135,000
$360,000
The “Further Processing Costs” consist of variable and
avoidable fixed costs.
Required:
Which product or products should be sold at the split-
off point, and which product or products should be processed
further? Show computations.
Review 7B: Sell or Process Further
Farrugia Corporation produces two intermediate products, A and
B, from a common input. Intermediate product A can be further
processed into end product X. Intermediate product B can be
further processed into end product Y. The common input is
purchased in batches that cost $36 each and the cost of
processing a batch to produce intermediate products A and B is
$15. Intermediate product A can be sold as is for $21 or
processed further for $14 to make end product X that is sold for
$32. Intermediate product B can be sold as is for $44 or
processed further for $28 to make end product Y that is sold for
$64.
Required:
a. Assuming that no other costs are involved in processing

potatoes or in selling products, how much money does the
company make from processing one batch of the common input
into the end products X and Y? Show your work!
b. Should each of the intermediate products, A and B, be sold
as is or processed further into an end product? Explain.
Answers
Cost-Volume-Profit Analysis
Review 1: Effect of Changing Variables on Operating Profit
Ans:
New contribution margin ($72 −
$16)...........................................
$56
New unit monthly sales (5,000 units + 200 units)......................
5,200
New total contribution margin: 5,200 units × $56 per unit.........
$291,200
Present total contribution margin: 5,000 units × $72 per
unit.........
360,000
Change in total contribution margin.......................................
(68,800)
Plus savings in salespersons’ salaries......................................
68,000

Change in net operating income...
($ 800)
Review 2: Breakeven, Margin of Safety, and Operating Profit.
Ans:
a.
Per kg.
Sales...........................
$4.50
100.0%
Variable expense........
3.00
66.7%
Contribution margin...
$1.50
33.3%
1. Sales = Variable expenses + Fixed expenses + Target
profit
$4.50Q = $3.00Q + $120,000 + $0
$1.50Q = $120,000
Q = $120,000 ÷ $1.50 per unit = 80,000 units
2. 80,000 units × $4.50 per unit = $360,000
profit

$4.50Q = $3.00Q + $120,000 + $90,000
$1.50Q = $210,000
Q = $210,000 ÷ $1.50 per unit = 140,000 units
4. Margin of safety = Sales − Sales at breakeven = $540,000
− $360,000
= $180,000
b.
1.
As Is
Proposed
Per Unit
Amount
Per Unit
Amount
Sales................................
$540,000
$4.50
$540,000
$4.50
Variable expense............
360,000
3.00
372,000
3.10

180,000
1.50
168,000
1.40
Fixed expense.................
120,000
1.00
100,000
0.83
Net operating income.....
$ 60,000
$0.50
$ 68,000
$0.57
Since net operating income increases by $8,000 the royalty is a
good plan, provided sales remains at the same level.
profit
$4.50Q = $3.10Q + $100,000 + $0
$1.40Q = $100,000
Q = $100,000 ÷ $1.40 per unit = 71,429 units
3. 71,429 units × $4.50 unit = $321,429
profit
$4.50Q = $3.10Q + $100,000 + $90,000
$1.40Q = $190,000

Q = $190,000 ÷ $1.40 per unit = 135,714 units
Review 3: Breakeven, Margin of Safety, Target Profit, and
Degree of Operating Leverage
Ans:
a. Contribution margin ratio:
CM ratio = Contribution margin ÷ Sales = $400,000 ÷
$1,200,000 = 0.333
b. Break-even units:
Selling price ($1,200,000 ÷ 20,000 units) = $60 per unit
Variable expenses ($800,000 ÷ 20,000 units) = $40 per unit
Sales = Variable expenses + Fixed expenses + Profit
$60Q = $40Q + $300,000 + $0
$20Q = $300,000
Q = $300,000 ÷ $20 per unit = 15,000 units
c. Increase in net operating income from additional sales of
100 units:

Selling price..............................
$60 per unit
Variable expenses.....................
$40 per unit
Unit contribution margin..........
$20 per unit
Additional sales........................
× 100 units
Increase in net operating income...................................
$2,000
d. Sales to attain target profit:
Sales = Variable expenses + Fixed expenses + Profit
$60Q = $40Q + $300,000 + $125,000
$20Q = $425,000
Q = $425,000 ÷ $20 per unit = 21,250 units
e. Margin of safety in dollars:
Break-even sales = $60 per unit × 15,000 units = $900,000
Margin of safety in dollars = Sales − Break-even sales
= $1,200,000 − $900,000 = $300,000
f. Degree of operating leverage = Contribution margin ÷ Net
operating income
= $400,000 ÷ $100,000 = 4.0
Review 4: How Does Degree of Operating Leverage Affect
Operating Profit.

Relevant Cost for Decisions
Review 5: Make or Buy Decision
Ans:
a.
Make
Buy
Direct materials (8,000 units @ $8.10 per
unit)........................................................
$ 64,800
Direct labor (8,000 units @ $4.40 per
unit)........................................................
35,200
Variable overhead (8,000 units @ $8.60 per
unit)..................................................
68,800
Supervisor’s salary (8,000 units @ $3.20 per
unit)..................................................
25,600

Depreciation of special equipment (not
relevant).................................................
0
Allocated general overhead (avoidable
only).......................................................
3,000
Outside purchase price (8,000 units @ $27.60 per
unit)......................................
$220,800
Opportunity cost........................................
( 16,000)
Total cost...................................................
$197,400
$204,800
b. The total cost of the make alternative is lower by $7,400.
Thus, net operating income would decline by $7,400 if the offer
from the supplier were accepted. Therefore, the company should
continue to make the part itself.
Review 6: Special Order
Ans:
Only the direct materials and direct labor costs are relevant in
this decision. To make the decision, we must compute the

average direct materials and direct labor cost per unit.
Direct materials..........................................................
$460,800
Direct labor................................................................
316,800
Total...........................................................................
$777,600
Current monthly production......................................
14,400
Average direct materials and direct labor cost per
unit.........................................................................
$54
Because price on the special order is $48 per trophy and the
relevant cost is $54, the company would suffer a loss of $6 per
trophy. Therefore, the special order should not be accepted.
Review 7A: Sell or Process Further
Ans:
Product D
Product F
Product G
Sales value after further processing.....
$534,000
$450,000

$360,000
Sales value at split-off.........................
300,000
275,000
195,000
Incremental revenue............................
234,000
175,000
165,000
Further processing costs......................
125,000
210,000
135,000
Incremental income (loss)...................
$109,000
($ 35,000)
$ 30,000
Products D and G should be sold after further
processing beyond the split-off point. Product F should be sold
at the split-off point without any further processing.
Review 7B: Sell or Process Further
Ans:
a. Analysis of the profitability of the overall operation:
Combined final sales value ($32 +
$64)...............................................
$96
Less costs of producing the end products:

Cost of common input...................
$36
Cost of processing common input.
15
Cost of further processing product
A................................................
14
Cost of further processing product
B................................................
28
93
Profit (loss).......................................
$ 3
b. Analysis of sell or process further:
Product X
Product Y
Final sales value after further processing...........
$32
$64
Less sales value at split-off point.......................
21

44
Incremental revenue from further processing.....
11
20
Less cost of further processing...........................
14
28
Profit (loss) from further processing..................
($ 3)
($ 8)
Don’t process further
Don’t process further
Task1-
Question: Module 8Discussion Forum
Discuss confrontation and negotiation.
Follow below rules to complete the assignment.
Within each module, there is a list of key terms. Each student
will select one of the key terms and conduct a search of
Campbellsville University’s online Library resources to find 1
recent peer reviewed article (within the past 3 years) that
closely relate to the concept. Your submission must include the
following information in the following format:
DEFINITION: a brief definition of the key term followed by the
APA reference for the term; this does not count in the word
requirement.
SUMMARY: Summarize the article in your own words- this
should be in the 150-200-word range. Be sure to note the
article's author, note their credentials and why we should put
any weight behind his/her opinions, research or findings

regarding the key term.
DISCUSSION: Using 300-350 words, write a brief discussion,
in your own words of how the article relates to the selected
chapter Key Term. A discussion is not rehashing what was
already stated in the article, but the opportunity for you to add
value by sharing your experiences, thoughts and opinions. This
is the most important part of the assignment.
REFERENCES: All references must be listed at the bottom of
the submission--in APA format. (continued) Be sure to use the
headers in your submission to ensure that all aspects of the
assignment are completed as required.
Any form of plagiarism, including cutting and pasting, will
result in zero points for the entire assignment.
Material:
Supplemental Resources:
https://www.youtube.com/watch?v=ZHn_kKI7OgA&feature=em
b_logo
Reading Assignment
· Read MODELS OF ORGANIZATIONAL DECISION
MAKING
· Read Intergroup conflict and intergroup effectiveness in
organizations: Theory and scale development
· Read The Advantages of Horizontal Organizational Structure
Task2:
Please provide comments/replies for below two discussions.
Each comment/reply should be 150 words.
Classmate disc1:
by Sasikanth Ratakonda - Thursday, 23 April 2020, 7:30 AM

Confrontation: A Confrontation can incorporate veritable
brutality, or just a contention of words. A showdown normally
alludes to a military ordeal including limiting military. This
importance ended up popular after the Cuban rocket
emergencies in 1963. Preceding that, showdown was used to
connote passing on two confining gatherings up close and
personal and it is gotten from the Latin word
"confrontationem".
Negotiation: Negotiation is the path toward talking about
something with someone in order to accomplish a concurrence
with them, or the dialogs themselves.
All we have had so far is showdown. It is the possibility of
encounter that, as because of a gladiatorial fight, it radiates an
impression of being feeble of objectives just by the last triumph
of one side, identifying with the last thrashing of the other. It
has the kind of an impasse, one in which any expansion on one
side is a mishap on the other, any incident on one side an
expansion on the other. In itself, it shows up not to be
vulnerable of any settlement that, since it benefits the opposite
sides, is satisfactory to both.
In any case if and when exchange seeks after encounter, it must
be founded on finding shared conviction. What does not turn out
clearly, in the present period of encounter, is that the mutual
assessment is possibly monstrous, that the United States and the
Soviet Union have, with the straggling leftovers of the world, a
run of the mill eagerness for the settlement of their
incongruities that very transcends their limited points of
interest. It is in the powerful thought of this normal interest that
all expectation lies.
The fundamental essential interest is in the avoidance of an
atomic war- - for we ought to expect that such a war would spell
an extraordinary obliteration for the opposite sides, to make
certain for advancement itself. Second just to this, there is the
essential excitement for reducing the great and money related
load of the unfathomable weapons on the opposite sides, a

weight helpless of ludicrous abatement if understanding could
be come to on the base necessities of the regular debilitation
fundamental to the upkeep of the equality of force.
Showdown, passed on unreasonably far by either side, would
bargain these ordinary interests. In case one side should drive
the other past center of beyond what many would consider
possible, it might thusly detonate the war in which it would
itself be eaten up. To take an uncommon model, if Moscow
should develop a position of solidarity over Central America,
and should then move to mount a nuclear weapon there, the
natural reaction of the American nation might be with the
ultimate objective that it would lose its prudence, the result
being the nuclear obliteration of the Soviet Union.
Correspondingly, if the United States should win by interruption
in secluding the Ukraine from the Soviet Union, this
"accomplishment" may, by making Moscow tense, lead to the
nuclear incineration of the United States. Along these lines,
paying little heed to whether the Soviet Union had the strategies
for mounting a nuclear battle equipment in Central America, or
if the United States could subvert the Ukraine, its own one of a
kind favorable position would be against doing in that capacity.
The circumstance being what it is, a conclusive focus of game
plan on either side must be confined. There is an old standard of
system, that one must be watchful with pushing one's opponent
against a shut passage.
Finally, it is simply founded on such a clearly confined
procedure, that the United States can hold the dedication of its
accomplices.
References :
Cornell, P., & Fahlander, F. (2007). Encounters, Materialities,
Confrontations : Archaeologies of Social Space and Interaction.
Newcastle, UK: Cambridge Scholars Publishing. Retrieved
from http://0search.ebscohost.com.library.acaweb.org/login.asp
x?direct=true&AuthType=ip,cpid,url&custid=s4338230&db=nle
bk&AN=553312
Mackillop, A. (2011). Confrontation, Negotiation and

Accommodation: Garrisoning theBurghs in Post-Union
Scotland. Journal of Early Modern History, 15(1/2), 159–
183. https://doi.org/10.1163/157006511X552877
Classmate disc2:
by Ulplaksh Vashisht - Wednesday, 11 March 2020, 2:48 PM
Confrontation:
All the individuals in the organization take a quick analysis of
their health to set an activity plan in a short time for the
improvement of the organization is called a confrontation
meeting. The purpose of making confrontation meeting in any
organization is to improve the communication between the
employees, it also promotes good work culture in the
organization, all the problems in the organization can be dealt
easily, the relationship between team members is also improved.
The six elements on which the confrontation depends on is
a. Climate setting
b. Information collection
c. Information sharing
d. Priority setting and planning among groups
e. Immediate action by teams in the organization
f. Make a review report on organizational progress
In the climate setting, all the employees in the organization and
the top executive will discuss the problems they are facing.
Teams are formed to collect the information that is required to
deal with the problem. The information collected by each
individual will be shared among all the teams. Depending on the
type of problem, data they have collected the team members are
given the list of solutions. After providing the required
solutions they must follow the plan immediately and results
should be submitted to the management group in a few days. For
every regular interval of time, the top management in the
organization should review the progress. (Mangrove. (2017))
Negotiation:

To deal with organizational conflicts most companies choose
negotiation. Negotiation is an open discussion that helps
different parties to find a solution for the conflict. In this
process, two or more different parties agree to exchange their
goals and services. If you consider negotiation in an
organization we can find negotiation behavior is seen between
the two teams or two people. To solve problems in the
negotiation and find a solution a neutral third party analyzes
both the arguments and finally comes out with one solution. It
is necessary that you need to make motivational approaches in
the organization to aspire to the goals of the negotiators. (Jerry.
(2018))
There are two types of approaches to negotiation strategies.
They are namely the distributive approach and integrative
approach. The distributive approach is also called a fixed pie
approach because in this approach the solution is considered as
a pie and distributed between two different parties. This
approach is not effective in making a creative solution. An
integrative approach is also called a win-win approach because
in this approach both parties concentrate on the goals of each
party and try to integrate. It will give very creative solutions.
References
Jerry. (2018, August 12). Organizational Behaviour and Design:
conflict and negotiation. Retrieved
from https://courses.lumenlearning.com/wmopen-
organizationalbehavior/chapter/negotiation/
Mangrove. (2017, August 23). Team Building, Organization
Confrontation Meeting. Retrieved
from https://theintactone.com/2018/05/03/od-u3-topic-2-team-
building-organization-confrontation-meeting/
Article8: Confrontation and Decision Making

Question:
Pick one of the following terms for your research: authority,
competition, confrontation, dependency, empowerment,
intergroup conflict, negotiation, organizational politics, power,
or rational model.
Follow below rules to complete the assignment.
Within each module, there is a list of key terms. Each student
will select one of the key terms and conduct a search of
Campbellsville University’s online Library resources to find 1
recent peer reviewed article (within the past 3 years) that
closely relate to the concept. Your submission must include the
following information in the following format:
DEFINITION: a brief definition of the key term followed by the
APA reference for the term; this does not count in the word
requirement. ( I prefer above 40 words)
SUMMARY: Summarize the article in your own words- this
should be in the 150-200-word range. Be sure to note the
article's author, note their credentials and why we should put
any weight behind his/her opinions, research or findings
regarding the key term.
DISCUSSION: Using 300-350 words, write a brief discussion,
in your own words of how the article relates to the selected
chapter Key Term. A discussion is not rehashing what was
already stated in the article, but the opportunity for you to add
value by sharing your experiences, thoughts and opinions. This
is the most important part of the assignment.
REFERENCES: All references must be listed at the bottom of
the submission--in APA format. (continued) Be sure to use the
headers in your submission to ensure that all aspects of the
assignment are completed as required.
Any form of plagiarism, including cutting and pasting, will
result in zero points for the entire assignment.

Material:
Supplemental Resources:
https://www.youtube.com/watch?v=ZHn_kKI7OgA&feature=em
b_logo
Reading Assignment
· Read MODELS OF ORGANIZATIONAL DECISION
MAKING
· Read Intergroup conflict and intergroup effectiveness in
organizations: Theory and scale development
· Read The Advantages of Horizontal Organizational Structure
Module 4 Discussion Forum
Discussion: Activity-Based Costing (ABC) and Master
Budgeting
Read at least 2 academically reviewed articles on ABC and 2
articles on Master Budgeting and complete the following:
A. Write an annotated bibliography of each article.
B. Based on the articles you reviewed, discuss what you learned
C. In addition, discuss how a manager would use the concepts in
the articles you reviewed in managerial decisions.
Instructions:
Completed the assignment by over 550 words and references.
- Read and respond to at least 3 of your classmates'
posts.(Below posted my classmate discussions) Read a selection
of your colleagues' postings. Respond to at least 3 of your
classmates’ posts. (Each response should be 150 words, It
should include the stuff like supporting their discussion and
Study Materials Link:
TextBook:https://saylordotorg.github.io/text_managerial-
accounting/index.html
· Lesson Lecture
· Video-1: Cost-Volume-Profit AnalysisURL
· Video-2: Cost-Volume-Profit AnalysisURL

· Video: Relevant Costs in Decision MakingURL
· Video: Relevant Costs (Make or Buy Decisions)URL
· Video: Relevant Cost (Special Order)URLAssigned
Reading/Study Materials
Use the following links to study Module 4 topics
Cost-Volume-Profit Analysis:
https://saylordotorg.github.io/text_managerial-accounting/s10-
how-is-cost-volume-profit-anal.html
Relevant Cost Analysis:
https://saylordotorg.github.io/text_managerial-accounting/s11-
how-are-relevant-revenues-and-.html
3-Clasmate discussion
Discussion1:
by Bindiya Marneni - Wednesday, 22 April 2020, 12:27 PM
Durana, M. (2019). Research Review on Activity-Based Costing
System (ABC): ABC's Development, Applications, Challenges,
and Benefits. SSRN Electronic Journal.
The above article focuses on the various aspects involving the
Activity-Based costing, including its history, challenges,
applications, and other factors (Durana, 2019). The authors put
it that the ABC system was developed to help small and all
organizations at large have reliable and robust methods of
allocating costs. The method is very accurate and reliable since
it provides a manager with authentic and all costs involved in
the production process. Additionally, through the ABC model,
an organization gets relevant insights about how to price their
products since they know of all their costs, including the
overhead costs which are not included in other methods. The
challenges presented by the author are that the organization
faces the problem of having the real figures in some activities,
and this makes them assume hence arriving at wrong estimates
and calculation altogether. Another problem of this method is
that it gives real costs, thus reduces the chances of overpricing

which organizations do not want since they want to manipulate
their customers. However, one of the critical applications of the
ABC system is ascertaining costs in the production process for
the organization to have the prices of their products set.
Babu, M., and Masum, M. (2019). Crucial Factors for the
Implementation of Activity-Based Costing System: A
Comprehensive Study of Bangladesh. ABC Research Alert, 7(1).
The above article by Babu and Masum looks at the fundamental
factors involved while implementing the activity-based costing
system in organizations based in Bangladesh (Babu and Masum,
2019). The authors found out that the process of implementation
varies from one organization to another and that the whole
process is influenced by a wide array of factors depending on
the size of the organization. In Bangladesh, the economy is
made up of much-growing businesses or the small and medium
enterprises that are hugely relying on activity-based accounting
to ensure that they ascertain direct costs and overhead costs
appropriately. The authors found out that the whole process of
implementation is made of three main factors which are
initiation, design, and finally, the real implementation phase.
These three phases help an organization to adopt a stepwise
process of implementing the ABC model hence be able to use it
appropriately. The authors, therefore, concluded that it is vital
for organizations to have a transparent and straightforward
process of implementing the ABC system for it to work well.
Jena, P. (2016). Reform Initiatives in the Budgeting System in
India. Public Budgeting & Finance, 36(1), pp.106-124.
The above article looks at the budgeting reforms made in India
and how they helped in improving the whole process (Jena,
2016). The authors focus on the economic problems facing India
before proceeding to highlight the reform process. India is one
of the fast-developing counties in the world but faces a wide
array of the problem, including, misappropriation of funds,
looting of public find and corruption. The country has had
corrupt finance minister that has been over budgeting about
government projects so that they can loot federal funds.

However, the budgeting reforms saw the country change its
budgeting process to a systematic and straightforward process
where the allocation of funds and resources was done in the
most transparent and accountable way. India adopted the use of
computerized and automated financial reporting systems to help
know about the country's taxes and how to equitably distribute
resources without any significant challenges as they faced
before.
Tenzer, I. (2016). Five Ways to Master the Art and Science of
Budgeting. AORN Journal, 84(6), pp.S47-S48.
The above articles highlight the essential skills and
competencies that can be exhibited by individuals to become
budgeting gurus (Tenzer, 2016). Today budgeting is everything,
and it is applied in almost all sectors starting from
governments, business organizations, and individuals. The
author presents key factors and knowledge that people aiming at
becoming financial officers can use to master the art of
budgeting. First is that the author stresses the importance of
business knowledge and competence. To become a competent
budgeter, then the individual must be well conversant with
financial issues and theories. Secondly is that an individual
must be able to know the appropriate methods to be used to
ensure that money and resources are used in the right way
without any losses. The third key factor is that the individual
must be straight forward, genuine, and accountable. This helps
the individual to be focused and avoid any shortcuts for self-
gain or any other agendas.
Classmate-2 Discussion: by Lakshmana Kumar Kilari -
Wednesday, 22 April 2020, 3:46 PM
Activity-Based Costing and Master Budgeting
A. Write an annotated bibliography of each article.
· Articles on ABC
Cannavacciuolo, L., Illario, M., Ippolito, A., & Ponsiglione, C.

(2015). An activity-based costing approach for detecting
inefficiencies of healthcare processes. Business Process
Management Journal, 21(1), 55–79. doi:10.1108/bpmj-11-2013-
0144
This article details a practical context that investigates the ways
in which the incorporation of an activity-based costing
approach, abbreviated ABC, into the current bookkeeping
scheme aids medical institutions in determining the shortfalls
linked to their analytical curative courses and associated re-
structuring involvements. Specifically, the authors applied the
Business Process Management (BPM)-ABC organizational
context to the paradigm of a particular treatment center avenue,
which is the orthopedic unit of an Italian campus hospital. For
data collection, Cannavacciuolo, et al. (2015) used both
unstructured interviews and field surveillance techniques.
Consequently, the study revealed that the BPM-ABC style is
capable of generating substantial data regarding the utilized
assets and the expenditures of the endeavors useful in
emphasizing prospects for the enhancement of diagnostic
therapeutic pathways. Moreover, the probe also exposed the
obstacles connected to a prevailing method of accounting
centered on expense midpoints that could obstruct the execution
of the BPM-ABC approach.
Almeida, A., & Cunha, J. (2017). The implementation of an
Activity-Based Costing (ABC) system in a manufacturing
company. Procedia Manufacturing, 13, 932–939.
doi:10.1016/j.promfg.2017.09.162
This paper illustrates the main results obtained from
implementing an industrial cost model based on the principles
of Activity-Based Costing (ABC), in a Portuguese coffee
production company. Particularly, Almeida & Cunha (2017)
focused on the manufacture of coffee in capsule by identifying
all the undertakings and used up assets encompassed in the
process. Essentially, the first phase included allocating the
recognized resources across formerly distinguished expense
drivers. Secondly, the researchers credited the actions to the

goods over the outlay drivers of the events that mirror their
intake, both linearly and directly. Ultimately, they then assessed
the overall commodity price, as per the used up actions and the
corresponding cost of resources. Consequently, the study
depicted that the enactment of the ABC approach caused the
acquisition of an extensive array of data, with great element,
significance and effectiveness, which in turn indicated that the
method acclimatized to the prerequisites of this firm.
· Articles on Master Budgeting
Bužinskienė, R. (2019). MASTER BUDGET FORMATION IN
PRIVATE COMPANIES. Professional Studies: Theory &
Practice/Profesines Studijos: Teorija ir Praktika, (21).
This study aims at analyzing the context of financial planning,
as well as to formulate the master monetary plan in a selected
private organization. In particular, the article strives to
illustrate the significance of the financial practice in Snaige
Company. According to Bužinskienė (2019), master budgets
pertain to devices used to measure the enterprise performance of
the fiscal regulation in business entities and to attain the
harmonization of several business roles. For the research
methods, the author used qualitative content analysis, data
visualization, literature analysis, business fiscal primary records
and methodical assessment techniques. Consequently, the
outcomes showed that Snaige would experience positive
consequences in terms of profit, at the conclusion of the
financial period. In addition, the cash budget also indicated that
the organization would not only have to look for new sources of
funding, but also require the preparation of fresh contract
provisions to clients for the obtained deposits.
OBI, J. N. (2015). Budgeting and budgetary control as the
metric for corporate performance. International Journal of
Sustainable development, 3(1), 1-33.
This article assesses the process of financial planning and
regulation in companies and its advantage as a forecaster of
business performance, on the notion that contemporary firms are
gradually valuing its importance towards realizing their goals.

For the method, the author used a descriptive technique
comprising the analysis of financial planning and control
undertakings in 30 companies chosen from Anambra, Lagos and
Delta States. In particular, OBI (2015) scanned and integrated
the most suitable practices of monetary planning and regulation
in these firms, to develop the fundamental information for the
paper. Consequently, the results showed that most firms
normally prepare preliminary financial plans only to exceed the
thresholds in the enactment phases because of deprived fiscal
methods of control. Nevertheless, progressive establishments
are currently determined to achieve more, by means of attaining
viable competitive edges in their markets and displaying great
revenue numbers, through adopting noble measures of planning
and controlling their finances.
B. Based on the articles you reviewed, discuss what you
learned
From the ABC articles it is evident that book keeping data,
especially expense statistics on processes and assets, is an
administrative element to be considered for re-structuring
measures (Cannavacciuolo, et al. 2015). Largely, ABC
distinguishes the crucial regions where corporate practice
executives could intercede, through associating the expenses to
procedures. Nevertheless, the outlay data ought to be combined
with the vital enactment pointers of the procedure, in order to
comprehend the most suitable techniques of re-structuring. In
particular, assets are linked to undertakings via asset drivers
and processes are subsequently catalogued to price items by
means of process drivers. With regard to the process, Activity-
Based Costing is normally permitted to examine the origins of
the outlays related to the undertakings, along with the rate of
their enactment. Furthermore, it also signifies an extra
importance from the administrative perspective (Almeida &
Cunha , 2017).
On the other hand, the master budgeting articles illustrate that
these monetary plans are basically alienated into either
operational or financial statements (Bužinskienė, 2019).

Specifically, the former mainly comprises the plans on
transactions, manufacture, managerial, and direct resources and
employment expenses, whereas the latter includes the budget
balance sheets and income statements, and money financial
plans. In addition, it is also clear that financial planning entails
establishing goals and observing performances compared to
those specific objectives. For this reason, it is extremely vital
for firms to strategize their monetary undertakings properly
beforehand, via the establishment of operational financial
planning and regulation processes in order to succeed (OBI,
2015).
C. In addition, discuss how a manager would use the concepts
in the articles you reviewed in managerial decisions.
To begin with, Cannavacciuolo, et al. (2015) emphasize the
function of Activity-Based Costing as an administrative
implement for facilitating policymaking procedures, in that it
permits deducing data for several reasons. Initially, this system
encourages a process of controlling expenses, due to the fact
that it mainly draws attention to the most expense-expending
undertakings and assets. Secondly, the approach also enables
the identification of re-structuring courses, through
differentiating between the additional and essential ones.
Likewise, Almeida & Cunha (2017) also contend that the ABC
method offers pertinent and beneficial data for the
administrative procedure in several areas. Among others, they
include the delineation of the costs of goods, the recognition of
practices that necessitate more work to either advance or adjust
them to the fresh certainties and requirements, and the
reformation of certain parts of the business division.
Similarly, but a different measure, Bužinskienė (2019) asserts
that his article is extremely significant to organizational heads
and hired bookkeepers since it could assist them towards the
well-organized creation of their financial strategies for the
upcoming years. Correspondingly, OBI (2015) also recommends
the highest managerial executives of contemporary companies
to put in serious efforts in matters relating to financial planning

and regulation, because it is impossible to attain any
considerable realization with disorganized processes for
managing their finances. In other words, this means that putting
in any efforts towards accomplishing functioning aims and
purposes, devoid of operational methods of controlling and
strategizing finances, would be equivalent to spearheading a
visionless chase of organizational aims.
References
Almeida, A., & Cunha, J. (2017). The implementation of an
Activity-Based Costing (ABC) system in a manufacturing
company. Procedia Manufacturing, 13, 932–939.
doi:10.1016/j.promfg.2017.09.162
Bužinskienė, R. (2019). MASTER BUDGET FORMATION IN
PRIVATE COMPANIES. Professional Studies: Theory &
Practice/Profesines Studijos: Teorija ir Praktika, (21).
Cannavacciuolo, L., Illario, M., Ippolito, A., & Ponsiglione, C.
(2015). An activity-based costing approach for detecting
inefficiencies of healthcare processes. Business Process
Management Journal, 21(1), 55–79. doi:10.1108/bpmj-11-2013-
0144
OBI, J. N. (2015). Budgeting and budgetary control as the
metric for corporate performance. International Journal of
Sustainable development, 3(1), 1-33.
Classmate3 Discussion---by Sukesh Anapati - Wednesday, 22
April 2020, 8:57 PM

A.Maha, I.,(2015). Activity-based costing (ABC) – an effective
tool for better management. Research Journal of Finance and
Accounting, 6(4), 66
According to Maha & Hossain (2015), Activity-based costing
(ABC) is a powerful tool for a business to cost its product
accurately and efficiently, preventing cost deflation that can
lead to maintainable growth and development that is necessary
to be inexpensive in a globalized and dynamic market setting.
The article includes a brief overview of ABC's foreign journals.
The author has strained to bring up the main essence of these
journals. The above publications cover a wide variety of
subjects from ABC's theoretical dimensions to its
implementation. The author has discussed some particular cases
in different countries. Some of our newspapers illustrate the
effect of ABC on European companies where, like some others,
the American meaning of ABC has been addressed. The research
incorporates some data on the ABC-maintaining Nestle
Bangladesh Ltd. Activity-based costing has been developed and
promoted as a way to address the structural biases of
conventional cost accounting and to restore validity to
managerial accounting. A conventional method records what
money is spent on and by whom, but the costs of operations and
procedures are not reported (Maha & Hossain, 2015, p. 66).
Wegmann, G. (2009). The activity-based costing method:
development and applications. The IUP Journal of Accounting
Research and Audit Practices, 8(1), 1-2.
Wegmann defined that, in this, the paper analyzes accounting
software systems that aim to enhance the costing system based
on performance. In the first part, we describe them using the
Strategic Accounting Administration stream. The Activity-based
Costing (now ABC) approach is the most well-known
accounting software breakthrough in the last 20 years. In
France, Activity-based Management (ABM) is very popular for
the ABC method and its key managerial growth. But the other
inventions that are based on the ABC approach are not very well

known and discussed (Wegmann, 2009, pp. 1-2).
The medium-sized industrial enterprise is the important
not, representing the rise and decline of our national economy,
the research focal point of the standard lies in what utilizes the
west to
which strengthens enterprises in The Master Budgeting
Wang, C. (2017). A brief discussion of the comprehensive
budget of industrial enterprises. Industrial Economics Research,
1(1), 45-46.
The medium-sized industrial enterprise is the important
not, representing the rise and decline of our national economy,
the research focal point of the standard lies in what utilizes the
west to
which strengthens enterprises in The Master Budgeting
Wang (2017), explained that the medium-sized industrial
enterprise is an important component of the national economy,
its growth is good or not, reflecting the rise and decline of our
national economy, the focal point of the research norm lies in
what the West uses to handle the financial management theory
budgets that improve the enterprises in the Master Budget.
Extensive budget management is a new model of financial
management for the enterprise, which relocates the budget to
financial management for the enterprise. It is a strategic
security system compliant with the business development plan,
which is a transparent operating index system with the
specifications of the market process, capital flow, information
flow and human resources of the entire company (Wang, 2017,
pp. 45-46).
Saeed, M. Z., (2016). The Effect of budgets in the
implementation of operational activities in private and public
corporations. International Journal of Management Science and
Business Research, 5(3), 11-12

According to Saeed & Jalloh (2016), Budgets are typically set
for all divisions and major segments within the organization.
They have to be thorough for all interrelated divisions. All
departments should contribute to the budget process so that
there is cohesion within the firm; for example, when marketing,
ordering, staffing, and finance departments collaborate,
operations will improve. Coordination includes the procurement
and coordination of the required staff, equipment and materials
for carrying out the company. A budget helps organize different
units of operations to ensure that all areas of the organization
are in contact with each other and know how they fit together.
The importance of budgets in the operations of the activities of
companies acts as an action plan to ensure continuity or pave
the way to successful implementation. This research looks at the
impact of budgets on the execution of operating operations in
private and public companies (Saeed & Jalloh, 2016, pp. 11-12).
B.
I have learned more information about master budgets and
activity-based costs. Budget is a management mechanism that
business managers can use to meet defined goals by alerting and
constructively motivating available resources. Without a
budget, it would be difficult to calculate success because the
target for benchmarking activities will not be available. On the
other hand, Activity-based costing (ABC) is a way to determine
true costs; that has become an important element of
manufacturing/service organizations and can be characterized
by way of a procedure that procedures the cost and presentation
of doings, resources, and cost artifacts. This can be used as an
alternative to conventional cost accounting systems.
C
As a manager, activity-based costing and master budgets used
efficiently. It uses multiple expense pools to distribute
operating costs, arranged by the operation. (Remember that the
large allocation of plants usages one cost pool for the complete
plant and the distribution of departments uses one cost pool for
all section.) The concept is that tasks are needed to manufacture

goods tasks such as buying materials, setting up equipment,
assembling goods and inspecting finished products.
References
Maha, I., & Hossain, M. A. (2015). Activity-based costing
(ABC) – an effective tool for better management. Research
Journal of Finance and Accounting, 6(4), 66. Retrieved from
https://www.researchgate.net/publication/309398925_Activity-
Based_Costing_ABC_-
_An_Effective_Tool_for_Better_Management
Saeed, M. Z., & Jalloh, A. A. (2016). The Effect of budgets in
the implementation of operational activities in a private and
public corporation. International Journal of Management
Science and Business Research, 5(3), 11-12. Retrieved from
http://www.ijmsbr.com/Volume%205%20Issue%203%20Paper%
202.pdf
Wang, C. (2017). A brief discussion of the comprehensive
budget of industrial enterprises. Industrial Economics Research,
1(1), 45-46. Retrieved from
https://www.researchgate.net/publication/324510855_A_Brief_
Discussion_on_the_Comprehensive_Budget_of_Industrial_Enter
prises
Wegmann, G. (2009). The activity-based costing method:
development and applications. The IUP Journal of Accounting
Research and Audit Practices, 8(1), 1-2. Retrieved from
https://www.researchgate.net/publication/23779100_The_Activi
ty-Based_Costing_Method_Development_and_Applications

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