Joey Pagedped

1. Traditional volume-based cost allocation systems are likely to systematically distort product costs
because they break the link between the cause for the costs and the basis for assignment of the costs to
the individual products. Also, cost distortions tend to be greater with greater differences between
relative proportions of indirect resources used by cost objects because traditional cost assignments
based on volume-related measures do not accurately reflect these difference.

2. Volume based traditional product costing systems most likely to distort product costs because
of two conditions:

(a) Indirect and support expenses are high, especially when they exceed the cost of the allocation base
itself (such as direct labor cost).

(b) Product diversity is high: the plant produces both high-volume and low-volume products, standard
and custom products, and complex and simple products.

Activity-based costing systems provide more accurate costs when these two conditions hold by creating
more accurate links between the causes of indirect and support costs and the bases for assignment of
the costs to cost objects.

3. Standard costs are predetermined or planned costs that are based on technical estimates. Standard
cost may be calculated on per unit basis because it is set for element of cost. On the other hand budget
are based on past experience, historical data and adjusted to the future. Standard cost is within the
scope of budget itself thus computing it in per unit basis is not possible for standard unit is an input to
budget because budget is set every business activity.

4. Flexible budgeting is based on actual number of outputs, the varible cost, and as standard unit is set
upon, a flexible budgetary cost can be made possible as standard units are inputs of budget cost.

5. Historical experience is often a poor choice for establishing standards because of the historical
amounts may include more inefficiency than is desired.

6. Planning, feedback, and controlling are the steps of the management process. Planning and
controlling have a direct relationship. Planning is a process in which management makes the plans and
finalizes objectives for the development of the organization to align with its goals and vision. Controlling
is the second step in which management controls the activities or performance of the employees to
achieve the set objectives decided during the planning stage. Feedback comes from controlling and
helps in measuring the planned performance, and pointing out the variations and exceptions of
performance. This also helps to correct the changes in planning and operations activities to achieve the
goals.

7. Managerial accounting focuses on an organization’s internal financial processes focusing on short-

term growth strategies relating to economic maintenance, while financial accounting focuses on an
organization’s external financial processes working on long-term financial strategies relating to
organizational growth.

8. The role of financial reporting in the development of management accounting is that it gives the data
that the management accountant requires for internal management accounting, like creating budgets
and determining the performance of the departments or individuals. Flexible change are done for
management to adopt to the competetive and wide range challenging Market and to be able to keep
the business going.

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