Peserta GEGAR VAGANZA 11

Permohonan untuk Kolej Kejuruteraan

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Budgeting Limitations

Budgeting, while essential for financial planning, has several limitations:

1. Inflexibility: Traditional budgets can be rigid, making it challenging to adapt to unexpected changes, like economic shifts or unforeseen expenses. This lack of flexibility may hinder responsive decision-making.

2. Time-Consuming: The budgeting process can be lengthy and resource-intensive, especially in larger organizations where coordination across departments is required. This can delay the implementation of initiatives and response to market dynamics.

3. Assumption Dependence: Budgets rely on assumptions, such as estimated revenues and costs. If these assumptions are inaccurate, the budget may not reflect actual financial needs or realities, leading to poor financial performance.

4. Focus on Short-Term Goals: Budgets often emphasize short-term goals and can overlook long-term strategic objectives. This can result in a misalignment between the budget and the organization's long-term vision.

5. Encourages Underspending or Overspending: Budget holders may rush to spend their allocation to avoid future budget cuts ("use it or lose it"), which can lead to inefficiencies. Conversely, underspending may lead to under-resourcing critical areas.

6. Conflict Among Departments: Competition for limited funds can create tension between departments, impacting teamwork and the overall organizational culture.

7. Difficulty in Measuring Outcomes: Budgeting focuses on financial inputs rather than outcomes, so it may not accurately measure the effectiveness or impact of spending.

8. Risk of Budget Padding: Managers may inflate their budget requests to ensure they have enough funds, which can result in a bloated budget and inefficient resource allocation.

Sajak Traditional Costing

In traditional costing, 

costs are assigned, 

By volume or hours, 

with overheads aligned. 

A simpler method, 

yet less precise, 

Allocating expenses, 

with a generalized device.

From factory overheads to indirect costs, 

Allocated broadly, 

with nuances lost. 

It serves many well, 

though it may not be, 

The most accurate method for costing you see.!

Traditional Costing:

• Basis of Allocation: Volume-based measures like machine hours or labor hours.
• Accuracy: Less accurate for complex processes.
• Cost Drivers: Generalized, often leading to over or under-costing.
• Suitability: Better for simple production environments.

Sajak ABC

Activity-based costing, 

a method that's precise, 

Tracing costs to actions, 

it really is quite nice. 

From overheads to labor, 

each expense is tracked, 

Giving clear insight, 

with no details lacked.

Allocating resources, 

by activities defined, 

Costs assigned to products, 

in a manner refined. 

Understanding where the money goes, 

in every single case, 

ABC brings clarity, 

at a detailed pace!

ABC Costing:

• Basis of Allocation: Specific activities that drive costs.
• Accuracy: More accurate, especially for diverse or complex processes.
• Cost Drivers: Detailed, based on actual activities, reducing the risk of cost distortion.
• Suitability: Ideal for complex environments with varied products or services.

The advantages of Activity-Based Costing (ABC) include:

1. Higher Cost Accuracy: ABC provides a more accurate view of costs by identifying the specific expenses of each activity involved in producing a product or delivering a service. This is more precise than traditional costing methods, which often allocate costs broadly.

2. Efficient Resource Management: Knowing the cost of each activity helps organizations identify areas where resources may be overused, enabling optimization and reduction of waste.

3. More Accurate Pricing: With detailed cost information, companies can set product or service prices more accurately, improving competitiveness and ensuring better profit margins.

4. Supports Strategic Decision-Making: ABC provides detailed and accurate cost data that aid in decisions such as identifying unprofitable products or services, improving processes, or reducing costs.

5. Increases Productivity and Efficiency: By analyzing costs at the activity level, companies can identify and reduce non-value-adding activities, leading to improved processes and overall efficiency.

6. Better Cost Control and Management: ABC allows organizations to evaluate costs based on specific activities, making it easier to control and manage costs in each area.

ABC helps organizations understand how resources are used in manufacturing or service delivery processes, supporting strategic planning and enhancing competitiveness.

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