Product Cost and Budgetary Control Methodologies and Systems Essay

Product Cost and Budgetary Control Methodologies and Systems - Essay Example The budgetary control systems controls costs through the preparation of budgets, comparing actual performance with the budget. This allows the managers to act upon the budget and results in order to attain maximum profitability (FAO, 2010). Over the last two decades the computer world is changing how companies operate and report. The need to incorporate computerized systems in every business aspects is still ongoing research. Budget information systems and product cost systems are analysed in this report, their benefits and challenges they pose. The product cost and budgetary control methodologies and systems There are two budget control methodologies i.e. the budgets and the budgetary control. The budget is the formal statement that represents the projected financial resources that are needed to undertake business activities. Budgetary control on the other hand is a technique and a tool that is used by management to compare the budget with the actual performance. Any discrepancies a re then acted upon either by revising the budget or exercise control action. The budget information system (BIS) BIS has been in use for the last 25 years having been used for budgetary needs in schools, cities and even countries. BIS integrates all the budget functions into one single application. These functions are capital budgets, human resources, operations, performance measures, reports and producing final budget documents. The system provides all the necessary features for maximizing the efficiency of the budget process. BIS is software that interfaces with the finance, personnel and payroll departments. It then condenses the historical data into database structures. This enhances performance in strategic planning, reporting, document processing, capital planning and improvements. Benefits of BIS The system improves overall performance by enhancing planning process. The system reduces errors hence planning is made easier and effective. The use of BIS accelerates the speed wit h which comparison of data is undertaken. It enables accurate tracking of costs in the system. The system quickens the budget preparation process hence few hours are spent in this process. Use of the BIS lowers the number of personnel needed for database management. To implement BIS in an organisation, there is need for training the involved staff. This is enhanced through videos materials, online sites, documents that come with the softwares and use of experts. The system can be customized to meet the individualized needs of a company i.e. application process, reports format and document processing. Different computer softwares are used for the BIS depending on the manufacturing company. However aspects of budgeting can be incorporated in one single software or broken down into budget softwares separately, control aspects, comparison parts etc. It is highly recommended for the company to incorporate the single application software of BIS. It may be expensive and complicated but wit h enough training and customer support from the producing company, the system is easy to use. The product cost is defined as the cost of direct labour, direct materials and direct overheads utilized in the production process. These costs are incorporated in the budget process and actual results compare for any variances. The product cost system sets out the process for accounting for the organisation’s product costs for the purpose of producing information