1a)

Conventional(traditional) cost accounting system

Conventional method is also referred as traditional method

All manufacturing cost that is assigned to the making of the product is known as
Conventional cost accounting system. Manufacturing cost like labour,material cost and other
expenses are important elements.

The traditional cost accounting method involves allocating manufacturing overhead costs to
the products manufactured.

The traditional method involved allocating manufacturing overhead costs based on the
number of units of output, direct labor hours, or production machine hours.

Allocating the many different (and ever-increasing) indirect manufacturing costs based on a
single factor (such as machine hours) is likely to result in misleading costs for a
manufacturer's goods.

The traditional method holds a record that mainly focuses of the production of goods or
labour/machine hours.It is easier to keep track as not much data is involved.Some businesses
have been following this particular method.

Traditional costing systems apply indirect costs to products based on a

predetermined overhead rate. Traditional costing systems treat overhead costs as a single pool
of indirect costs. Traditional costing is optimal when indirect costs are low compared
to direct costs.

There are several steps in the traditional costing process, including the following:

1. Identify indirect costs.
2. Estimate indirect costs for the appropriate period (month, quarter, year).
3. Choose a cost-driver with a causal link to the cost (labor hours, machine hours).
4. Estimate an amount for the cost-driver for the appropriate period (labor hours per quarter,
etc.).
5. Compute the predetermined overhead rate (see below).
6. Apply overhead to products using the predetermined overhead rate.

Example of Traditional Method of Cost Accounting

Assume that a paper manufacturer has $1,000,000 of manufacturing overhead costs
consisting of depreciation, electricity, insurance, compensation of supervisors, production
engineers, material handlers, equipment maintenance, etc. The manufacturer has 50,000
production machine hours. Using the traditional method of cost accounting, the company will
allocate or assign $100 of overhead of each machine used to produce the output. Applying
$100 per machine hour for every product will spread the overhead costs, but will not
recognize the variety of activities and efforts that occur with different products.

The traditional method may have been reasonable or at least sufficient for the
company's external financial statements (especially when similar products are manufactured
and inventory levels are consistently small). However, the traditional method will be
inadequate for determining the true cost for diverse goods being produced and sold to
customers with diverse demands.

b)

Activity Based Costing Costing vs Traditional Costing

Additional cost accounting we're gonna have one plant wide overhead rate basically
calculated using something like machine hours or labor hours we're gonna just take whatever
the overhead is for the plan and then we're just gonna divide it by the number of machine
hours labor hours that's gonna give us one plant wide overhead rate that we're gonna then
apply on the basis of either labor hours machine hours throughout the year with activity based
positive we're actually gonna have multiple rates have multiple rates we actually called them
activity rates because as you if you if you remember we're gonna have a number of cost pools
with activity based costing we we put our overhead and other items into these cost pools and
then we actually calculate an activity rate for for each each of these pools so traditional
costing however is just gonna have that one plant wide rate that's used to allocate overhead
because of this traditional costing is much easier to implement and when we think about if
you just wanted to have a costing system it's easier to calculate one rate than multiple ones
but in addition to that it's not just obviously you know doing division for for calculating a rate
but it's actually ABC involves interviewing employees to talk about well what items should
be going into the cost pools which cost pools should we have and then you know kind of
making estimates about quarters it's a very complex system and so it's gonna be much more
difficult to implement and then also you have the fact that in some cases employees will
actually actively resist the implementation of an ABC system system because they've already
been doing traditional costing for years and then now somebody comes along and says we're
going to do a ABC costing I want you to track the amount of time you spend on this activity
this activity and people don't respond well to change and they might actively resist the
implementation of an ABC system for this for all these reasons it's just easier to do traditional
costing and leave out BC altogether but another important difference is that traditional
costing we're only talking about product costs right so when we're talking about the allocating
overhead we're talking about manufacturing overhead traditional cost but with ABC we could
actually be talking about. Costs and if you don't remember what. Cossar we're talking about
things like SG and a right so we might have some SG and a expense that we decide is
relevant that we wanna be allocating to the products in terms of you know customer support
people calling to complain about their orders and so we have these. Clause and we may and
emphasis on may it's not required we do what we want in our firm in terms of what we think
is relevant but we may choose and say hey we want to include some of these SG and a clause
and allocate some of those to the products and with activity based costing we can do that
traditional costing methods we're just we're just allocating product costs and period costs are
basically just gonna be expenses heard we're not we're not really you know allocating those
two to product lines and in part for that reason traditional costing can be used for external
reports and what I mean by that is I'm talking about we're calculating cost of goods sold i'm
not talking external reports in terms of like putting together an income statement and stuff
like that right you have your financial accounting your financial reporting and that's different
than your cost and you're costing system but Even so you remember traditional costing
basically a rose for the need to calculate cost of goods sold so we can use traditional costing
to compute cost of goods sold and the auditors will accept those methods but they will not for
if we're using activity based costing alright so activity based costing a lot more subjective and
so we can't use it in any case for external reports whatsoever it's just strictly for internal
purposes to help managers with with decision making and as as you might have concluded
from that then it follows that if we were to implement an ABC system we must continue then
to have the traditional costing system so we can continue to calculate cost of goods sold thus
if we're going to have ABC we're going to have two sets of books what I mean by two sets of
books is we're still doing a traditional costing system on the one hand maybe we've got one
excel tab where we're saying OK we're gonna calculate cost of goods sold it by the traditional
method for the auditors but then for internal purposes we're gonna have a second set of books
where we actually have our activity based costing figures and and calculate so we would
actually have two different sets of profit margins two different sets of costs so we're gonna
have two systems here the ABC and traditional costing whereas obviously if you just do
traditional costing that would be sufficient so you might be wondering if this point well why
basically looked at a bunch of negatives and so why would anybody why would anybody
want to implement ABC for their farm and the main driver of doing ABC is is simply the fact
that it's much more accurate kind of going back to this notion of just taking one plant wide
overhead rate and saying OK we're just we're just gonna say that overhead is just driven by
machine hours and that's really all we care about when we're costing hours specific product
well hey wait a minute what if this one product is having all kinds of issues and it's causing
people to burn up our phone lines and and talk to our customer support people a lot well OK
in that case we we we would be understating our costs if we didn't you know allocate that to
that product line or if for example a certain a certain product requires a lot more orders or
something than than the other product and those types of things we're not really capturing we
just say well we're just gonna allocate overhead based on one rate that was with our machine
hours and that's it right so this we're just kind of doing this because it's easy right that's the
advantage of traditional costing it's easy it's acceptable for gap for cabling cost good sold
those things when we really want to make decisions which is what cost accounting is all
about ABC is really the method that's going to give us the most accurate cost right we're
saying OK let's let's look at all the things that are driving the overhead costs and and let's go
ahead let's compute a rate for each cost pool and then let's go ahead and say OK as that
activity occurs what are the costs how are the costs really being driven how can they come up
with the most accurate cost and when we have the most accurate cost then we can make the
best decisions about whether to keep a product line whether to drop a product line these are
huge decisions and to make those decisions you need the inputs you need good information
and so basically ABC is superior in terms of accuracy but again you've gotta you've gotta
kind of do a cost benefit analysis just put cost benefit here when you're deciding whether you
want to implement an ABC system and then given that you have decided to implement ABC
you still kind of have to keep this cost benefit strategy in mind when you're deciding OK well
how many cost pools are I want I don't want 100 cost pools right the employees are gonna get
burned out like I don't want to track my time going into 100 different class pools so you
always have to bear in mind you have to trade off this this idea of of accuracy versus cost and
and the ease of implementation so again you don't want to just run into your firm and say hey
look ABC is gonna give us superior numbers we're gonna implement it we're gonna have 100
or 200 cost pools and we're gonna find out it's exactly what our products cost so even though
this under costing and over costing can have huge effects on your firm it always comes back
to doing a cost benefit analysis for deciding whether ABC is good for your firm and the
extent to which you should in this video we're going to talk about the difference between
activity based called I don't wanna track my time going into 100 different cost pools so you
always have to bear in mind you have to trade off your numbers huge effects on your firm it
always comes back to doing a cost deciding whether ABC is good for your firm and the
extent to which

In the field of accounting, activity-based costing and traditional costing are two different

methods for allocating indirect (overhead) costs to products.
Both methods estimate overhead costs related to production and then assign
these costs to products based on a cost-driver rate. The differences are in the accuracy and
complexity of the two methods. Traditional costing is more simplistic and less accurate than
ABC, and typically assigns overhead costs to products based on an arbitrary average rate.
ABC is more complex and more accurate than traditional costing. This method first assigns
indirect costs to activities and then assigns the costs to products based on the products’ usage
of the activities.

Traditional Costing Method

Traditional costing systems apply indirect costs to products based on a
predetermined overhead rate. Unlike ABC, traditional costing systems treat overhead costs as
a single pool of indirect costs. Traditional costing is optimal when indirect costs are low
compared to direct costs. There are several steps in the traditional costing process, including
the following:
1. Identify indirect costs.
2. Estimate indirect costs for the appropriate period (month, quarter, year).
3. Choose a cost-driver with a causal link to the cost (labor hours, machine hours).
4. Estimate an amount for the cost-driver for the appropriate period (labor hours per quarter,
etc.).
5. Compute the predetermined overhead rate (see below).
6. Apply overhead to products using the predetermined overhead rate.

Predetermined Overhead Rate Calculation

Use the following formula to calculate predetermined overhead rate:

Predetermined Overhead Rate = Estimated Overhead Costs / Estimated Cost-Driver

Amount
For example:

$30/labor hr = $360,000 indirect costs / 12,000 hours of direct labor

Activity-Based Costing Benefits

Activity based costing systems are more accurate than traditional costing systems. This is
because they provide a more precise breakdown of indirect costs. However, ABC systems are
more complex and more costly to implement. The leap from traditional costing to activity
based costing is difficult.

Traditional Costing Advantages and Disadvantages

Traditional costing systems are simpler and easier to implement than ABC systems.
However, traditional costing systems are not as accurate as ABC systems.
Traditional costing systems can also result in significant under-costing and over-costing.

c) there are pros and cons for both traditional and activity based costing.

Advantages & Disadvantages of Traditional Costing

 Simple Traditional costing assigns expenses according to an average overhead rate.
...
 Cost-Effective Since it is less complicated than activity-based costing, a
company’s accountants don’t have to spend as much time performing calculations
for traditional costing. ...
 Widely Understood Internally ...
 Easy to Explain Externally ...
 Limited Accuracy ...
 Not Helpful ...
 Ignores the Unexpected ...
 Too Simple ...

The Advantages of Activity Based Costing

 1. It provides a more accurate cost per unit. Because there is more accuracy in the
costing, using ABC can help provide better pricing and sales strategies. ...
 2. It allows for deeper cost insights. ...
 3. ABC can be applied to all overhead costs. ...
 4. It can transfer over to service costing. ...
 5. It provides quantifiable figures.
The Disadvantages of Activity Based Costing

It can be difficult to explain to those who are invested into the process

it may have limited value for some organisations

the cost of implementing ABC might not justify its cost.

ABC typically requires other systems to be changed as well

assigned costs are ultimately an estimate

2a)performance and evaluation system

Bringing evidence to bear in decision-making is a critical component of effective and

efficient government. Performance measurement and evaluation are two key tools
available to help policymakers and program managers develop systematic evidence,
understand how well policies and programs are working, and identify possible
improvements. Both evaluation and performance measurement generate information
that falls along the continuum of evidence, serve as methods for systematic assessment,
and aim to facilitate learning about and improve results of government activities. At the
same time, there are important differences between these methods that dictate what
each can tell us about programs and policies.

Performance Measurement

Ongoing collection, monitoring, reviewing, and reporting of data on pre-selected measures

related to level and type of activities, products and services delivered, and outcomes of
activities
Objective: Measuring progress toward pre-established goals and targets  Determining
whether an activity is achieving its stated output/outcome objectives and making adjustments
if it is not  Serving as an early alert system in the case of significant changes in operations

Data is largely quantitative  Data points assessed against targets or compared to previous
data for same measure, in order to detect trends over time

It helps to state output goals it lets us how many people participated any proex with numbers
or percentage who were willing to participate in the program to achieve that targeted goal and
it keeps track of to ration that took the participant to achieve the targeted goal

Evaluation

Individual, systematic studies to examine how well all or part of a program, intervention,
policy, regulation, or other government activity is working

Objective: Assessing the effectiveness of a program, intervention, policy, or regulation,

compared with its absence or with one or more alternative approaches  Establishing a
causal relationship between an activity and the outcomes experienced by those affected by it
 Addressing questions about implementation, variations in effectiveness across different
settings or populations, and contextual factors

Data and analytical techniques are guided by the evaluation questions  Generally includes
both quantitative and qualitative data  In the case of causal studies, requires complex
methods to isolate impacts from other influences

It analyzes certain individuals and ushman in the program

it also assesses the people who achieved their targeted goal and also study from the result
why some of them didn't achieve their target

it also explores different methods on how the participant experience different from a different
organization

Are you OK all time behind time your over cost or cost or you are still under cost that is not
overspend yet so you need to collect data in order to understand what is your current progress
status So what data to collect in order to have you to know what is your progress status now
so how when and who will collect the data who is going to do this and when you're going to
do this and how to do this so how to analyze the data once you collect it how do you know
how to analyze the data so that you can have a conclusion that you made of your progress
status how to report current progress management so of course there are many many
management levels that you need to report to them the top management the senior the
window level you know the functional and all this and and also your team members so you
need to know all these things first in order to capture the data and disseminate all your
information or update your management so next we look at project monitoring systems for
control So what is the information system structure so first we go into one by one which is
the first one what data are collected the first question is what are in that year to collect what
data you have to collect so once a week movie this project there's something please OK
schedule and cost so next is the remaining cost to complete the project and then next is the
date that project will be completed the potential problems to be addressed now so that some
of you send me emails about the problems you encounter so one of the problems that uh one
of the team leaders sent me is until today you are not able to get a good respondent uh the
participant to answer your assessment so there's one problem you're facing now so you have
to you know that it's quite uh high risk this event is happening because you only have uh
according to his e-mail he has lost his team just collected 6 until today so that's very few and
you have to reach the target of 120 so you need to address this problem now so next one is
out of control activities that requiring intervention so also another team in a tutorial group 5
having a problem there's a conflict among the team members so one of the team members
voice it out is it so this one is out of control and the require my intervention so I went in and
there are some So you need to do some actions immediately look at what's your status quite
going on what are the issue what's the problem then you could click so before you drive onto
too late then if when you're finishing then it's too late for you to solve the problem so next is
the cost and all the shape the schedule overruns and the reason for them so as you go along
you do the tracking and realize that oh I'm over cost or I'm behind time so what's the reason
what are the causes for this why causing all this so understanding the problem then only you
can take action so next because you're having this problem then you forecast of the overrides
at time of project completion so you know that overruns is going to happen I'm going to be
over scheduled so how far is the overscheduled by how many days or how many weeks so
you try to focus will be my new project completion date so next continue so next is you're
collecting the data and your analysis so who will collect the project data so you have to
assign somebody to collect this project data how will data be collected so how are you going
to collect is it interview or is it through e-mail you're asking when will the data be collected
so when when is it after you is it one week later two weeks later or when when you should
collect all this kind of progress data who will compile and analyze the data who will be
assigned the task to collect this data and then you sit down compile all the data and analyze
and give present the findings so next is reports and reporting so who will receive the report so
once you have analyzed the data then you generate a report of your status so who who are
you supposed to send the reports to which level top management manager is who are the
people and how will the reports be transmitted how do you remember how you send to them
OK and when so when is the time you're supposed to send the reports to the different levels
the middle level the functional you know at the senior level and so on so how to do all these
things so you need to understand how to do it the project progress report format so inside
your project progress report what kind of content you must report so progress since last report
so because you are having regular updating of your management about your progress status
so let's say you really have done one progress report so this is the first progress report I
submitted and this is my second one so that is called the progress since the last report so next
the current status of project so you usually you have to report about what is your current the
latest status now will be about your schedule what is your timeline is it ahead of time behind
time or all the time then how much is it is it of course exactly exactly I allocated or I already
over 'cause I spent more than I allocated what I planned or I still are under cost I didn't spend
as much as what I planned so next is your scope our scope is your like for example you're
doing the C test you're doing the uh post assessment and also the for COVID-19 and the
game one then your scope will be you need to collect 126 of feedback so here have you
achieved the 130 sets of respondents that you collected your feedback from this the faculty
and the departments that you have defined then you can know so if I already achieved by this
date because remember you know network diagram what is the date the timeline you must
achieve that you must complete that task so by the time you see that it's maybe it's not
achieving the target and the time is not up yet but you can estimate roughly so if you use a set
let's say three weeks now only one week gone and you only collected success of course you
will start with you Oh my God I only got six sets within two weeks I can achieve 126 looks
like quite unlikely so you know that you will not be achieving the scope now so you have to
do something so next is the cumulative track so later you can see a diagram of one of the
chart that you could learn using the value you see the cumulative so as you accumulate along
then you can see what is the trend you seek you are progressing well or going negative side
next is the problems and issues since the last report since the last report you saw some
problem and this report here you uh voice out what are the problems that is happening now so
one is the actions and resolution of earlier problem to report the previous worldwide problem
and how to solve it what are the new differences variances means difference different from
the previous one what are the new problems that arise now so you need to identify now your
address in this current report and then next one will be the corrective action correct this
problem facing now and the differences they say this is over scheduled So what kind of
action I should take to overcome this behind type problem so you learn from previous lecture
that how to catch up then you apply some of the approaches that how to catch up stop
outsourcing and so on not getting project control processes so first you need to know the term
control what's the meaning of control control means the process of comparing actual
performance against the plan to identify the division so they missed you collect the data of
the current table you compare what is actually happening with your the one that earlier the
courses of action and you know something happened so what should i do now and you take
appropriate corrective action and from there type

2b)performance measurement and strategic information management

The Strategic Value of Information

1.They develop a comprehensive set of performance indicators that reflects internal and
external customer requirements and the key factors that drive the organization.

2.They use comparative information and data to improve overall performance and
competitive position.

3.They continually refine information sources and their uses within the organization.

4.They review organizational performance.

5.They involve everyone in measurement activities and ensure that performance information
is widely visible throughout the organization.

6.They ensure that data and information are accurate, reliable, timely, secure, and
confidential as appropriate.
7.They ensure that hardware and software systems are reliable and user-friendly and that data
and information are accessible to all who need it them.

8.They systematically manage organizational knowledge and identify and share best
practices.

Measuring the Return on Quality

1. To lead the entire organization

in a particular organization.

2. To manage resources

Balancing the quality cost against expected revenue gains

3. To operate the process that

make the organization work

and continuously improve.

 Quality is an investment.
 Quality efforts must be made financially accountable.
 It is possible to spend too much quality.
 Not all quality expenditures are equally valid.

Overview
Criteria for Performance Excellence Results
The Scope of Performance Management
Human Resource Measure
Customer-Focused Measures
HR Measures can relate to employee well-being, satisfaction, training and development, work
system performance and effectiveness

The Balanced Scorecard

Direct measures of customers satisfaction and dissatisfaction.
Product and Service Measures
Organizational Effectiveness Measures
Measures and Indicators
What is Data?
Quarterly Performance Audit

Relate to attaining key organizational goals and includes unique and innovative measures to
track business development.

Include internal quality measurements, field performance of products, defect levels response
times and data collected from customers.

Leadership and Social Responsibility Measures

Financial and Market Measures
The Role of Comparative Data
The representation of facts that come from some type of measurement process.

Financial performance might include revenue and return on investments while marketplace
performance includes market shares.

Looking at data without a basis for comparison false sense of achievement.

Refers to the Numerical Information that results from measurement.

Managing Information and Knowledge Assets

What is Measurement?
Information

 Financial Perspective

The ultimate result that the business provides to its shareholders.

 Internal Perspective

The performance of the key internal processes that drives the business.

 Customer Perspective

Customers needs and satisfaction

  Innovation and Learning Perspective

Basis of a future success.

Derived from the analysis of data.

The act of quantifying the performance dimensions of products, services, processes, and
another business activities.

Simply collecting data is not enough. Companies must ensures that data are reliable and
accurate, that the hardware and software systems that process the data are reliable, and
that data and information are available to all who need them 9n a timely in a fashion
and secure from those that should not have access to them.

Designing the Effective Performance Measurement System

Identifying and Selecting Process Measures
Linking Measures to Strategy
Practical Guidelines for Designing a Performance Measurements
1. Identify all customers of system and determine their requirements and expectations

2. Define the work process that provides the product or service.

3. Define the value-adding activities and outputs that compose the process.

4. Develop specific performance measures or indicators.

5. Evaluate the performance measures to ensure their usefulness.

Provides a means of setting targets and allocating resources for short-term planning,
communicating strategies, aligning departmental and personal goals to strategies, linking
rewards to performance, and supplying feedback for organizational learning.

Aligning Strategic and Process-Level Measurements

Enterprise Resource Planning (ERP)

Process-Level Measurements
Software packages that integrate organizational information systems and provide and
infrastructure for managing information across the enterprises.

SMART - Simple, Measurable, Actionable, Related and Timely

  Fewer is Better.
 Measures should be linked to factors needed for success.
 Should include a mix of past, present, and future.
 Should be based around the needs of the customer.
 Measures should start at the top and flow down to all levels of employees in organization.
 Multiple Indexes can be combined into a single indexes.
 Measures need to have a targets or goals.

Data Reliability

Analyzing and Using Performance Data

Data Accessibility and Security

The Cost of Quality

Knowledge Management
Analysis
All organizations measure and reports cost as a basis for control and improvement.

Refers to an examination of facts and data to provide a basis for effective decisions.

Interlinking
Term that describes t quantitative modeling of cause-and-effect relationship between external
and internal measures, such as the relationship of customer satisfaction measures to internal
process measures.

Data Mining
Quality Cost Classification
Quality Cost in Service Organization
Appraisal Cost
Prevention Cost
The process of searching large database to find hidden patterns in data, using analytical
approaches and technologies such as cluster analysis, neural networks and fuzzy logic.

Those associated with efforts to ensure conformance to requirements, generally through

measurement and analysis of data to detect nonconformance

Investment made to conforming products from occurring and reaching the customer,
including the following specific cost:

The nature of quality costs differs between service and manufacturing organizations.
  Test and Inspection Cost
 Instrument and Maintenance Cost
 Process measurement and Control Cost

 Quality Planning Cost

 Process Control Cost
 Information Systems Cost
 Training General Management Cost

Capturing Quality Cost through Activity-Based Costing

External Failure Cost
Internal Failure Cost
Occur after poor-quality products reach the customer

Incurred as a result of unsatisfactory quality found before the delivery of a product to the
customer

Activity Based Costing organizes information about the work or activity that consumes
resources and delivers value in a business.

 Cost due to Customer complaints and Returns

 Product recall cost and warranty claims
 Product liability cost

 Scrap and Rework Cost

 Cost of Corrective Action
 Downgrading Cost
 Process Failure

2c)the linkage between the performance measurement system and the budget implementation

1. Performance measurement is not a magic answer. Budgeting is about choices. And choices are about
power and politics. Improving budgeting does not necessarily mean improving decisions. But budgets can
be made better by presenting better choices and presenting them more clearly.

2. Performance budgeting can present better choices by requiring each budget unit (internal and contract)
to answer the basic questions in performance accountability: 
Who are your customers. How do you measure if your customers are better off? How do you measure if
you’re delivering service well? How are you doing on the most important of these measures? Who are the
partners who have a role to play in doing better? What works to do better (including no-cost and low-cost
actions)? What do you propose to do? These questions should be answered on a regular basis throughout
the year, and used once a year to drive the budget.

3. The budget process should formally assess answers to these questions for each budget unit starting from
the smallest budget unit to the agency as a whole. 

4. Paper should be minimized by strictly limiting the number of performance measures at each level to no
more that 3 to 5. Budget narrative and the printed budget document should be kept to strict minimums
which can be separately supplemented in the internal and external budget process.