Answer to Question #159963 in Management for Prince

Question #159963

Subject : Business Performance Measurement

1."Target costing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably" explain? ( please answer in 200 to 250 words)

2."The goal of performance system is to implement strategy "elucidate?(please answer in 200 to 250 word's

3.Differentiate between flexible budgeting and activity based budgeting?(please give at least 10 points for difference)

4.which is more relevant in todays environment (please answer in points )

a)activity based budgeting or

b)flexible budgeting

Expert's answer


Target costing is the initial process to manage a company's future returns strategically. The company would accomplish this goal by deciding the life cycle cost at which the company must produce a proposed commodity with the specific quality and performance if the item's anticipated selling price is to be gainful. Target costing causes input to the product development process and not its return. The company can enact its target cost by estimating the suggested product's anticipated selling price and subtracting the desired profit margin. The main object of the target cost is to design the goods and services that meet customer satisfaction and can be executed at their target price.

Target costing is a technique of cost and a management approach of establishing market conditions, considering factors such as comparable goods, switching costs for the consumers, and level of competition, among others. Those factors are vital for they help the management when they intend to control the costs as they have limited control over the selling prices.

The advantages of target costing includes;

 management commitment to gain competitive advantages

it values the customers since the products are designed from customer's expectations.

It enables improvement in the company's operations, creating a measurable economy.

It helps in achieving the best value of cash instead of just realizing the minimum cost.


The performance system ensures that the activities meet an organization's objectives inappropriately and professionally. The performance systems could concentrate on producing an organization, department, employees, or management processes. The organization's senior leadership or task owners are responsible for organizing and propagating the performance system. It can include preparing timely outcome and coaching, specifying duties and feedbacks, canvassing workers effective productivities and behaviors, awarding best performers, and so on. The main objectives of the performance system, including

a.      Consistency

b.     The organization's decision on workers' rewards, promotions, transfers, or other activities should be congruity.

c.       Organization impacts

d.     The organization should identify daily returns, including financial, from always having responsible and hardworking employees.

e.       Motivation

f.      All organization workers should be highly inspired. The management can identify more productive employees by using objective performance appraisal to determine promotions, transfers, rewards, and other policies. Motivation will encourage employees to improve on their performance.

g.     Needs for training

h.     Evaluation of employee’s performance can help to spot the worker with the weakness that demands training.

i.       Morale and retention

j.       Highly motivated workers are likely to be loyal. Thus, the management will behave beneficial training worthy employees even as the national laborforce become more mobile. Moreover, moral improvement results in more cordial, an increase in output, and reduced labor cost.

k.      Firing risks

l.       The performance system can help the organization to identify low-performance workers who should be dismissed. It is possibly more significant that management may be ready to terminate inadequate workers if an objective evaluation system determines the shortcoming.


Deferent between fixable budgeting and activity-based budgeting.

a.      Activity-based budgeting is the budgeting technique where the activities that incur costs are documented, analyzed, and studied. It hardly accounts for inflation or business development by adjusting previous budgets, while fixable budgeting is a budget that adjusts or flexes with the changes in activity or volume.

b.     Fixable budgeting is highly enlightened and more beneficial than activity-based budgeting, in which its amount does not change.

c.      Activity-based budgeting(ABB) is mostly applied by businesses to focus on the company's short-term goals instead of flexible budgeting.

d.     Flexible budgeting has too many rules that can be easily broken by individuals who try to work within the boundaries and is susceptible to cheating, which is not the case with ABB.

e.      ABB does not incorporate irregular payouts, but a flexible budget does, which enables these payouts to used when funds are most needed

f.      ABB work and focuses on output that drives cost while a flexible budget does not.

g.     ABB has an advantage over Flexible but Differentiate between flexible budgeting and activity-based budgeting? (please give at least 10 points for difference)get because it allows one precisely identify the associated cost for each operation.

h.     A flexible budget can be easily manipulated or modified about attained levels, which is not the case with ABB budgeting.

i.       ABB is costly and time-consuming, relatively more than flexible budgeting as it is intensively resource-based.

j.       Lastly, ABB is more complicated than Flexible budgeting, for it requires a highly skilled accountant to deeply understand the business processes within a simple and complex production cycle.

4. Fixable budgeting is relevant in today’s environment because it is;

a.      It is relatively easy and straightforward to implement.

b.     It is easy to standardize.

c.      It is easy to an absolute continuity.



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