Question

The implementation of budgeting in a world class manufacturing environment may be affected by the impact of (i) total quality ethos (ii) just-in-time philosophy and (iii) activity-based focus. Briefly describe the principles incorporated in each if the three and discuss ways in which each may result in changes in which budgets are prepares as compared to traditional incremental budgeting.

Answer 1

A core definition of total quality management (TQM) describes a management approach to long-term success through customer satisfaction. In a TQM effort, all members of an organization participate in improving processes, products, services, and the culture in which they work

`Just-in-time' is a management philosophy and not a technique. It originally referred to the production of goods to meet customer demand exactly, in time, quality and quantity, whether the `customer' is the final purchaser of the product or another process further along the production line.

ABC focuses attention on cost drivers, the activities that cause costs to increase. Traditional absorption costing tends to focus on volume-related drivers, such as labour hours, while activity-based costing also uses transaction-based drivers, such as number of orders received