Labour costs related to actual work are:

• Basic pay
• Overtime pay
• Production and Efficiency Premium

There are many benefits that result from the preparation and use of budgets. For example, businesses can better coordinate their activities, employees become more cost conscious and try to conserve resources, the company reviews its organization plan and changes it when necessary, etc. Benefits of budgeting can be explained as follows:

• Efficient Resource Allocation: By preparing the budget, the required amount of all resources to use in operations can be predicted approximately, before the period begins. Therefore, any unnecessary resources in an operation can be transferred to any other operation to full utilization of capacity (Edmonds, et al., 2000: 285). For example, in the case that the company predicts the low volume of production in a product next year, the labors will not fully utilize their capacity next period. By transferring some labor from the production of that product to another (or by not hiring some employees any more), managers may provide full utilization of resources for remaining labors. Unnecessary production and inventory storage can also be prevented by using the sales forecasts for the upcoming period.
• Communication: Once the objectives are determined and the plans are prepared, management should ensure that all subordinates and superiors understand the objectives and the short-term plan. The budgets are used at this point as a communication tool that translates the objectives into action plans for the company as a whole. In other words, working to attain the budgeted targets means implying the short-term plans determined by management.
• Coordination: Since the organization of a company is a chain of operations, any inefficiency in a division affects the whole organization’s success. In other words, the way to reach the organizational goal is made of paths to attain divisional/departmental goals. Thus, all divisions and employees should work in coordination; otherwise, it becomes almost impossible to reach the common objective. This coordination is provided by the budget because the goals of each division and their interrelationships are determined by the budget. In summary, budgets coordinate all divisions to arrange their activities to attain a common objective (Edmonds, et al., 2000: 285). Performance Evaluation: By determining goals for each division, the budget reveals targets for superiors or subordinates to meet during the budget period. When the period ends, these targets are compared with the actual results and performance of managers and employees can be evaluated by considering the deviations from the target. In summary, the budget determines the standards to meet during the period by management.
• Time Management: Comparing the actual results with the targets does not help managers only with evaluating the performance, but also saves their time by identifying current and potential bottlenecks in operations. Management receives the advanced notices of shortages and bottlenecks through the variance analysis, and gain the opportunity to take corrective actions to minimize the anticipated adverse effects for the next period (Edmonds, et al., 2000: 286; Blocher et al., 2010: 365). For example, a manager may realize the need for additional raw materials for the next period and start searching for suppliers with better conditions. If the budget variances on direct (raw) materials had not signed this need, the company would have to purchase the additional materials for higher prices in a short time, when faced with a shortage of the raw material.
• Motivation: Providing reasonable targets to employees motivates them to work efficiently in order to attain the expected results. Because they know what is expected from them; and that the results will be evaluated at the end of the period. Therefore, the primary objective of employees become reaching pre-determined goals, which are determined by management and communicated via budgets.

As also understood from the information given, the correct answer is E. Efficient resource allocation, communication, coordination, time management and motivation are the benefits resulting from the preparation and use of budgets.

Materials requisition records are the records containing information about the cost of direct materials used on a specific job and in a specific department.

Break Even Point is the volume of production or sales where total costs are equal to revenue.

To calculate the unit cost, there is a five-step procedure of process costing. The steps are as follows:
1. Summarize the flow of physical units of output
2. Compute output in terms of equivalent units
3. Summarize the total cost to account for
4. Compute the cost per equivalent unit
5. Assign total cost to completed units and ending work-in-process inventory

These costs are generally accepted as the investments that companies incur in order to create the needed capacity.

Similar to the fact that successful implementation of short-term plans constructs the way to reach the long-term objectives, attainment of objectives at narrow scope is the path to follow in order to reach the objectives at a broader sense.
Therefore, companies prepare different budgets that reveal objectives at a different scope;

Master budget

Operating budgets

Financial budgets

Functional Budgets

Step 1: Identify the cost object.

The rate refers to the amount of cost allocated to each unit of the allocation base.

Operating budgets reflect the company’s short-term plans related to the implementation of strategic projects, and result in the preparation of budgeted income statement.

Programmed (Routine) Decisions: Programmed decisions are routinely repeated decisions.

The difference between the actual results and budgeted amounts is called “variance”.

Allocation rate represents the amount of overhead cost allocated to jobs whenever a unit of allocation base is used/spent during the accounting period.

Over the years, budgeting techniques have taken different forms in order to improve the efficiency of planning and executing the operations. Different approaches are developed for different companies, depending on the nature and variety of their operations. If the operations are suggested to incur cumulatively over the years, “incremental budgeting” is preferable; whereas “zero-based budgets” may be better for planning each year separate than the preceding one.

As also understood from the information given, if the operations are suggested to incur cumulatively over the years, “incremental budgeting” is preferable, so the correct answer is A.

The information about the budgeting techniques taking place in the options:

Incremental budgeting technique does not require complex calculations or assumptions and can be achieved for various departments easily. Additionally, as the current year’s budget is the basis for it, no large deviations incur in the following year’s assessments, providing the companies a more stable budget year-by-year. Another benefit of using this budget is that the value of equality is created among all departments as all departments are given a small amount of improvement in their targets. However, at this point, this budgeting technique may have some shortcomings as managers may determine lower targets, within which high spending or low revenue generation ability is tolerated. Departments do not need to be innovative or to decrease the costs as far as the budgets are met with the current level of efficiency.

As opposed to traditional budgeting that starts with the current budget, zero-based budgeting requires managers to prepare the budget with zero-base, meaning that all items to be included in the following year’s budget should be analyzed and determined by considering only the next year’s operations. No item can be added to the budget unless the managers justify its need and usefulness for the company.

With the fact that preparing the budget on a departmental basis does not provide accurate information on drivers of success on a company, many companies apply Activity-Based Budgeting (ABB) technique. By applying this technique, the budgeting process is saved from the chart of accounts structure (such as depreciation, marketing, salaries, etc.).

With the kaizen budgets, expectations on continuous improvement are incorporated with the budgeting process. The required amounts of resources are adjusted every time according to the desired levels of efficiency and productivity. Kaizen budgeting approach is much more effective when combined with activity-based budgeting technique.

With the fact that preparing the budget on a departmental basis does not provide accurate information on drivers of success on a company, many companies apply Activity-Based Budgeting (ABB) technique. By applying this technique, the budgeting process is saved from the chart of accounts structure (such as depreciation, marketing, salaries, etc.).

Managers use production budgets to prepare plans for gathering the necessary resources for the budgeted production. One of those necessary resources is direct materials. Plans regarding the direct materials are prepared with the help of two budgets, which are;

1. Direct materials usage budget, and
2. Direct materials purchase budget.

The sunk cost is excluded from future business decisions. Thus, it doesn’t need to be taken into consideration while decision making. In other words, all costs that do not qualify as relevant costs are called sunk costs. Main features of sunk costs are that they are not related to future decisions and they do not change between various alternatives.

Flexible budget is the budget that adjusts the revenues and expenses according to actual sales volume.

2-4 should be change

One or more of the following objectives are taken into account in pricing decisions:
• Maximizing profits: Maximizing business profitability is the leading objective of any pricing policy.
• Maintaining or increasing market share: Maintaining and increasing the market
share of the business in the sector is closely related to the pricing decisions.
• Determining socially responsible prices: Today, most of the businesses take various social objectives such as environmental factors, legal restrictions, moral factors into consideration while determining their pricing policies.
• Maintaining the minimum return on investment rate: Businesses consider each
product or service as an investment. They do not invest in any production or service unless they provide a minimum return. Businesses try to determine a price that will provide a minimum return on their investments.
• Being customer focused: It is aimed to make the customer feel that the customer needs and sensitivities have been reflected in the price while determining the prices.
• Maximizing sales revenues: In the case of cash need or uncertainty in the market, businesses can set a price to increase their sales instead of their profits.

It should be Throughput Costing Method

Normal costing method also suggests covering all manufacturing factors as product cost in parallel to the full costing method; however, in normal costing method costs of indirect manufacturing
factors are allocated to products depending on the utilization rates of these factors.