Southern New Hampshire University
Introduction
The budget process is an important component of any organization. This paper discusses the budget process, variances, and the major reasons that propel the firms to make the decision that they make. This paper appreciates that fact that the make or buy decisions helps to improve the efficiency of an organization.
Part A: Budget Process and Variance
The differences between the sales can effectively be understood through the budget process and the variance for materials such as labor and overhead (Nobles, Mattison, Matsumura, 2014). Variances can occur due to the overhead costs that affects the actual sales and the profitability of the firm. The variance may be caused by the price and supply of labor, materials, and overhead as their availability is directly tied to the economic conditions of a state and the current market forces.
The ethical considerations should form part of the change in the original budget and the final budget to help make the business sustainable (Roxana, 2014). After evaluating the actual variance in labor, materials, and overhead, the application of business ethics will provide proper support of the budget initiatives. Furthermore, the ethical conservations will promote the efficiency and increased profitability of the firm.
Part B: Make or Buy Decision
The decision to make or buy must be executed after careful consideration of some factors. The forces of the market will inform the make or buy decision as it influences the profits made in the market. Besides, the benefit of the stakeholders must be given priority in deciding whether to make or buy. Furthermore, the cost of materials, labor and the availability of the products in the house will affect the make or buy decision. The decision to make or buy will only involve clients with good ethical practices. Doing business with the right clients will help the business to avoid unnecessary problems and to save its reputation.
Part C: Non-Financial Performance Measures
Ethically, the company should apply the use of non-financial measures with integrity to avoid damaging the company reputation. Therefore, they should only rely on accurate information as they present their data for company development. In addition, they should deal with clients with a good reputation to help protect the company image.
Conclusion
This budget process, variance, make or buy decisions, and the non-financial performance measures are essential components of accounting. The understanding of the budget process and variance make it possible to analyze the operational results and to determine the changes necessary to make a firm more efficient. The decision to make or buy should be approached with ethical consideration to make the business more efficient.
References
Epstein, B.J. & Jermakowicz, E.K. (2010). Interpretation and Application of International Financial Reporting Standards 2010 (7th ed.). UK: John Wiley & Sons
Nobles, T. L., Mattison, B. L., Matsumura, E. M. (2014). Horngren’s financial and managerial accounting (4th ed.). Upper Saddle River, NJ: Pearson Education, Inc
Roxana, A. E. (2014). A theoretical model of code of ethics conceptualized from companies' public disclosures on ethics. Accounting and Management Information Systems, 13(1), 111-158
