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Activity-Based Cost Reduction Information in Governance - Coursework Example

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The author of this coursework "Activity-Based Cost Reduction Information in Governance" focuses on the activity-based costing. According to the text, it refers to an approach of allocating expenses in relation to resources consumed during the task of producing each of the products of services…
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Activity-Based Cost Reduction Information in Governance
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 How Board and Audit Committee Utilize Activity-Based Cost Reduction Information in Governance
Activity- based costing refers to an approach of allocating expenses in relation to resources consumed during the task of producing each of the products of services (Carver, 2011). When using this technique, the managers are able to assign both direct and fixed cost to each of the task in production of the products or services (Firstenberg and Schoff, 2009). The auditors are responsible for establishing the extent in which the company’s board or managers have achieved their production goals. The auditors will achieve their goals by comparing the actual performance with activities planned by the organizational managers or board.
The board members are responsible for setting the organization’s goals and strategies to achieve them within the given period (Carver, 2011). This requires board members to have full information concerning products and services they intend to produce. The board members are responsible for budgeting for the resources the organization will require in the production of specific commodities. The information about resources required for the production process is essential because the board is aware of exactly what to produce in terms of quality and number of units of each product they will produce (Firstenberg and Schoff, 2009). The information also relate to the time in which the board members expect to raise the required resources and when they will complete the production process. The board will be able to determine the area of shortage of resources for the completion of the production task for each activity or service and will decide whether to reduce the number of units to be produced for each commodity or whether to add more resources in order to produce the targeted quantity (Carver, 2011). Since charitable organizations aim at meeting specific needs of the society, activity-based costing will help the board members to establish a base for mobilizing more resources from financiers of the organization to provide essential goods and services in the society.
The work of auditors is to obtain proof of the efficiency in which organization has utilized its resources. The auditors use activity-based costing information set by the organization’s board to make comparison of what the board has actually produced in relation to what the board had planned to produce (Carver, 2011). The auditors will attest the value of each product or service in relation to the expenditure set by the board. The auditors have a duty to match the quality of products or services with the resource used in producing those commodities. Since the man aim of the charitable organizations is to serve a specific role in the community, auditors will be able to determine whether the products or services produced by the organization serve specific interest of the public (Firstenberg and Schoff, 2009). The management should ensure that the resources are utilized efficiently by applying the most competent approaches in their production activities.
In conclusion, determining the value of the product based on the cost incur in the production process for each item is beneficial for both board members and the auditors. It helps the board members to decide the most efficient production process. The board members are able to set a target of the amount of each product, or service they will produce based on the available resources. This is also beneficial to the auditors who can effectively compare the efficiency in which an organization has utilized its resources during the production process.
Carver, J. (2011).Boards that Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations. John Wiley & Sons. 448 pages
Firstenberg, P. B. and Schoff, R. (2009). The 21st Century Nonprofit: Managing in the Age of Governance (2nd edition): ISBN-13:9781595422491. 336 pages Read More
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