PBC Cost

Posted by Ralf on September 1st, 2013 — Posted in News

is he who is without taking into consideration the experience gotten. This budget is useful to the excessive and continuous rise in prices, upgrade requirements, change, and steadily increasing costs at all levels, basically. It is very costly and untimely information. The design of some authors, the analysis process of each budget item, starting with the current level of each, and then justify additional expenditures that may require the programs next year, is typical of public administration and should not be the procedure for deciding in the private sphere. To this end, pushed the PBC (zero-based budgeting) as a technique that supports the principle that for the next period the amount of each item is zero. While a valid approach given by the previously executed, another states that nothing exists and everything must be justified from scratch, analyzing the cost – benefit of each activity.The first of the systems (incremental method) modifies the items in the previous period, while the latter transferred to each period responsibility for their justification to the holders of each area. The appearance of the PBC was a reaction to the procedure in public sector – primarily quantitative and qualitative almost anything – that not only contributes to a critical analysis of each game, but a kind of inertia generally promotes an increase in expenditures. Their instrumentation or application involves several stages, the most important the analysis of the items or packages decision because it depends on most of the results to improve their effectiveness. The PBC is hardly operational because it requires each manager starts every year from scratch, as if it had never been active and discover a new way of working and also to evaluate the cost relating to the benefit.In a real budget, the previous reporting period are always subject to change or elimination, and should be carefully analyzed and evaluated in order to their destinations. However, it should be noted that the common budget does not mean that previous expenditures are endorsed and often simply increased. By contrast, requires competition for the periodic review of all proceedings and evaluation of management and activities of each responsible for defining the component parts. The PBC is a process whereby the administration by enacting the annual budget, making decisions to allocate resources for indirect areas of the company, so that in each of these indirect activities is shown that the profit generated is greater than the cost incurred.No matter what the activity is being developed from long ago, if not justify its benefit should be removed, ie on the principle that all activities should be subject to cost – benefit analysis. This technique does not apply to any item of raw material cost, labor and manufacturing overhead. It is immediately applicable, especially in companies where the proportion of indirect costs to the product is greater than the direct costs to total costs.

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