Why Are Firms Reluctant to Use Actual Costing? How Does

question 104

Essay

Why are firms reluctant to use actual costing? How does normal costing solve the problems?

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Definitions:

Budgeting Process

A systematic approach where businesses estimate their future income, expenditures, and capital needs to achieve their financial goals.

Selling Price

The amount of money for which a product is sold to the customer, not necessarily reflecting its cost or intrinsic value.

Department Spend

Relates to the total amount of money allocated and spent by a specific department within an organization.

Ensuring Budget

A financial plan that is designed to make sure all finances are covered and allocated appropriately for a certain period, often aimed at preventing overspending or deficits.