Suitability of Activity Based Budgeting for Orbital Corporation Limited

This report discusses the suitability of Activity Based Budgeting (ABB) for Orbital Corporation Limited. It includes a description of the organization, ABB and its features, differences between ABB and traditional budgeting system, and the suitability of ABB to Orbital Corporation Limited.

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A REPORT ON SUITABILITY OF ACTIVITY BASED BUDGETING FOR ORBITAL
CORPORATION LIMITED
By (Name)
Course
Tutor
University
The City and State where it is located
Date

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Table of Contents
Cover page...............................................................................................................1
Description of the Organization..............................................................................2
Description of ABB and its Features......................................................................4
Different of ABB and Traditional Budgeting System............................................6
Description of the Suitability of ABB to Orbital Corporation...............................8
Reference List........................................................................................................11

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Overview of Orbital Corporation Limited
The Orbital Corporation Limited was hitherto known as Orbital Engine Corporation
Limited when it was founded. It changed its name in October in the year 2014 to Orbital
Corporation Limited. The company was established in the year 1972 and is being based in
Balcatta in Australia. Although, in recent years the business as expanded it based to other
continents in the globe, such continents are Africa, Asia and Europe (Charest & Picky 2016,
p.143).
On the other hand, Orbital Corporation can also be described as an industrial technology
limited company has stated by (Burton 2017, pp. 12-15). It engages in several activities
including examination and research, enterprise, manufacturing and development. The company
also take part in manufacturing of technological products of unmanned inflight vehicles, and in
productivity and safety. It as well provides manufacturing services in consumers industries in
different parts of the globe such as Europe, Africa and Australia (El-Masry 2017, pp.347-389).
The firm develops and deliveries engines, propulsion systems, fuel components systems and
propulsion for the original components equipment developers and the in the automobiles after
marketing services. Similarly, the company deals in the manufacturing of LPG, which is known
as liquid propane gas system for various companies such as Ford Eco-LPi Falcon, where it
handles a large range of passenger vehicles and utilities (Creghan 2013, pp. 214-237). Orbital
Corporation Limited Company also trade in importation, assembling and in distribution of
several LPG structures for the aftermarket LPG installers and automatic factories.
Correspondingly, OCL offers consultation services including embedded, engine
managing, controlling systems, automobile and engine trail or testing, development of products

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and certification of the same product it has develop (Fellahin & Gasman 2014, p. 46). It has also
extended its consulting services to monitoring and acquisition of data, and in prompt prototyping
clarifications. In designing the company is mandated to develop CAD and CAM, and statistical
analyses of solutions for power-train and in engineering solicitations. Moreover, the firm is
licenses the following systems, FlexDI which is a marine technology, and scooter or motorcycle
market systems (Fellahin & Gasman 2014, p. 46). The company can be describe has the one that
particularly operates in the aviation, automobiles, naval, motorbike and unmanned flying
machine system engine marketing.
Description of ABB and its Features
According to Marcy and Demotte (2014, pp. 102-472) is that ABB is a system which
carry out automatic recording, research and analysing of the activities that result to cost for the
organization. Marcy and Demotte (2014, pp. 412-452) added that these systems are not merely
of the adjustments of the former budgets of accounts because of inflation or because of business
expansion but because of the proficiency in the organization operations and developments
needed in budgeting based on various activities of the same firm. On the other hand, Creghan
(2013, pp. 214-237) highlighted that ABB or Activity Based Budgeting is termed as a planning
system in which costs are connected with the activities and expenditures budgeted for are being
complied has based on the expected level of activities.
The concept of ABB is more different from traditional budgeting where costs existing
level were adjusted to the inflation and main revenues costs for the purpose of deriving the
budget annual or yearly. The budgeting system permits a high degree of refinement when it
comes to cost planning by focusing on the attention of the volume and kind of activities opening

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in within the business or organization (Fellahin & Gasman 2014, p. 46). The result of using ABB
system is seen in the management planning because it play main role in reduction of level the
activities required to engender revenue, which in return improves profits generation to the firm
as explained by (Huang 2017, pp.21-40). By using, the system the managers will be enforced to
have a more detailed knowledge of the organization procedures if they need to improve the cost
schemes of the firm. The activity based budgeting is likely to be used by new organization
which do not have historical information of their budget that they can rely on. It is also useful to
firms that are undergoing materialistic changes. For examples, these changes can be new
subsidiaries, significant clients, change in the location of the business, or change in the location
of the business (Huang 2017, pp.21-40).
The activity based budgeting procedures can be broken down into a three-phase process.
The three-step will be help an organization to identify pertinent activities that leads to cost
driving. Cost driving or drivers are the things that responsible for the cost being incurred by the
company in its revenue and expenses (Massa & Afuah 2017, pp.71-104). The three-phase
procedure of the ABB include; the determining of the number of the units connected to every
activity. The number is normally the baseline of the cost calculations. Second phase, is
delineating the cost of each unit of the activity and then multiplying the result by the level of the
activity. The third phase, is the giving various instance of the ABB. Example of last step can be,
when a company expects to receive 40,000 orders of sales in the future and cost to process one
order is $ 1. Thus, the ABB for the expenditures connecting to processing of sales orders for the
next year will be $ 40,000 (Massa & Afuah 2017, pp.71-104).
Features of Activity-Based Budgeting

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Some of the features of activity based budgeting include the following as discussed by (Maxcy &
Demette 2014, pp.102-372); (Robbersmz 201, pp.67-78).
Permits control of the budgeting procedures
The activity-based budgeting allow organizations to be more concerning and regulates
the budgeting process within the firm. In this system the planning of revenues and expenses take
place at the precise glassy to provide useful information and details regarding budget projections
(Saebi 2012, p.201). In addition, it allows the administrative organ of the company to have more
control of the budgeting processes as well as in alignment of the budget with all company
objectives.
Expensive nature of the ABB
The activity-based budgeting is considered to be more expensive than the traditional
budgeting systems. It both requires a large amount of funds and time to be developed. For
instance, if the management of a company need to develop ABB they will need more information
and time for its establishment (Maxcy & Demette 2014, pp.102-372). They also requisite
additional expectations and managerial insight that results into potential of various opportunities
for the budgeting erroneousness. In terms of maintenance, the ABB requires analysis and
ongoing looking after of the budget variances that needs more resources compared to other
budgeting techniques and methods.
Provides useful information
The activity based budgeting provides significant information in the total quality
management or TQM environment (Saebi 2012, pp.201-202). These useful data is enables the

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managerial of the organization to relate the cost of any activity with level of the service being
provided. From this relationship, it will be easy from the company to make wise decision
concerning several activities.
It is evaluative
The activity based budgeting is evaluative because it evaluates every cost driver in the
company. It takes into regard all phases involved in any business activity. With this evaluate
characteristic, ABB eliminates irrelevant activities and only keep those activities which are
necessary for the business prosperity
Economical edge of the business
Activity based budgeting is a system that eliminates all sorts of irrelevant and
unnecessary activities that help the company to lower its costs (Robbersmz 201, pp.67-78). The
lowered costs results into the production of products and services of lowest prices compared to
those of competitors. Hence, helping the company to gain a competitive or economical edge.
Ways in ABB is different from Traditional Budgeting System
Srinivasan and Dobbs (2017, p.220) suggested various ways in which activity based budgeting
differ from the traditional budgeting systems and they are discussed below in details.
Activity based budgeting insights permits a better production procedures and in making
of decision as well as better allocation of resources to support various priorities (Williams &
Rycroft-Malone 2018, p.45). By allowing balancing of operational needs the ABB tries to avoid
summation of the financial impacts on the operational infeasible related to unnecessary planning.

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Its means that the traditional budgeting system was not avoiding the calculation or summation of
negative financial operations, thus resulting to unnecessary plans in the budget.
In ABB low-level managers and workers can discuss the operational conditions and terms
while in traditional budgeting system lower-level managers and workers can discuss the financial
conditions and terms. It provides a vividly and clear way of how the company resources and
activities are connected it help managers and workers to understand as well as to communicate
the information of the budget among themselves. This help workers to understand what can be
done best to improve their jobs and how they can improve their job performance as well.
It enhances traceability and limpidity to allow balancing in capacity. ABB constitutes of a
complex and sophisticated operating model that enable avail various set of tools for the
balancing of the budget capacity compared to traditional budgeting system which lack cultured
and complex operating prototypical.
Activity based budgeting is different with the traditional budgeting system or TBS
because it integrates budgets with other management initiatives. It attempts let out the vertical
orientation of traditional budgeting system, by endeavoring of horizontal orientation which is
able to cut all over the organizations boundaries. Hence, permitting the integration of the budget
with initiatives such as KPI.
Discuss on whether ABB is suitable for Orbital Corporation Limited
The activity based budgeting is suitable for the Orbital Corporation Limited as explained in the
following points.

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First, ABB is suitable to the OCL because the cost of the budgeting is can be divided into two
potion. The division of the cost can either be in fixed or variable cost. By dividing costs into two
division ABB will provides Orbital Corporation with quality data of how to design a suitable and
flexible cost system when it comes in its consulting services and manufacturing apprehensions.
Secondly, the suitability of ABB to the client firm which is OCL is in the properly
distinction of the made on the cost patterns and behaviors. Because activity based budgeting
system indicates the cost patterns and how these cost behaves over a given time the organization
will find it more suitable in its varies costs activities.
Third point concerning the suitability of the ABB to Orbital Corporation Limited is the
relationship between behaviour patterns and volume, diversity relationships, and events and time
associations (Yudhoatmojo, Sandhya & Yohans 2014, pp. 811-866). The firm will find it easy to
budget by considering all the associations related to the ABB. For instance, by considering time
and event associations the organization will determine and establish which event to budget on
more compared to other events as well as the time of the events.
Appropriateness of cost driver can be identified when using the ABB. Thus, it
appropriate and suitable for Orbital Corporation Limited has it will enable the company to
identify and overhead the traces of product being produce by the organization. The appropriate
cost driver will the firm determine which cost to incur and which one to be in gored at what time
during budgeting procedures.
According to Alex and Miller (2017, p.687) description is that activity based budgeting
or ABB can be suitable for a company has it comprises cost drivers. Therefore, the Orbital

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Corporation Limited finds ABB seemly because of it constitutes of cost drivers which turns as
dictates of the cost behaviour patterns within the organization departmental.
Finally, the activity based budgeting is suitable for OCL because it helps the organization
to develop a based costing structures within the organization formulation (Al-Salty, Gharaibeh &
Elias 2016, pp.610-813). Developing of activity based costing in condition with ABB has three
phases according to (Bernice, Berezina & Cobanoglu 2015, p. 988). The first phase is the
identification of the functional sections with the departments such as production and distribution.
Second phase, is the separation of functional activities. The third phases, identification of the
supporting activities and aspects that impacts main activities. Consequently, ABC will help the
organization to trace its cost from resources to company activities and then to particular
products.

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Reference List
Alex, M. & Miller, L., (2017). ABB system operation and implementation in large organizations.
Journal of Creativity Information Administration, 31(4), p.687.
Al-Salty, Z., Gharaibeh, X. & Elias, T., (2016). The relationship between activities based
budgeting and traditional budgeting system: A theoretical perspectives of management.
International Journal of Business Management and Financial Research, 47(4), pp.610-813.
Bernice, H., Berezina, K. & Cobanoglu, F., (2015). Suitability of activity based budgeting to
large scale firms in Europe. International Journal of Modern Economical Management, pp.988-
997.
Burton, C., (2017). Managerial Accounting Informants. In accounting practice in European
financial management (pp. 12-15). Routledge.
Charest, T., & Picky, M., (2016). Description of the first Australian Company- Orbital
Corporation Limited, p.143. [Retrieved On 18th September, 2018 Online]
Creghan, S. H. (2013). Main Feature of Activity Based Budgeting. Journal of Management
Trends. (2) 2. (pp. 214-237). Concordia University Press.
El-Masry, A., (2017). Why do consumers companies trust ABB? Journal of Managerial
Accounting 55(4), pp.347-389.
Fellahin, S., & Gasman, O., (2014). Adapting and striving with numerous operational models in
BUSINESS. Innovation Management Journal, p. 46

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Huang, M., (2017).Evaluation of ABB and ZBB suitability to organizations. Journal of
Marketing and Economic Research, 81(3), pp.21-40.
Massa, L., & Afuah, A., (2017). A critical assessment and evaluation of various features ABB.
Academy of Management Accountings, 111(2), pp.71-104.
Maxcy, S., & Demette, E., (2014). Fundamentals of accounting in higher education and
business strategies. Page Press, pp.102-372.
Robbersmz, F.G., (2017). A review of diagnostics and prognostics of low-speed machinery
towards wind turbine farm-level health management. Managerial Accounting Reviews Jouranal,
55, pp.67-78.
Saebi, S., (2012). Business and operational model in ABB and ZBB: the features of budgeting
systems. Journal of Management Accounting, pp.201-202.
Srinivasan, R.S. & Dobbs, C., (2017).What is activity based budgeting? Smart Cities Businesses:
Basics, Philosophies, and Solicitations in Management, pp.219-221.
Williams, L., & Rycroft-Malone, D., (2018). Exploring the use of traditional budgeting system
and activity based budgeting: Evaluation Aspect of Modern Accounting, pp.41-78
Yudhoatmojo, M.B., Sandhya, O.I. & Yohans, A.Y.., (2014) Examples of activity based
budgeting relationships and association: In Informatics and Computing (ICIC) pp. 811-866.
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