Application of Managerial Accounting Concepts in Accomplishing Business Objectives

Application of Managerial Accounting Concepts in Accomplishing Business Objectives
Student’s Name
Institutional Affiliation
Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc465156194 \h 3Body PAGEREF _Toc465156195 \h 4Roles of Managerial Accounting in Business Organizations PAGEREF _Toc465156196 \h 4Scope of Managerial Accounting PAGEREF _Toc465156197 \h 4Marginal Analysis PAGEREF _Toc465156198 \h 5Break-Even Analysis PAGEREF _Toc465156199 \h 5Constraint Analysis PAGEREF _Toc465156200 \h 5Inventory Valuation PAGEREF _Toc465156201 \h 6Target Costing PAGEREF _Toc465156202 \h 6Transaction Analysis PAGEREF _Toc465156203 \h 6Trend Analysis PAGEREF _Toc465156204 \h 7Capital Budgeting PAGEREF _Toc465156205 \h 7Standard Costing PAGEREF _Toc465156206 \h 7Summary PAGEREF _Toc465156207 \h 7Conclusion PAGEREF _Toc465156208 \h 7References PAGEREF _Toc465156209 \h 9
Application of Managerial Accounting Concepts in Accomplishing Business Objectives
Introduction
Managerial accounting is a set of techniques applied by managers in generating financial information that can be used in making vital decisions in a business unit. Businesses accomplish their objectives when they can effectively solve problems arising from within their operations. This is the main objective of applying managerial accounting in running the businesses. Many businesses have collapsed due to failure in their managerial accounting strategies. Studies have shown that 70% of businesses fail due to poor management which entails poor decision-making and problem-solving (Needles & Crosson, 2013). Poor decision making is attributed to lack of substantial information on which the decisions are based on. Planning and budgeting are prepared by the managerial accountants to help in highlighting the expected income and the projected expenditures. These two elements form the core of managerial accounting and are therefore important to understand.
Management accountants have duties to evaluate risks and employ strategies through planning, forecasting and budgeting. To achieve this, there has to be a good understanding of the financial, operational basics. Planning entails putting resources together towards set goals of a business enterprise. Consequently, the paper aims to highlight, the roles and scope of management accountant, application of various concepts and methods of managerial accounting such as break-even analysis, inventory valuation, target costing, transaction analysis, trend analysis, standard costing and capital budgeting as the key to accomplishing business objectives.
Body
Roles of Managerial Accounting in Business Organizations
Managerial accounting serves to enhance decision making in business organizations through a comprehensive collection of data, processing and documentation of information. The management uses the information in planning, controlling as well as evaluating business operations and strategies (Drury, 2013). Management accounting helps in guiding the accounting efforts towards the achievement of the goals of business. Also managerial accountings helps in establishing business internal frameworks, formulation of strategic business plans and in making managerial decisions based on scarce resources (Drury, 2013)
Scope of Managerial Accounting
As indicated by its role, managerial accounting gathers information within an organization to help in the facilitation of decision making. This means that data is gathered from various arms of the organization. Hence, the scope of managerial accounting is vast and includes each and every operation of the business. Accounting management draws its members from the accountants, operational managers, finance professionals and marketing managers (Drury, 2013). However, to be precise, managerial accounting covers the following areas: financial accounting, cost accounting, evaluation accounting, statistical methods, operations research, office services, law, internal audit, external reporting and taxation.
Elements of managerial accounting include margin analysis, break-even analysis, constraint analysis, inventory valuation, target costing, transaction analysis, trend analysis, capital budgeting analysis as well as standard costing (Drury, 2013). Analysis of each of these elements yields information that is helpful for managers to make adjustments in the processes of the organization. Below is the analysis of each element and how it contributes to the achievement of the business objectives (Drury, 2013).
Marginal Analysis
Applying marginal analysis in making decisions in a business organization is helpful in making decisions so as to maximize profit. For example, using marginal revenues and marginal cost to decide on the optimal production levels in a firm. A business will continue increasing its production until a point where the marginal benefit is equal to marginal expense (Mowen, Hansen, & Heitger, 2011).
Managers use information generated from the marginal analysis in increasing production to increa...