Application Of Managerial Accounting Concepts In Accomplishing Business Objectives

Managerial Accounting Research Paper Outline
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Managerial Accounting Research Paper
APPLICATION OF MANAGERIAL ACCOUNTING CONCEPTS IN ACCOMPLISHING BUSINESS OBJECTIVES
Table of Contents
1 Executive Summary (includes a THESIS statement)
2 The Role of Managerial Accounting in Planning and Control
3 Cost of Goods Manufactured an Statement of Income for Utility of Variance Analysis Effects on Managerial Decision Making
4 Ways Managerial Accounting Systems Support Decision-making in Capital Budgeting Methods
5 Differentiate between Static and Flexible Budgets
6 Compare and Contrast Costing, Cash flow, and Ratios Analysis in Managerial Decision-making
7 Variable Cost Methods, Allocation of Fixed Costs, Appropriate Relevant Costs in Decision Making
8 Break-even Points, Contribution Margins, and Cost Volume Pricing Analysis
9 Organizational and Financial Elements of a Successful Budgeting Process
10 Conclusion
References
Managerial Accounting Research Paper
Executive Summary
Managerial accounting focuses on accounting personnel who make key decisions within an organization including executives, product managers, and sales managers. While this is the case, financial accounting is charged with availing financial information for external use by parties like shareholders and creditors who need to use the accounting information which is typically not detailed. Managerial accounting makes detailed financial projections for the organization’s various segments and includes information such as product profitability in the form of nonfinancial measures. External reporting rules are replaced y internal specifications to enable good decision making.
Management accounting techniques address a specific purpose and may address weaknesses such as the lack of integrated budgeting. Therefore the management should examine specific company goals which are unattainable without using other methods. However some approaches have beneficial tools that can be used across the organization without incurring extra costs. Adopting of these management techniques is slow and inconsistent with their application creating confusion.
The management landscape has many methods which managers need guidance about, making it difficult to know which method works best and what managers require is a general understanding of which model works best in incorporating accounting and financial information which is essential for their job performance. This paper explores various ways in which management accounting is useful in accomplishing business objectives.
The Role of Managerial Accounting in Planning and Control
Accounting aims to communicate financial information that allows users to make decisions. It embodies the segment of accounts that manages this same information for internal financial concerns that pertain to information requirements for external users like customers and other stakeholders enabling management to make decisions which are financially viable and cost effective (Emmanuel et al., 1990). The information preferred upon management is useful in formulating progressive plans for the organization. The various ways in which management accounting is useful in the planning process includes budgeting, evaluation of strategic operations, investment planning, modelling future performance and creation of project schedules.
Planning involves forecasting activities that are aimed at achieving strategic business objectives for short or long term planning through the provision of accounting information to facilitate future planning. Management accounting assesses future strategies in order to formulate future goals to achieve those objectives. It involves decisions on adoption of production systems, price regulation or trade policy regulation as well as capital investment decisions (Emmanuel et al., 1990). It also establishes control over processes through verification of their viability pertaining to the plan.
Utility of Variance Analysis Effects on Managerial Decision Making
The manufactured goods’ value equals the total cost of completed goods dispatched from the inventory of work in progress into the inventory of finished goods. The value of goods sold is equal to the total cost of sales from the inventory of finished goods transferred into the cost of goods sold. All these amounts are important for accountants to generate an income statement for any manufacturing company.
The responsibility of management is to evaluate variances. Costing provides information that is critical in performance evaluation. Standard costs are comparable to actual costs and the deviations within the two are what are referred to as variance. When actual costs are lower than the standard costs, variance results are favourable while the reverse means the results are unfavourable (Horngren, 2002). Variance evaluation is important in effectively controlling any organization. The difference in the total standard and actual costs enables management to conduct an analysis to determine the cause of the variance. Total variance for direct materials is the comparison of direct material costs to standard direct material costs.
When goods are procured at a cost higher, equal to or lower than the standard cost a variance occurs. To properly analyse variance, the total direct material variance is categorised as material price variance, which is the difference between the normal price for materials purchases and the paid amount and the variance of product quantity that compares the standard quantity of materials used against the actual quantity of material used. The variance of quantity is measured in terms of the normal price per unit (Horngren, 2002). Variance calculations can be done through several means such as computation of the values or through algebraic calculations for price and quantity variances. Negative variances offset positive variances and a total variance can be zero due to favourable pricing.
Managerial Accounting Systems in Capital Budgeting Methods
Capital budgeting processes happens by describing the needs, identifying the available alternatives, evaluating the available options and their cash flows, selection of the most suitable alternatives and project audit. Capital budget requirements are identified by the mid level management and communicate it to the senior management in the form of proposals which include the identified need and potential solutions. The senior management then evaluates the proposal and determine whether it is viable (Burns & Walker, 2015).
All organizations make strategic investment decisions that project into the future. The analysis and decisions on long term budgeting is known as a capital expendit...