managerial accounting for managers read online

managerial accounting for managers read online

The Importance of Managerial Accounting for Managers: A Comprehensive Guide

1. Introduction to Managerial Accounting

In today’s highly competitive business environment, it is imperative for the firm to have accurate and reliable estimates and updated information concerning the revenues, costs and value being created. To a significant extent, the responsibilities for these managerial accounting tasks rest in the managers of the firm. Frequently, the managerial accounting focus has been on the first two and generally only one (i.e. cost management) in the context of term contracts. With rapid technological, economic and business changes, many companies have adopted some or parts of total quality management, just in time inventory and/or advanced accounting configuration/production management concepts/materials requirements planning. In this paper, we provide managerial accounting, management context.

The concept and analysis are useful for academics and researchers exploring the role of management accounting in the firm and the determinants of organizational practices. Moreover, the concept is useful for managers, management consultants and worker councils seeking to improve the effectiveness and functioning of cost accounting systems. Overall, managers have the responsibility to direct the firm’s efforts, and can do so in an effective and efficient manner when managerial accounting provides accurate and reliable estimates and updated information of revenues, costs and value creation. Far from being a punitive and authoritarian administrator, the responsible manager must communicate with the employee.

Initial or preliminary contributions include having created an extensive source of examples and proposals of rational cost estimates, translated managerial standards and concepts, evaluated employee performance in terms of normal returns, related FECM concepts with the overall accounting framework. Subsequent or further research should include examining alternative policies that may be of special interest in general services. The results show that managerial accounting adds value to the firm in several ways.

In this paper, we provide a brief introduction and extensive background of managerial accounting. We then describe the steps in choosing a product and the cost concepts commonly used in FECM. We also discuss the generally accepted accounting principles for inventory management in both financial and non-financial measures of performance in FECM. Finally, we present the typical marginal standards used by managers when guiding and motivating employees or teams.

2. Key Concepts and Principles in Managerial Accounting

Managers and accountants in the corporation perform the same tasks that underlie the operations of profit-making firms across the globe. As such, this book places a major emphasis on the need for students to fully understand the fundamental concepts, rather than merely instructing students on how to go about closing each period successfully. The easy part of accounting is performing the calculations; the difficult part is knowing when to use different managerial accounting tools and techniques. This function of the accountant is not easy and also cannot be taught to people who do not work diligently on this activity.

Learning objectives: – Understand the difference between managerial accounting and financial accounting. – Define relevant costs and summarize the advantages of relevant-cost analysis. – Discuss the theory of constraints. – Evaluate whether a business segment should be dropped. – Understand the meaning of terms such as opportunity cost and explain why the accounting for these costs is often overlooked. – List the five steps necessary to manage a bottleneck. – Understand the negative impact of incorrect units of measure. – Show an understanding of target costing and how it results in a proactive cost management attitude. – Be able to calculate the breakeven point for a business. – Understand the concept of operating leverage and how the use of leveraged funds can increase the overall return on a business.

3. Strategic Decision-Making with Managerial Accounting Tools

Joint Products and By-Products: In some production processes, several products might be produced simultaneously. The objective is to allocate the joint and common production costs—like total costs of production or the costs up to the split-off point—among the individual products. The primary means of allocating joint costs are the relative sales value, the relative physical quantity, and the net realizable value methods. The by-products characteristics are similar, but they differ from joint products in that they provide a somewhat lower source of revenue compared to joint products.

Making a product or buying it from an external supplier: In some cases, it is cheaper to make a product compared to buying it from an external supplier. Other things being equal, the relevant cost to compare to the price quoted by the supplier is the incremental cost, i.e., the difference between two scenarios, one including buying the product and the other making it.

Cost-Volume-Profit (CVP) analysis: A CVP analysis looks at fixed and variable costs, and the relationship of volume with costs and profits. The break-even analysis is a special case of the CVP analysis that tells you what level of sales revenues is needed to cover all of the operating costs (including both fixed and variable costs) and cover all the financing costs.

4. Budgeting and Performance Evaluation

A useful way to understand the setting of managerial accounting and the body of knowledge that has developed is to examine the basic concepts and methodological tools that managerial accountants use to guide managers’ operational decision making. Understanding these tools and the decisions they inform give one a basic appreciation for the organizational environment in which managerial accountants work. Then, as you gain insights into the complexity and challenge of the decisions that are informed by managerial accounting, you can better appreciate why managers call on these professionals to help them make sense of their operations.

Managerial accounting provides several techniques to help managers plan, implement, and control operational activities. These techniques help managers estimate future product demand, establish and control operating budgets, evaluate managers’ performance, and identify the costs of products, services, and activities efficiently. This guide first focuses on how managerial accounting supports decision making within companies and then turns to the role of planning and control systems. How can managers predict the future? What is a budget, and why is it important? How does feedback help managers control operations? These are some of the questions we answer in the next chapter.

5. Advanced Topics in Managerial Accounting

Increasing the value of a firm is a strategic goal of all organizations, both profit-oriented and not-for-profit. The use of value-chain-related concepts management accountants have developed and supported is one approach to reaching this objective. Again, whether the firm is a unit of a Fortune 500 company, a government contractor, or a participating unit of a league of non-profit organizations, management accountants can draw upon their experiences and help their colleagues enhance the value provided by their own organizations. These days, increased interest in value-chain-related topics has several names: activity-based management, activity-based costing, business process reengineering, cost of quality, value analysis, and target costing are just a few of the methods available to help both managers and their employees improve their decision-making abilities and, ultimately, the performance of their organizations.

The importance of modern managerial accounting is not limited to the conventional topics discussed earlier. Intense competition, shortened production and market development cycles, and increased globalization have created the need for quality information to support decision making in areas such as process improvement, time-based management, and new product development. These topics are increasingly being addressed by accounting practitioners.