managerial accounting 16th edition read online

managerial accounting 16th edition read online

The Importance of Managerial Accounting in Modern Business Practices

1. Introduction to Managerial Accounting

Broadly, in the context of business, management performs the following major functions: – Planning the company’s future course – setting the direction involved in growing the business, be it through diversification or growth within a market. – Decision-making for the whole company – identifying and developing those ranges of products and services that the company will sell. – Actual business activities – managing and controlling the work activities that build production capability, ensure quality control, and market the products or sell the services that economies of size and special skills to produce.

Managerial accounting is concerned with providing information to managers – that is, people inside an organization who direct and control its operations. Hence, it is also referred to as management or cost accounting. The management of an entity grows and flourishes based on its managerial effectiveness. Managerial effectiveness is affected by the planning, decision-making, and control functions performed by managers on behalf of the entity. Information is a vital input into this process of management, and a manager’s performance will be judged largely by the value of the decisions made by an organization. It is managerial accounting that provides much of the necessary information.

Introduction to Managerial Accounting

2. Key Concepts and Principles in Managerial Accounting

2. Key Concepts and Principles in Managerial Accounting Learning Objectives 1. Describe the changing role of managers in businesses and for nonbusiness organizations. 2. Describe the biggest challenges and opportunities for managers. 3. Identify the skills of successful modern managers. 4. Explain why accounting is typically identified as the language of business. 5. Explain how managers use accounting information in their decision-making roles. 6. Identify some of the principles that guide management accounting. 7. Identify the role of ethics and professional values in the management accounting discipline.

1. Introduction This chapter provides an overview of the subject and introduces concepts and terms that will be used throughout the casebook. The subsequent chapters will rely on these important concepts to assist in developing solutions to the business case problems. The concepts that have been presented have a rich heritage and are the topic of a very large academic discipline.

3. Cost Behavior and Analysis

Cost behaviors may vary with relation to external factors, such as sales, overtime hours, inflation fluctuation, levels of capacity, and changes in the processes of production. Managerial accountants are able to predict the behaviors of the cost by focusing the application on two relevant ranges of cost. Variable costs, generally, are seen as changing in relation to the change of volume of activity. The behavior of fixed costs is not directly related to any change in production. Costs that have a mixed behavior consist of both elements. The key point is to understand the behavior of costs that permit managers to predict the cost at a level of activity. This contributes to making financial decision making much more intelligent. A good approach is adopting the cost-volume-profit analysis. Therefore, in the coming chapter, we will be dealing more with cost-volume-profit analysis of costs.

Cost behavior and analysis

4. Budgeting and Performance Evaluation

Based on the department manager’s timing the performance report, there are three types of business units: profit centers and cost centers. A profit center is a department in a business that generates sales and revenues as well as expenses. The department head has the authority to incur costs and also has some control over the revenue generated. In addition to the cost of staff, supplies, and so on, he or she has the power to decide how the department should be operated to generate sales. A cost center is a unit in a business that incurs costs, but they do not provide revenue or contribute to the profit of the organization. Some popular examples are the production and personnel departments. The manager of the cost center is only responsible for the cost incurred in the department. He or she has no control over how cash is raised or about the capital invested. An investment center is a business unit that incurs costs and also generates revenues, which are usually simultaneous with the costs. The manager controls cash raised from sources outside the investment center, such as from the issues of bonds or shares of stock, as well as being responsible for making capital expenditure decisions.

Managers use managerial accounting techniques to plan what to sell, how much to sell, what price is to be charged to reimburse the costs of production, and also earn an optimal profit. Also, they have to plan how to finance the operations and how to manage cash, etc. This is very important to maintain continuous production and also continuous employment. There has to be a plan in place that covers all the aspects of business. Planning is the primary function of management. It is the base upon which all the management activity and operation base. A budget plan is a detailed planning and is made for the entire organization for the complete year. It is used by the managers to manage their business. They use financial reports to judge the quality of the operation of their departments. Performance reports are made for each manager and financial statements are compared with the budgeted statements.

5. Strategic Decision Making with Managerial Accounting

The knowledge of managerial accounting techniques, the requirement of strategic management and operations Accounting for perceived limiting factor: every organization possesses predetermined constraining factors that will tend to limit its ability to congruence, make sales, and basically manage matters. Managerial accounting managers are often intrigued by the question “how poorly do you allocate your resources to optimize your profits”. When considering this question, a form of cost accounting is often used to ensure effective decision-making when the organization is conceptually limited with a constraining factor of the production segment. The idea must be remembered that the strategies a company undertakes are often long term. Products are sold, and services are produced as evidenced by the question that is posed to the accounting staff. What are the expenses and profits assigned to the lighthouse and its customers?

Strategic decision-making in the context of accounting and financial management is crucial for all managers in any business organization, and understanding the basic managerial theories alongside utilizing the knowledge of CDMA will better enhance their overall decision-making process. With the high continuous competition the organizations are facing, these two tools will enable them to make better decisions in an exponential manner. Most especially, the financial information available from managerial accounting processes is of strategic importance for making more operational decisions referred to as the day-to-day decisions. These take the form of “keep or drop” removes, and “what inquiries are you or some machines available?”. The day-to-day decisions are focused on the level of the supplying capacity, the mix, and the design costs and quality displacements.