Managerial decision for the future, it’s relevance,
Managerial accountants serve the needs of managers employed within an organization, it is vital for them to understand the company’s strategies to be successful in applying their skills to influence decisions that will create value for the stakeholders. (Collier, 2006). I think, which agrees Collier view that their role involves more than just “crunching number, they provide information to managers within an organization so that they can formulate plans, control operations, and make decisions.
From a control standpoint they may closely track sales data to see if a budgeted price cut is generating an anticipated increase in unit sales. (Garrison, Noreen, & Brewer, 2018) Companies do not succeed by sheer luck, instead, they need to develop a strategy that defines how they intend to succeed in the marketplace. A management accountant emphasizes on decision for the future, it’s relevance, timeliness and segment reports, understanding a company’s strategies and intend assist in evaluating inefficiencies and reducing the cost of operations. A management accounting system must provide timely and accurate information to facilitate efforts to control cost, to measure and improve productivity, and to devise improved production processes (Collier, 2006). A managerial accountant looks outward to help a company evaluate its competitive position relative to its competitors by collecting and analyzing data on costs, prices, sales volume and market share (Garrison, et al, 2018) . As strategic planners, they understand the financial and operational sides of business.
They report and analyze financial as well as nonfinancial measures of process performance and corporate social performance. A managerial accountant helps managers perform three vital activities—planning, controlling, and decision making. Establishing goals and specifying how to achieve them, gathering feedback to ensure that the plan is being properly executed or modified as circumstances change and selecting a course of action from competing alternatives. 30 years ago, managerial accountant experiences are limited to: cost analysis, cost estimation, and analyzing distribution channel variance profit analysis and financial analysis (Tepes-Bobescu, 2015). Management accountants today must know and have experience of: activity-based cost analysis comparative analysis targeting costs, product life-cycle, cost analysis economic value quality management and total value chain analysis. Value chain analysis requires the cooperation of all managers involved in applying this concept including engineers’ designers’ production, distribution and marketing managers (Tepes-Bobescu, 2015).
Information from traditional management accounting systems including cost accounting are generally unsuitable for value chain analysis from a variety of reasons. Generally traditional management accounting focuses on internal information. Often it places excessive emphasis on production costs. It also assumes that cost reductions are to be found in the “added value” i.e.
the sale price less cost of raw materials. Using a value added approach can be misleading because there are several other entries purchase such as engineering maintenance distribution and service. Added value starts too late for ignoring links with suppliers and stops too early for ignoring ties with customers. Costs are classified in diverse ways that enable managers to predict future costs, and compare actual costs to budgeted cost while assigning costs to segments of the business (such as product lines, geographic regions, and distribution channels), and to properly contrast the costs associated with competing alternatives (Garrison, et al, 2018).