Management accounting influence, Managerial Accounting

Management Accounting Influence


(A) Transfer pricing and performance measurement relies upon the judgment of the management accountant to make a suitable choice of approach and to calculate suitable values where appropriate.

(B) Values which are suitable for performance measurement purposes are not necessarily suitable for decision making, planning and control purposes. For planning purposes, reasonable future forecasts or targets which meet long-term planning requirements present two acceptable approaches and incremental budgeting offers a third means by which values can be established in practice.  For control purposes, values should ideally be set just above aspiration levels. For performance measurement purposes, values should be set which avoid sub-optimization and dysfunctional behavior and which further the objectives of the performance measurement scheme and of the company in general.  It is unlikely that a single value can meet all requirements.

In some circumstances, multiple values can be established. In overcoming the problem of setting up reliable and valid values for control, planning, decision making and performance measurement needs, however, further problems may arise. Imagine that a company establishes one target for performance measurement purposes and another, lower value, for planning purposes. The planning value must be kept secret from the divisional manager if it is to motivate since some types of manager may lower aspiration levels to the planned target. Secrecy can have detrimental effects to the coordination and communication objectives of budgeting. Again, the behavioral consequences of establishing values are of paramount importance and the management accountant finds that effective accounting is partly based on setting up sound systems at the technical level and partly based on setting up systems which work for the people within the organization.

(C) Emphasis on cost, profit and investment centre performance in the short term can have detrimental effects on the organization in the long term.

Posted Date: 12/8/2012 5:34:04 AM | Location : United States







Related Discussions:- Management accounting influence, Assignment Help, Ask Question on Management accounting influence, Get Answer, Expert's Help, Management accounting influence Discussions

Write discussion on Management accounting influence
Your posts are moderated
Related Questions
You want to purchase a house that costs $325,000. You have a down payment of $65,000 and will take out a mortgage to make up the difference. The AMC Mortgage Corporation offers a q

Material storage Sophisticated mathematical models to control economic buying, and systems control the flow of material may all be for naught if the obvious-efficient storekeep

Marginal cost or incremental cost pricing method: Here the company may work on the premise of recovering its marginal cost and getting a contribution towards its overheads. Thi

Shoe Shine is a local retail shoe shop located on the north side of Centerville. Yearly demand for a popular sandal is 500 pairs, and John Dirk, the manager of Shoe Shine, has been

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Western States Supply, Inc. (WSS), consists of three divisions—California, Northwest, and Southwest—that operate as if they were independent companies. Each division has its own sa

Price sensitivity Nagle has identified nine factors that contribute to price sensitivity and has also presents various methods or techniques to measure it. The factors that con


Suppose the spot price for Euro is $1.30, the futures price for delivery in 6 months is $ 1.29675. Assume that the 6 month borrowing/lending rate in Euro is 1.5 percent (annually,

Product life cycle costing It is an approach used to give a long term picture of product line profitability feedback on the effectiveness of life cycle planning and cost data t