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
ABC System and service organizations The ABC system has been taken up as applied to a manufacturing organizations with the same efficiency. One basic characteristic of service

Bank guarantee is one of the facilities which the commercial banks extend in support of their clients in favour of third parties who will be the beneficiaries of the guarantees. In

Material usage variance Difference among standard quantity of material and actual quantity used is the material usage variance. This variance arises due to: Economic use of

Do you think the food industry in general has equivocated on food labeling? Are all foods labeled natural in the same way? Has modern society subverted the concept of nature?

The Rohr Company’s old equipment for making subassemblies is worn out. The company is considering two courses of action: (a) Completely replacing the old equipment with new equipme

Explain the Scope of cost accounting Scope of cost accounting: the scope of cost accounting is very wide and includes the following: 1 cost ascertainment: it deals with t


QUESTION:  PART A One of the divisions within Acme Manufacturing company is presently negotiating with another supplier regarding outsourcing component A that it manufac

Competition oriented pricing policy Most companies fix the price of their products after a careful consideration of the competitor's price structure. Deliberate policy may be f

Anderson Nuclear Power Plant will be "mothballed" at the end of its useful life (approximately 20 years) at great expense. The expense recognition principle requires that expenses