Management Accounting Essay

Technological Change Technology has dramatically changed the way we live. Information technologies, transportation systems, food technology and medical and scientific discoveries affect the way we work, eat and play. For example, Internet. Many devices we use daily rely on micro-chips and software to operate correctly. Global positioning systems route you quickly to your destination. Companies can communicate internally with their members, suppliers and customers through devices such as the Internet, mobile phones and PDAs.

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Advanced technologies allow organizations to make better quality products more efficiently through automation and precise operations; to make firm’s products more reliable and safer; to make few mistakes, lower production costs significantly and to enable firms to deliver their products and services timely and reliably. These create customer value by taking higher quality products at lower prices in a more efficient way. As all the process can be done via Internet, and it will update the relevant company databases instantly.

Manager can use this up-to-date information for planning purposes and monitoring the execution of their company’s strategy. This create organizational value which benefits received by various stakeholders from their investment in their firm. Globalization Customer Preferences Organizations must continually monitor technological change and global competition, but unless they identify and meet customer preferences. Firms fulfill customer desires is critical to the success of an organization to create customer value. Companies must continually seek to add value to customers by adapting to changing customer preferences.

Value chain analysis is help to solve this problem. Value chain analysis is associated with both JIT and TQM. A typical value chain might be: Research and development? Design and engineering? Production? Distribution? Customer service In addition, these activities are called value-added activities which provide value for customers in order to create customer value. Organization and their management accounting systems must adapt to a rapidly changing environment. JIT, TQM and value chain analysis are the methods that take advantage of technological changes and allow an organization to compete and meet customer demand.

The framework for organizational change, outlined in Figure 1. 1 to highlight that an organization’s planning and control decisions must be consistent with its strategy. The model just focuses on how organizations make decisions and control behavior (and the trade-off between the two) such that organizational value is created. Management accounting plays an integral part in assisting an organization to achieve its goals through planning decisions and control. This accounting allows for better planning decisions through more knowledge of the problem.

Managers use accounting for control through influencing members of the organization to make decisions that are consistent with organizational goals. Preferred characteristics of management accounting include accurate measures of multiple inputs and outputs of the organization, timeliness, identification of responsibility and the capacity to be forward-looking. Company cannot offer all of the products and services in the world. However, it can try offer a large selection of products and services to satisfy the majority of customers. Accounting can provide information on revenues of selling products by different types.

Managers can use this information to identify the best sellers, and predict future sales. Secondly, information on wholesale costs can help managers to identify the most profitable units. Also, Managers can use information on inventory to reduce unwanted stock and free up resources to order other, more popular products. These help managers to make an efficient resource allocation in order to increase competitiveness. However, advanced technology makes the existing technology of the organization outdated and it takes cost of installing the new information systems and employee training.

The quality of customer service can be measured by number of repeat customers, number of complaints received, number of returns and other data provided in-store and online surveys. Since the cost of acquiring new customers is much greater than the cost of retaining old customers, information about customer service quality is extremely useful. Managers can use this information to decide the development of a new products and services. However, this may threaten the success of existing products services. Company also required information about employee performance.

For example, marketing and sales could be evaluated by measures of sales and profitability. The company would try to reduce costs in non-value-adding departments such as warehousing and administration. These would help managers to make suitable planning decisions by evaluating past information. Reference Bhimani, Horngren, Datar and Foster (2008); Management and Cost Accounting 4TH Edition; FT Prentice-Hall C. McWatters, J. L Zimmerman, D. Morse (2008); Management Accounting: Analysis and Interpretation, 3rd Edition, Chapter 1


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