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Principles of Managerial Accounting 1020
23 July 2023
Reflection Paper 2
The management accounting framework is made up of three key principles. These
principles play an important role in decision making, linking decision making authority with the
necessary information. The three principles are: decision making authority, making and
supporting decisions, and evaluating and rewarding performance.
Decision making authority is typically assigned to managers who oversee various assets
in an organization. The employees under these managers are given responsibilities which are
outlined through job descriptions, verbal instruction, or management accounting system
documents and reports. Managers are given their expected outcomes through management
accounting reports, and these outcomes align with their organization’s goals. It is the manager’s
responsibility to make informed decisions that help achieve their goals/outcomes, in turn help the
organization achieve their goals/expected outcomes.
Making and supporting decisions is another important piece to the management
accounting framework. A manager needs reliable and timely information in order to make
informed decisions. The information needed includes both historical and projected data about
their specific operation as well as other parts of their organizations value chain. The value chain
plays a big part in this area. It encompasses all activities and resources needed to create and
deliver a product or service to customers.
Another important piece to making and supporting decisions is benchmark studies.
Organizations share information with independent consulting companies, where they will collect
and compare that information with other organizations within the same industry. This helps
2
organizations compare costs and processes with one another. Not only do organizations share
information with independent consulting companies, they also share information with suppliers
in their value chain and customers. This allows suppliers to get products to the organization right
when they need to be there, and customers are able to see progress on their goods or services. All
of this to say, there is a lot that goes into decision making. It cannot be a decision made on a
whim, but one that is made by taking in all necessary information and making the best decision
that fits with the information obtained.
The last piece of the management accounting framework is evaluating and rewarding
performance. The assets that the managers oversee are owned by the organization. In order for
the organization to ensure that the assets are earning a good return, the organization (or
shareholders) will use the financial statements as a way to evaluate the decisions made.
Typically, if a manager is meeting or exceeding all goals or predicted outcomes, they are
rewarded.
There are three major components to production cost: direct material, direct labor, and
manufacturing overhead. All three of these components are the costs associated in producing a
product or fulfilling a service. Direct material costs are the expenses used for materials that can
be easily traced through the production process to the final product. Direct labor costs are the
wages and/or salaries paid to the employees that are providing the labor for the product or
service. Once again, these should be easily traced through the production process to the final
product. Manufacturing overhead are all the other costs in the manufacturing process that cannot
be easily traced through the production process.
3
Period costs are the expenses that are not attached to the direct manufacturing of a
product or service. Selling costs would fall under a period cost. While it is necessary to have
expenses in order to sell a product or service, those costs are not directly associated with
manufacturing the product or service. There are also administrative costs, these costs are
associated with staff support and other administrative functions. Once again, not directly related
to the manufacturing or a product or service. These selling and administrative costs are expensed
in the period when they are incurred on the income statement.
I am currently employed by UPS and actually use a few of the concepts we have talked
about thus far in my everyday work. At the beginning of the year, our business plan rolls out to
each department. This allows us to see our goals for several different areas of our operations. The
elements listed on the business plan are identical to the financial reports we see each month, we
call them cost statements. A few of the elements are: total operating costs, production, cost per
piece, hourly staffing, administrative staffing, part time management staffing, full time
management staffing, aircraft turns, cost per turn, volume, etc. When the cost statements come
out at the beginning of the month, it gives us the results for the previous month. Those results are
compared to the same month last year, as well as the goals for that month from the business plan.
This allows us to see our performance for the previous month compared to the plan, as well as
last year. The business plan allows us to set ourselves up, having that information ahead of time,
we can make plans in order to achieve our goals. Using the information from the previous year,
we are able to see where we might run into some issues, once again, coming up with plans to
overcome.
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Related Questions
One of the primary goals of managerial accounting is to provide day to day information to individuals from
the following groups, except: Question 12 options: a. board of directors b. lower level managers c. internal
decision-makers. d. upper level managers
arrow_forward
Managerial accounting provide information for decision making, planning, and controlling an organization's operations
Select one:
O True
O False
arrow_forward
Give true solution for general accounting question
arrow_forward
Identify the true statement in relation to management accounting
a . There are structured standards of acceptability for managerial accounting b . The structure of managerial accounting practice is relatively flexible
c . Managerial accounting information is a legal requirement
d . Managerial accounting information is prepared for external users
arrow_forward
When managerial accountants design an evaluation system that is based on criteria for which a manager is responsible, and it is structured to encourage managers to make decisions that will meet the goals of the company as well as their own personal job goals, the framework used is ________.
Group of answer choices
A. a controllable factors framework
B. an uncontrollable factors framework
C. a strategic plan framework
D. a responsibility accounting framework
arrow_forward
d) Explain why managerial accounting is important to managers in an organization
e) Describe the organizations and rules that govern accounting
arrow_forward
Explain the distinguishing features of managerial accounting. Show how ManagementAccounting benefits the firm.
Identify and explain six trends in managerial accounting
arrow_forward
Present the following:
Definition of managerial accounting
Role of managerial accounting and the management accountant in a business or organization
Ethical issues/concerns for the management accountant
General description of at least three managerial accounting techniques available and their application within a business or organization
Part II (Four to six double-spaced pages)
Select at least three of the five topics identified below:
Cost Management Techniques
Costing Methods
Capital Investment Decision Techniques
Budgeting
Quality Control
For each topic selected present real world examples of the application of managerial accounting techniques within a business or organization. Examples may be gathered from your own professional experiences or from case studies obtained from credible sources (excluding textbook examples explored in previous weeks). Presentation of each example should include how a managerial accounting technique was applied in the business or organization s…
arrow_forward
Managerial accounting is an important part of any enterprise’s management information system. Name two other information systems that supply information to management.
arrow_forward
Indicate whether the following statements are true or false:a. Managerial accounting information is designed primarily to meet the needs of external users such as shareholders, creditors, and the general public.b. Managerial accounting reports must be prepared for the business as a whole.c. Operational planning develops short-term actions for managing the day-to-day operations of the company
arrow_forward
h
arrow_forward
_______ comprises of the plan of the organization and all the co-ordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data to promote operational efficiency and to encourage adherence to prescribed managerial policies.
a.
Internal Control
b.
Internal Audit
c.
Audit Plan
d.
Risk Assessment
arrow_forward
Requirements
Each of the statements below describes a responsibility of management. Match each statement to the management responsibility being fulfilled (a. Plan
or d. Controlling).
1.
2₁
3.
Are the statements below more descriptive of managerial accounting or financial accounting information?
Each of the statements below paraphrases an ethical responsibility. Match each statement to the standard of ethical professional practice being fulfilled
c. Integrity, or d. Credibility). Each standard may be used more than once or not at all.
Requirement 1. Each of the statements below describes a responsibility of management. Match each statement to the management responsibility being fulfilled
c. Directing, or d. Controlling).
Statement
1. Identifying alternative courses of action and choosing among them
2. Running the company on a day-to-day basis
3. Determining whether the company's units are operating according to plan
Setting goals and objectives for the company and determining strategies…
arrow_forward
One of the managerial accounting functions in a decentralised organisation is to
develop a responsibility accounting system for the purposes of managerial
performance measurement. Critically evaluate how responsibility accounting is
related to the purposes of performance measurement systems. Provide
appropriate and relevant references in your discussion, analysis and evaluation.
arrow_forward
Comparing managerial accounting and financial accounting
Match the following terms to the appropriate statement. Some terms may be used more than once, and some terms may not be used at all.
a. Accounting systems that must follow GAAP
b. External parties for whom financial accounting reports are prepared.
c. The role managers play when they are monitoring day-to-day operations and keeping the company on track.
d. Internal decision makers.
e. Accounting system that provides information on a company’s past performance.
f. Accounting system not restricted by GAAP.
g. The management function that involves choosing goals and deciding how to achieve them.
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TRUE OR FALSE
arrow_forward
47
I. Financial accounting info. is usually used exclusively by internal parties such as managers.II. Financial accounting info. is presented according to generally accepted accounting principles.III. Managerial accounting info. includes items like budgets, performance evaluations, and cost reports.Which statement(s) is(are) true?
arrow_forward
There many modern management patterns that organizations use.
In this case, discuss the merits and demerits of
employee-centred approach
arrow_forward
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- One of the primary goals of managerial accounting is to provide day to day information to individuals from the following groups, except: Question 12 options: a. board of directors b. lower level managers c. internal decision-makers. d. upper level managersarrow_forwardManagerial accounting provide information for decision making, planning, and controlling an organization's operations Select one: O True O Falsearrow_forwardGive true solution for general accounting questionarrow_forward
- Identify the true statement in relation to management accounting a . There are structured standards of acceptability for managerial accounting b . The structure of managerial accounting practice is relatively flexible c . Managerial accounting information is a legal requirement d . Managerial accounting information is prepared for external usersarrow_forwardWhen managerial accountants design an evaluation system that is based on criteria for which a manager is responsible, and it is structured to encourage managers to make decisions that will meet the goals of the company as well as their own personal job goals, the framework used is ________. Group of answer choices A. a controllable factors framework B. an uncontrollable factors framework C. a strategic plan framework D. a responsibility accounting frameworkarrow_forwardd) Explain why managerial accounting is important to managers in an organization e) Describe the organizations and rules that govern accountingarrow_forward
- Explain the distinguishing features of managerial accounting. Show how ManagementAccounting benefits the firm. Identify and explain six trends in managerial accountingarrow_forwardPresent the following: Definition of managerial accounting Role of managerial accounting and the management accountant in a business or organization Ethical issues/concerns for the management accountant General description of at least three managerial accounting techniques available and their application within a business or organization Part II (Four to six double-spaced pages) Select at least three of the five topics identified below: Cost Management Techniques Costing Methods Capital Investment Decision Techniques Budgeting Quality Control For each topic selected present real world examples of the application of managerial accounting techniques within a business or organization. Examples may be gathered from your own professional experiences or from case studies obtained from credible sources (excluding textbook examples explored in previous weeks). Presentation of each example should include how a managerial accounting technique was applied in the business or organization s…arrow_forwardManagerial accounting is an important part of any enterprise’s management information system. Name two other information systems that supply information to management.arrow_forward
- Indicate whether the following statements are true or false:a. Managerial accounting information is designed primarily to meet the needs of external users such as shareholders, creditors, and the general public.b. Managerial accounting reports must be prepared for the business as a whole.c. Operational planning develops short-term actions for managing the day-to-day operations of the companyarrow_forwardharrow_forward_______ comprises of the plan of the organization and all the co-ordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data to promote operational efficiency and to encourage adherence to prescribed managerial policies. a. Internal Control b. Internal Audit c. Audit Plan d. Risk Assessmentarrow_forward
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SEE MORE QUESTIONS
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Recommended textbooks for you
- Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,Pkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE LPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
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Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Pkg Acc Infor Systems MS VISIO CD
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ISBN:9781133935940
Author:Ulric J. Gelinas
Publisher:CENGAGE L
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ISBN:9781947172609
Author:OpenStax
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