Hello. I noticed in Chegg\'s textbook solutions section for Financial and Manage

Question

Hello.

                  I noticed in Chegg's textbook solutions section for Financial and Managerial Accounting for MBA's 4th edition, chapter 13 question 20 is missing an answer. Will you please solve question 20 in chapter 13 please.

Financial and Managerial Accounting

Assume Amy Fuller has just been promoted to product manager at Kraft Foods. Although she is an accomplished sales representative and well versed in market research, her accounting background is limited to reviewing her paycheck, balancing her checkbook, filing income tax returns, and reviewing statements are no doubt useful to investors, she just doesn’t see how accounting can help her be a good product manager.

Required

Based on her remarks, it is apparent that Amy’s view of accounting is limited to financial account. Explain some of the important differences between financial and managerial accounting and suggest some ways managerial accounting can help Amy be a better product manager.

Thanks!

Explanation / Answer

The major difference between Fiancial and Managerial Accounting are;

1. Fiinancial Accounting is meant for external reporting where management accounting is for internal reporting.

2. Financial Accounting is the basis for Govt Tax calculations where Management accounting is used to aid management decision amking.

3. Financial Accounting statements are mandatorily audited and for public companies submitted to Regulating authority and also published to public. No such need is there for managerial accounting records and statements.

4. Fiancial Accounting does not deal into management accounting areas like CVP analysis, Marginal costing and Job & Process costing.

As a product Manager , Knowledge in Managerial accounting will help Amy in many areas. So major areas where Managerial Accounting techniques can be useful are ;

1. Marginal Costing and understanding of Variable cost and fixed cost componenets. A thorough understanding of nature of costs like product cost and period costs will help to understand the implication of change in any cost and Amy can be a better decision maker.

2. CVP Analysis: the Effect of Fixed cost on chnaging sales volume along with the understanding of variable and fixed cost dynamics will help Amy in decision making in many situations like pricing for a new market, price change for modified product, make or buy decisions for product or component , special order pricing , effect of change in fixed or variable costing, product replacement or discontinuation decision etc.

I think these two are the major areas in Managerial Accounting that can tremendously help Amy as a Product manager.

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