1- Every company strives to control costs to be competitive. Using the informati
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Question
1- Every company strives to control costs to be competitive. Using the information you have learned thus far in the course, discuss how managerial accounting can contribute to cost control. Be specific?
2-
A- . Discuss the advantages and disadvantages of preparing a participatory master budget.
B- Managers use management by exception for control purposes.. (1) Describe the concept. (2) Explain how standard costs help managers apply this concept to monitor and control costs. (3) Find a firm that utilizes management by exception and discuss their application.
Explanation / Answer
Managerial accounting
Managerial accounting refers to the process of identification, measurement, analysis, interpretation and dispersion of information in order to achieve the goals of the organization. Managerial accounting refers to the use of accounting information provision in order to ascertain ample information before the decision is being taken on important matters in the organization.
Managerial accounting contributed in cost control by undertaking various tools and techniques as shsown below:
Standard costing
Standard costing is one of the techniques issued by the management accounting for controlling the cost. It involves establishing the target cost and performance standard that are required to be ascertain underlying the prevailing working conditions. It involves the cost which is pre determined that defines what each service or product will cost underlying certain situation.
Budgetary control
Management accounting takes into consideration budgetary control in order to control the cost by preparing budgets. It involves establishing budget pertaining to each department or function of the company. It requires analyzing the variation underlying the actual performance against the budgeted performance. Taking corrective actions and revising the budget if required.
Inventory control
Management accounting control cost by controlling the inventory underling which investment made in parts and materials carried underlying the stock is being regulated in accordance with the predetermined policy set underlying the policy established for inventory by the management. It involves fixing the limit pertaining to which the inventory will be kept, Setting out pattern for the investment, Laying down the policies of the inventory
Simplification and standardization
Management accounting adapts to the process of standardization and simplification for controlling the cost in the organization. Where standardization involved selection of the different grades and varieties of the product that are required to retained and making most of the details for manufacturing standardized as possible. Simplification on the other hand involves analysis of the product as a result of which unwanted design and varieties are eliminated. Only a limited type, grade, and sizes pertaining to the underlying product are being retained.
Automation
Managerial accounting takes into consideration automation for controlling the cost in the company. Automation involves equipment that is controlled automatically and there is no need for any human interaction for the same. It involves usage of various integrated chips, analog computers and electronic signal. It basically saves cost by replacing the human being and result in increased production with increased quality.
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