...Accounting Information for Managers To Make Better Decisions 1 Abstract This paper analysis how the accounting information would support the decision making process. The main goal of an accounting system is to provide financial information about the organization including financial situation and the performance of the organization. The decision makers should know the situation of the organization either by comparing competitors or previous periods’ performance in order to achieve the objectives of the company and this being possible by using accounting information. In addition, this thesis studies the importance of having effective and efficient accounting system to make better decision as it relates to increase the profitability target of an organization. Organizations should replace their weak accounting system in order to ensure that each team member in the Accounts Department is conscious of their role to produce good accounting information (1, Okoli Margaret). The result of this paper describes that providing right information to the right people in time via management reporting to maximize the use of reports in decision-making. 2 Introduction Any organization should survive and excel in the fast paced and ever changing market. We are living in the digital era so information can be found everywhere via websites, databases documents, reports, and emails. However, it’s important to read the historical data-set during decision making process but providing report in quick & timely...
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...objectives part. Findings of these objectives have described on three different chapters respectively. Directors of Jessop ltd wants to know how a management accountant can contribute on Jessop’s continuous growth. I find on my study strategic management is very likely forward looking not like traditional cost accounting. Strategic management accounting is considering external factors like competitors and management accounting contributes not only strategy developing also critically evaluates the current strategy of any organisation. In addition, management accountant can assist to control costs by implementing activity based costing methods, offer competitive pricing, budgeting process etc. Also, by applying benchmarking process, management accountant can discover strengths and weakness of Jessop ltd and way to overcome these weaknesses and keep their steady growth by exploiting all strengths. In the second chapter of this study has described various types of relevant and irrelevant cost as well as tells which costs should management of Jessop be included on total cost calculation and why should not consider. Overall impacts of relevant and irrelevant costs (revenue) on decision making has depicted on that chapter in brief form. Focal point of final chapter is on how Jessop will be beneficiary by successful implementation of activity based costing (ABC) and various problems of execution of ABC which may offset all those benefits. Concluded in concise small or medium sized organisation...
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...the transportation model an example of decision making under certainty or decision making under uncertainty? Why? Can we apply transshipment models to inventory applications? Why or why not? Yes, transshipment models can be applied to inventory applications. This will ensure lower costs through proper management and disbursement of the inventory while providing faster response times. The inventory levels can be managed by location in order to ensure minimal levels and the shipping will occur for less cost and faster service due to inventory placement within regions (Taylor III, 2011). Is the transportation model an example of decision making under certainty or decision making under uncertainty? Why? The transportation model is an example of decision making under certainty. The data, in this case the route and items, has to be known in order for the decision making to be determined under certainty (Taylor III, 2011). Explain the assignment model and how it facilitates in solving transportation problems. What benefits would be gained from using this model? 2ND RESPONSE Can we apply transshipment models to inventory applications? Why or why not? Yes, it does seem that transshipment models can be applied to inventory applications. Inventory applications deal with transporting goods to different destinations just like the transshipment models. By applying a transshipment model to inventory applications, we will be able to lower cost through accurate management and disbursement...
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...Running head: COSTING AND PRICING DECISIONS Costing and Pricing Decisions Cost Allocations Cost allocation is the process of assigning the indirect costs of producing a product. These indirect costs may be shared by multiple products. This is where cost allocation comes into play. Indirect costs can be allocated to products, services and departments. Cost allocation allows a company to calculate fully cost of their products. This provides them the ability to price products accurately. Three common costs that need to be considered when allocating costs include joint costs, sunk costs and opportunity costs (Jiambalvo, 2007). Joint Costs When at least two products come out of a common input they are considered joint products. Joint costs are the costs of the common input that is put into the joint products. An example of joint products would be the various types of fuels that are made from crude oil (Jiambalvo, 2007). Joint costs are commonly found in extractive, agricultural and chemical industries. They are also found in industries where different types or grades of the same product are made. It is very vital that the system used to cost the products incorporates the consumption of resources by product. If this is not done properly costs will be unclear and unprofitable products are likely to be produced (Tunes, Nyrud & Eikens, 2008). Horngren et al., 2006 wrote about four methods used for the allocation of joint costs. These Four methods are sales value...
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...7-5: Massey Electronics a. The following table presents the allocation of the $9.5 million of shared manufacturing overhead using the four proposed schemes. Direct labor hours Direct labor dollars Direct material dollars Square footage Allocated overhead based on: Direct labor hours Direct labor dollars Direct material dollars Square footage of plant b. Texas 3,000,000 $60,000,000 $180,000,000 200,000 Mexico 4,000,000 $40,000,000 $200,000,000 300,000 Total 7,000,000 $100,000,000 $380,000,000 500,000 $4,085,000 5,700,000 4,465,000 3,800,000 $5,415,000 3,800,000 5,035,000 5,700,000 % Texas 43.0% 60.0% 47.0% 40.0% $9,500,000 9,500,000 9,500,000 9,500,000 Questions involving how to allocate costs involve what input base to tax, and hence how the choice of the taxing scheme affects the firm’s cash flows. Since Massey has tax loss carry forwards, the allocation of the $9.5 million manufacturing overhead does not affect taxes, which is usually an important cash flow stream to consider. The four allocation methods create significant differences in the dollars allocated to the two plants. In fact, the Texas and Mexico plants allocations vary by up to $1.9 million, depending on which method is used. Since the lines of business end up paying for these allocated costs through higher full cost-based transfer prices, the choice of allocation method could prove economically important if the lines of business change their...
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...Short-term Decision Making 5.1 Introduction and objectives Previous chapters have focused on the nature of costs and how they behave in relation to changes in activity and over time. The nature of costs is an important factor to consider in decision making. Types of decisions are usually split into short and long-term. Chapter 14 (Capital Investment Appraisal) considers the longer-term decision-making process, whilst this chapter focuses on the short-term. After studying this chapter you will be able to: Understand costs that are relevant to the decision-making process in different circumstances Demonstrate working knowledge of typical short-term decisions managers have to make and how financial data can support these decisions Recognise the issues of managing scarce recourses in decision making; and Appreciate the implications of outsourcing in a business context. 5.2 Relevant costs in decision making Relevant costing is a management accounting term and relates to focusing on only the costs relevant to a specific decision being made. It simplifies the decision-making process as it ignores cost data that is ‘irrelevant’, or will not have an impact on the specific decision being made. When making a particular decision-relevant costs are those that may change, depending on the decision taken. Relevant costing is often used in short-term decision making and a number of specific practical examples are illustrated later in this chapter. A typical decision could...
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...Introduction Decision makers in any organization have an important role to play because their decisions are the underpins of policies and other variables that can affect the health of the organization. There is no doubt that the success of an organization depends on the ability of its managers to make good decisions, and to make them at the appropriate time (Edwards,Duan & Robins,2000). With Internet-hosted databases and user friendly query device being mostly used, organizations are turning to decision support systems (DSS) software to analyze the company's databases and develop them into information helpful for decision makers. According to Power (2007) information Systems researchers and technologists have built and investigated computerized Decision Support Systems (DSS) for approximately 40 years. For the purpose of this work, I will define DSS as computer software that facilitates and accepts inputs of a large number of facts and methods to convert them into meaningful comparisons, graphs, and trends that can facilitate and enhance decision makers’ decision-making abilities to solve problems (Haitham, 2015). The advantages of using decision support systems for decision making. The use of DSS has been positively associated with success of better decisions that enhanced employees’ productivity (Edwards et al., 2000; Haag & Cummings, 2008).In my team, we have lots of reports to submit as required by OSHA /EPA and DSS software is being used to achieve 76 percent...
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...IFAC Board Exposure Draft November 2012 Comments due: February 28, 2013 Professional Accountants in Business International Good Practice Guidance Project and Investment Appraisal for Sustainable Value Creation IFAC’s mission is to serve the public interest by: contributing to the development of high-quality standards and guidance; facilitating the adoption and implementation of high-quality standards and guidance; contributing to the development of strong professional accountancy organizations and accounting firms and to high-quality practices by professional accountants, and promoting the value of professional accountants worldwide; and speaking out on public interest issues. The PAIB Committee serves IFAC member bodies and professional accountants worldwide who work in commerce, industry, financial services, education, and the public and not-for-profit sectors. Its aim is to promote and contribute to the value of professional accountants in business. To achieve this objective, its activities focus on: increasing awareness of the important roles professional accountants play in creating, enabling, preserving, and reporting value for organizations and their stakeholders; and supporting member organizations in enhancing the competence of their members through development and sharing of good practices and ideas. Copyright © November 2012 by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please see page...
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...Leaders make rational decisions every day in the effect to maximize the benefits and minimize the costs for themselves and everyone affected by it. These leaders just as often make decisions based on emotions, opportunities, present states of condition, and other factors, which are considered irrational decisions. People have the natural desire to be correct without weighing the consequences. One recent example of a company that has been criticized for potentially making a very irrational decision is Facebook. CEO, Mark Zuckerberg, announced that he is buying WhatsApp for 16 Billion in cash and stock, along with another 3 over a couple years, making it a 19 Billion dollar deal for the company. WhatsApp is a leading chat app that has grown quickly in the last few years. It allows people to send video, photos, and text messages. It is more popular in many countries outside of the United States. The app will also not promote any ads for users. The deal’s enormous price tag brings a lot of question into Zuckerberg’s rationale behind his decision and if the pros outweigh the cons. Consequentialism is focused on the basic consequences that come with decisions and determining net balance between the good consequences and the bad ones. Zuckerberg’s decision to buy WhatsApp is consistent with his goal of connecting the entire world, especially developing countries, through technology. The app has over 450 million users. There almost as many messages sent using the app as there are...
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...Decision in Paradise Pt.2 Your name here: MGT/350 July 20th, 2011 Facilitator: Decision in Paradise Pt.2 Introduction Kava was in need of assistant, and it would take Teva Pharmaceuticals to aid this small island, which must pick the decision-making method that describes/explains the problems, collet data, and permits for pors and cons analysis (Chapman, n.d). However, they will need to provide a way for goals to include the top chances of achievement with the means obtainable with costs implicated, plus recognize the required individuals to emerge not only in the decision-making process except to put into pratice the goal(s) when selected. Applying a decision-making technique Today we have several decision-making methods. A tool for the mind, a well-liked career skills online resource, suggests the following decision-making techniques (n.d.). 1. Pareto Analysis - goals are prioritized then resources are applied to high priority items first, helpful when there are many goals being considered. 2. Paired Comparison Analysis - weigh the reletive importance of different courses of actions, helpful when all facts are not known for making the comparison of apples to oranages, and/or priorities are not clear or complete. 3. Grid Analysis - rank, and then compare the factors that must be considered with goals, choosing the goals with the highest rank; most successful when factors needing considerations are known. ...
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...JGT Task 3 Jay Sorensen WGU JGT Task 3 SUBDOMAIN 326.3 - EVALUATING ECONOMICS OF MANAGEMENT DECISIONS SUBDOMAIN 327.3 - DEVELOPING & MAINTAINING QUALITY SUBDOMAIN 329.5 - USING INFORMATION SYSTEMS FOR COMPETITIVE ADVANTAGE Competencies: 326.3.1: Decision Analysis - The graduate analyzes risks and values and uses a variety of decision analysis tools and decision theory to evaluate alternatives during decision-making processes. 326.3.3: Decision Strategies - The graduate evaluates decision methods and develops strategies for organizational decision processes. 327.3.2: Metrics and Tools - The graduate...
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...overhead costs to products. It identifies activities in a company and assigns the cost of each activity resource to all products and services according to the actual consumption by each. As revealed in the article, this costing method had both pros and cons. The article favored the advantages of the ABC method although the satisfaction scores were below the average for all tools used. For those companies that disfavored ABC method, the most common complain was that it took too much money and time using this method, and the method might not capture the complexity of their operations. In fact, ABC method is not production-specified. For production costs, standard costing was still “kill of the hill” with a usage rate of 42% according to the article. However, it is inaccurate to say that ABC method is increasingly being abandoned, only four out of 141 organizations previously used ABC but no longer use it according to the survey. In addition, the survey revealed that around sixteen percent companies considered ABC but chose not to implement it. The main concerns of managers of those companies regarding which cost-measurement system to choose were that they were not sure if it was a better way to allocate cost, if it accurately reflected how resources were used, if the information was timely, and if updating the system was difficult. Having said about the disadvantages and concerns about ABC method, the article still suggested that more companies should consider using ABC method...
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...STUDY GUIDE BMAC5203 ACCOUNTING FOR DECISION MAKING Week 2 Topic 2: Basic Cost Concepts and Cost Classifications Readings Mowen, M. M., Hansen, D. R., & Heitger, D. L. (2009). Cornerstones of managerial accounting (3rd ed.). South-Western Cengage Learning. Chapters 2 and 3 (page 28–98) e-Content (a) (b) Download PowerPoint slides (lecture 2) from myVLE (Group Tool) and read through the notes before your first class. Download past examination questions from OUM’s digital library and do the questions relevant to this topic. Study Notes The learning outcomes: 1. Explain the meaning of cost and how costs are assigned to products and services. (a) Cost is the amount of cash or cash equivalent incurred for producing goods and/or services. A cost unit/cost object is any item such as products, departments, customers, and activities for which costs are measured and assigned. Cost are assigned to cost objects either directly or indirectly. Direct cost such as direct material, direct labour and direct expenses are traced to cost units directly. Indirect costs referred to as production overheads cannot be directly identified to the cost objects. Therefore, they are allocated by using a more complex approach. (This approach will be discussed later). (b) (c) (d) (e) 14 STUDY GUIDE BMAC5203 ACCOUNTING FOR DECISION MAKING 2. Define how costs are classified (cost classification). Costs can be classified using the three broad managerial accounting objectives...
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...Contents Decision Making 3 Theory of Constraints 4 IMA Guidelines for Ethical Behavior 4 Competence 4 Confidentiality 5 Integrity 5 Credibility 5 Corporate Social Responsibility 5 Manufacturing Costs: 6 Non-Manufacturing Costs 6 Product Costs vs. Period Costs 6 Prime Costs vs. Conversion Cost 7 The Activity Base (Cost Driver) 7 Fixed Cost and Variable Costs 7 Cost Classifications for Predicting Cost Behavior 7 Mixed Costs 8 The High-Low Method 9 Cost Classification for Decision Making 10 Opportunity Cost 10 Sunk Costs 10 Types of Product Casting Systems 10 Why use an allocation base? 11 Manufacturing Overhead Application 11 Decision Making Decision making involves making a selection among competing alternatives. * What should we be selling? * Who should we be serving? * How should we execute? Strategy Strategy is a game plan that enables a company to attract customers by distinguishing itself from competitors. Focal point of a company’s strategy should be its target customers. Customer Intimacy Strategy – Understand and respond to individual customer needs. Operational Excellence Strategy – Deliver products and services faster, more conveniently and at lower prices. Product Leadership Strategy - Offer higher quality products. Enterprise Risk Management A process used by a company to proactively identify and manage risk. Lean Production – Just-in-time (JIT) production Customer orders – create order...
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...Investment analysis Contents 1. Be able to apply cost concepts to the decision-making process 2 2. Be able to apply forecasting techniques to obtain information for decision making 4 3. Be able to participate in the budgetary process of an organization 5 4. Be able to recommend cost reduction and management processes for an organization 7 5. Be able to use financial appraisal techniques to make strategic investment decisions for an organization 8 6. Be able to interpret financial statements for planning and decision making 10 References 12 1. Be able to apply cost concepts to the decision-making process 1.1 explain the importance of costs in the pricing strategy of an organisation The pricing strategy becomes the major element in marketing mix of Dell Computers as it is related to product positioning. When there is a planning for new product launch pricing strategy is important and it requires general sequence of stages involved during pricing the new product. The different steps are as follows: (Daft, 2011) * Developing marketing strategy – helps the company to develop marketing strategy based on market analysis, market segmentation and positioning * Marketing Mix decisions – Defining a product, distribution and its promotional tactics * Estimation of demand curve – Estimating the demand and understand how it varies from quantity wit price * Cost Calculation – Calculation of fixed cost and variable cost associated with product development * Knowledge...
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