Effects of Accounting Information on Performance

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School of Management and Economics Bachelor thesis, 10 p Examiner: Jerzy Kociatkiewicz Tutor: Anders Jerreling

Växjö 2006-06-02

The impact of accounting information on management’s decision-making process

A Case Study

Group A1:

Vera Lengauer Adelheid Mayr Sandie Parasote

(A) (I) (F)

vleex05@student.vxu.se ambex05@student.vxu.se spaex05@student.vxu.se 1

Executive Summary
Wexiödisk AB is a producer of dishwashing machines for professional use. Its headquarter is located in Växjö and its products are present on the European, as well as the Japanese and Australian market. Currently the company is Scandinavian’s leading supplier in its business field. Since 2004, Wexiödisk belongs to an Italian group, called the Ali Group.

For being a successful organisation, it is not only necessary to make decisions, but to implement the right ones. Wexiödisk’s present success, as shown in its leading position, can be led back among other things to a number of beneficial decisions. A decision is concerned with the selection of an action often out of a number of alternatives. In order to choose the right one, decision-makers need some guidance, which is partially provided by information gathered by management accounting. Tools used in the management accounting area are consequently considered as a helpful support.

Also Wexiödisk focuses on some of these tools, including the costing system, profitability, costing tools and budgeting, which will be presented in this thesis. The costing system contributes to the available knowledge of costs, building the basis for several decisions, like determining prices. Profitability is used especially for decisions concerning discontinuing operations, whereas budgeting deals with the evaluation of investments.

These financial information supports decisions made in Wexiödisk. Various decision-making models have been identified in literature to examine this process of decision-making. Out of this pool a sequential model was chosen to illustrate the decision-making steps in Wexiödisk. This model divides the decision-making process into several stages that follow each other. However, it will be illustrated that the decision-making process in Wexiödisk is a bit more complex and cannot be easily squeezed into these steps. It will become apparent in this paper that this process is influenced by many people, making it difficult to determine one final decision-maker as well as a certain decision-making point. Besides, experiences, feelings, preferences and other qualitative factors can have an impact on decisions in Wexiödisk.

Nevertheless, financial information affects the decision-making process. In Wexiödisk the role of management accounting information is interwoven and integrated in the whole decision course, having the ability to influence the process at almost every stage. 2

Table of contents
Acknowledgement...................................................................................................................... 5 1 Introduction ........................................................................................................................ 6 1.1 Background ................................................................................................................ 6 1.2 Problem discussion..................................................................................................... 7 1.3 Research question....................................................................................................... 7 1.4 Purpose ....................................................................................................................... 7 1.5 Limitations ................................................................................................................. 8 2 Methodology ...................................................................................................................... 9 2.1 Research...
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