-]How Managerial Accounting Adds Value to the Organization
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Managers need information for all of the managerial activities described in the preceding section. That information comes from a variety of sources, including economists, financial experts, marketing and production personnel, and the organization’s managerial accounting system.Objectives of Managerial Accounting Activity List and describe five objectives of managerial accounting activity.
| Managerial accountants add value to an organization by pursuing five major objectives: 1. Providing information for decision making and planning, and proactively participating as part of the management team in the decision-making and planning processes. 2. Assisting managers in directing and controlling operational activities. 3. Motivating managers and other employees toward the organization’s goals. 4. Measuring the performance of activities, subunits, managers, and other employees within the organization. 5. Assessing the organization’s competitive position, and working with other managers to ensure the organization’s long-run competitiveness in its industry. “In five years [we will become] even more strategic. Really understanding the ins and outs of all the organizations, and really trying to be visionary—understanding what is happening to our business.” (1c)Hewlett-Packard
| Nowadays managerial accounting analysis is considered so crucial in managing an enterprise that in most cases managerial accountants are integral members of the management team. Far from playing a passive role as information providers, managerial accountants take a proactive role in both the strategic and day-to-day decisions that confront an enterprise.Although much of the information provided by the managerial accounting system is financial, there is a strong trend toward the presentation of substantial nonfinancial data as well. Managerial accountants supply all kinds of information to management and act as strategic business partners in support of management’s role in decision making and managing the organization’s activities. As we will see in subsequent chapters, contemporary managerial accounting systems are focusing more and more on the activities that occur on all levels of the organization. Measuring, managing, and continuously improving operational activities are critical to an organization’s success.To illustrate the objectives of managerial accounting activity, let us continue with the example of Disney’s Animal Kingdom.Providing Information for Decision Making and Planning, and Proactively Participating as Part of the Management Team in the Decision-Making and Planning Processes For virtually all major decisions, Disney’s management team would rely largely on managerial accounting information. For example, the decision to establish the new theme park would be influenced heavily by estimates of the costs of building the Animal Kingdom and maintaining it throughout its life. The theme park’s managers also would rely on managerial accounting data in formulating plans for the park’s operations. Prominent in those plans would be a budget detailing the projected revenues and costs of providing entertainment.While Disney’s top management contemplated its decision about the theme park, the company’s managerial accountants could not simply gather information and then sit on the sidelines. The managerial accountants were key participants in the management team as decisions were made and plans formulated for the theme park’s operations.Assisting Managers in Directing and Controlling Operational Activities Directing and controlling day-to-day operations require a variety of data about the process of providing entertainment services. For example, in directing operational activities, the park’s management team would need data about customer food-service demand patterns in order to make sure appropriate staffing was provided in the theme park’s...
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