Managerial Accounting and the Business Environment
Managerial accounting is concerned with providing information to managers- that is, people inside an organization who direct and control its operations. Managerial accountants prepare a variety of reports. Some reports focus on how well managers or business units have performed- comparing actual results to plans and to benchmarks. Some reports provide timely, frequent updates on key indicators such as orders received order backlog, capacity utilization and sales. Other analytical reports are prepared as needed to investigate specific problems such as a decline in the profitability of a product line. Operational excellence comes to The Diamond Business
An engagement ring purchased from Blue Nile, an internet diamond retailer, costs $5,200 compared to $9,500 if purchases from Tiffany & Co., a bricks-and-mortar retailer. Because the Blue Nile allows wholesalers to sell directly to the customers using its website, while diamonds change hands as many as seven times before being build sold to a customer. Blue Nile carries very little inventory and incurs negligible overhead. Bricks-and-mortar tie up large amounts of money paying for the inventory and employees on their showroom floors. Blue Nile generates a high volume of transactions by selling to customers anywhere in the world; therefore, it can accept a lower profit margin per transaction than local retailers, who complete fewer transactions with customers within a limited geographical radius. The work of Management and the need for Managerial Accounting Information Every organization- large and small- has managers. Someone must be responsible for formulating strategy, making plans, organizing resources, directing personnel and controlling operations. For example, Good Vibrations runs a chain of retail outlets that sells a full range of music CDs. The chain stores are concentrated in Pacific Rim cities such as Sydney, Singapore, Hong Kong. The company has...
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