MANAGEMENT ACCOUNTING

Management accounting

Management accounting

Part 1: Value drive management accounting

Introduction

In businesses, it is observed that there is excess of new approaches to enhance and improve the performance of the business, which includes: flatter organizations, total quality management, improving continuously, empowerment, kaizen, business reengineering, team building and so on. Among these management approaches most of them proved their importance but there are some approaches that failed for the businesses. It is the fact that most reason behind most of the failures was unclear target of performance which is not properly aligned with the goal of developing value (Sahay, 2003, pp. 177-192).

Marginal costing is related to flexible type of standard costing which segregates the variable cost and fixed cost of the business associated with the firm's output. Specifically it can be said that marginal costing is the approach of costing that helps business in completely and adequate manners for monitoring and planning of cost that is associated with the drivers of business resource. It then separates the cost associated with resource driver based on fixed and variable cost of the driver, and variable cost of the resource driver changes with the level of operation and it is defined by marginal analysis.

This paper aims on critical analysis of marginal accounting and identifies if the marginal costing in the business is considered as value driven management accounting for the business. In later part will be provided for Classic Manufacturing Company for ABC based accounting for the business.

Discussion

In business world, it is found there are number of management approaches that recently appeared in the context of management. These approaches includes; flatter organizations, total quality management, improving continuously, empowerment, kaizen, business reengineering, team building and so on. It is found that most of the management approaches that are developed in recent times are found successful for the business.

Transformation in management accounting

In the beginning of analysis it is to mention here that the concept of cost accounting is categorized into two types of groups: first is meta-management concept of costing that are based on universal objectives of the business and management concept of business that are focused on profitability targets of the business. In first group the focus is based on management outcomes and planning of the business that is value oriented and monitoring the meta-management roles along with the assistance of information regarding systems of supply chain. In second group the aim of the business based on outcomes and specific areas of management system. It is to mention here that such approaches focus on achieving the short term goals of the business in term of profitability and undertakes shareholder and corporate value as long term objectives of the business. However with the concept of meta-management, it assists the management of business in monitoring and planning the activities but it does not replace the coordination responsibilities of management (Sahay, 2003, pp. 177-192). The approach of accounting management helps in the coordination activities by developing valid structures for coordination and activities of planning and ...