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Accounting For Decision Making Essay

823 words - 4 pages

TUI UNIVERSITY
MICHAEL J. GILLIARD
ACC 501, Accounting for Decision Making
MODULE 2: Case, A Revised Income Statement, The Contribution Margin Approach
Anthony Culpepper, PHD
In the 21st century the business environment is changing very rapidly. These changes are reflected in global competition, rapidly advancing technology, and improved communication systems, such as the Internet. The activities that make an enterprise successful today may no longer be sufficient next year. A crucial role of managerial accounting is to continually assess how an organization stacks up against the competition. I do agree with the notion of value costing for the 21st Century organizations. Traditional ...view middle of the document...

The types of situations more appropriate for application of the some of the costing methods of the 20th Century can be illustrated by reference to cost control techniques. Cost accounting is a central method in management accounting, and traditionally, management accountants’ principal technique was variance analysis, which is a systematic approach to the comparison of the actual and budgeted costs of the raw materials and labor used during a production period. This "tried and true” application can be still used today in industries and firms.
Cost-Volume-Profit Analysis is still relevant in the 21st Century business organization. Cost value profit analysis can still be used however; it can not by the sole source used to gather profit analysis. In fact, moving away from a historical cost accounting perspective and towards a proactive cost management is the challenge that an enterprise has to face. Assigning the costs to a larger number of cost pools that better represent those activities that are responsible for their birth, portrays the general idea upon which future managerial accounting will evolve.
Traditional costing systems provide precise, objective, verifiable and good information for external reporting purposes but do not provide relevant information for management decision making. The types of situations more appropriate for application of the some of the costing methods of the 20th Century can be illustrated by reference to cost control techniques. Cost accounting is a central method in management accounting, and traditionally, management accountants’ principal technique was variance analysis, which is a systematic approach to the...

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