It further explains the control procedures expected at the three levels of management control (strategic, tactical and operational) and provides a discussion of how control is exercised and information required at each management level, relates to Highline Co. Ltd.
The traditional management accounting systems are of minimal use in the preparation of the strategic plans, monitoring of achievement process of predetermined objectives of the organization and performance evaluation of the employees. The failure of traditional accounting systems have triggered the process of research in order to find out the suitable methods which can eke the changing business techniques in order to achieve the organisational objectives in today's global business environment (Ittner & Larker, 1998).
According to the evaluation of the manufacturing data in different companies it has been found that the manufacturing has been transformed. Labour cost is no more considered as the significant cost of manufacturing, it has been replaced by the overhead cost which has become a significant cost of manufacturing process. This change has reduced the usefulness of the traditional accounting techniques. By undertaking the examination of the material cost and labour cost data the validity and generality of these claims can be tested. Moreover, the extent to which manufacturing has changed over time and the nature of these changes can also be examined. This can help the management of the company in designing an effective and up to date management accounting system according to the current needs of the company. The changing products and management styles have reduced the usefulness of cost accounting and management control systems in the modern age of information technology which were previously used in many organizations.
Decline in Direct Labour:
The automation of the machinery assembling plant in the company has reduced the number of labour used in the production process. Labour cost constitutes a small portion of the manufacturing costs and the overhead costs have become the major constituent of the manufacturing cost. The changing trend has also raised the level of manufacturing overhead which represents 33% of the total manufacturing cost in the company.
Due to the changing pattern of manufacturing process the traditional cost systems also tend to fail in the true valuation of cost. It has been noted that the management has taken inaccurate decisions and adopted strategies which have restrain the manufacturing process.
In order to confirm the above assertions the management can gather data to analyze two important issues:
1. The production labour has declined as a percentage of total manufacturing costs.
2. The ratio of the total wage expenditures to production wages has been increased for all, most, or some manufacturing companies over time. (Boer and
This project report is addressed to the Managing Director of Highline co. Ltd. The project report examines the reasons of the inadequacy of the information provided by the management accounting system to assist in strategic decision making in order to defend and strengthen its position.
Contemporary Management Accounting System Table of Contents Overview 3 The Concept of Management Accounting 5 The Drivers for the Changing Role of Management Accounting Practices 7 The Contemporary Business Environment 8 Role of Management Accountants in Contemporary Organizations 10 References 14 Overview Anthony G.
Strategic management accounting is an emerging field whose boundaries are loose Coad and, as yet, there is no united view of what it is or how it might develop. The existing literature in the field is both unrelated and put out of place (Coad, 1996:392). The research focuses on the advantages of strategic management accounting.
Management accounting is considered to be useful when it properly displays an external image and a futuristic picture for an organisation. Strategic Management Accounting on the other hand can be distinguished from other management accounting activities through its extensive external orientation; this extensive external orientation includes focus towards customers, competitors, suppliers and all other stakeholders that get affected by the organisation’s normal course of business.
According to the author, management accounting has failed in the application of qualitative features of management as well as the strategic thinking in management. As a result of the failure of management accounting, strategic management has been introduced in the profession of accounting hoping it will be effective in areas of management.
A fusing connection among the variety of visions is involve in captivating a strategic direction, explanation and study of management accounting information, and rival's performances proposes the basic extent in favour of contrast.
Management accountants are perfectly trained and they have this ability potential and expertise to contribute along with the strategies and with the evaluating process to over those decision-making problems that they have in the market.
Further, the strategic decision-making issues related to the different factors like competitive pricing of products or services, the operational strategies of the business, the manufacture and development of products and the product costing are discussed in detail.
This point of view is well supported with both early (Solomons, 1952) and contemporary researches (Boyns and Edwards, 1997a). Needless to say, standard costing has come a long way before it became generally accepted.
Originally, cost accounting systems were mainly concerned with variable costs, such as labour and raw materials expenditures.
Formulation of strategies necessitates a proper collaboration with all department like operation, marketing, HR, R&D, finance & accounting etc. These departments are the treasure house of potential information about the current
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