But with the concept of management accounting system, John has decided to place in a better and sound managerial accounting system.
The proposed solutions seem to be useful for John and Mary Farmers and other agricultural enterprises. Its basic aim is to gather better and vast information for managerial purposes and such information will be used in the long term as well. As, John and Mary Farmers are more keen in knowing the differences in the cost of production between farms and the profit difference between differing commodities produced over the years. To address this issue, the managerial accounting system will have its respected costs and profit centers. This method is more commonly known as “responsibility accounting”. Each service center is given its support cost centers. Those support cost centers are divided into activities and sites. These costs are further re-allocated to production cost centers. The marketing centers are concerned with the cost of marketing related with the products. Further on, profit centers are introduced, these profit centers account for both costs and revenue, the key performance measure of any profit center is therefore profit. This proposed costing system seems like a product costing system or an Activity Based Costing System. The benefit of having such systems is that each allocated center (either profit or cost) is responsible for its negative or positive variances. This system would prove beneficial for almost all agricultural businesses, with agricultural products having shorter life cycles and more complex production processes, this proposed system recognizes the complexity with its multiple cost drivers. Besides this, as the agricultural sector being a more competitive sector, this proposed system facilitates a better understanding of the driver of overhead costs. With all these positive feedbacks