Challenges Of Management Accounting

Question 1

Management accounting is an internal business function that tracks internal costs for decision-making purposes. Manufacturing and production companies often use management accounting to allocate production cost to each good or service produced by the company. Management accounting can face various challenges and carry several responsibilities in a small business (Adapted from an internet source).

Elaborate in detail any THREE (3) challenges and THREE (3) responsibilities of a management accountant. You will need to provide relevant example(s) to support your answer.

Answers:

A challenge of a management accountant is budgeting. Small businesses often use budgets to plan future expenditures for operations. Owners typically conduct

It is a continuous accounting process that must be properly managed by owners and employees. Financial information should be carefully separated to ensure that only timely, valid and relevant information is included on management reports. This process can involve the creation of internal management accounting policies that employees must follow when reporting information to the owners. Another challenge is technology advancement, more innovative software and other tools have been developed to assist management accountants in performing their task. This show that today’s business environment cannot operate without technology. The future of management accountants depends on how they able to adapt and respond to emerging technologies. As the world becoming unified, entity with board less transactions worldwide need for standardization. This definitely led accounting profession under intense pressure to warrant comparisons uniformity. Management accountant is expected to be able to provide for accurate information then assists them in decision making since they work closely with company’s management. Intensifying competition and business environment changing has brought into significant challenges and pressures on management accounting profession to

This includes everything from the costs needed to produce a product to the amount of the product produced. This helps managers determine, very specifically, what the future will hold if variables are altered. For instance, transportation expenses and costs for materials can change. These variable costs can affect the bottom line. CVP analysis allows the manager to plug in variable costs to establish an idea of future performance, within a range of possibilities. Key calculations when using CVP analysis are the contribution margin and the contribution margin ratio. The contribution margin represents the amount of income or profit the company made before deducting its fixed costs. The contribution margin is sales revenue minus all variable costs.

Example if an organization has sales of RM 750,000 and total variable costs of RM 450,000, its contribution margin is RM 300,000. Assuming the organization sold 250,000 units during the year, the per unit sales price is RM 3 and the total variable cost per unit is RM 1.80. The contribution margin per unit is RM 1.20. The contribution margin ratio is 40%. It can be calculated using either the contribution margin in dollars or the contribution margin per