Management accounting influence, Managerial Accounting

Assignment Help:

Management Accounting Influence


(A) Transfer pricing and performance measurement relies upon the judgment of the management accountant to make a suitable choice of approach and to calculate suitable values where appropriate.

(B) Values which are suitable for performance measurement purposes are not necessarily suitable for decision making, planning and control purposes. For planning purposes, reasonable future forecasts or targets which meet long-term planning requirements present two acceptable approaches and incremental budgeting offers a third means by which values can be established in practice.  For control purposes, values should ideally be set just above aspiration levels. For performance measurement purposes, values should be set which avoid sub-optimization and dysfunctional behavior and which further the objectives of the performance measurement scheme and of the company in general.  It is unlikely that a single value can meet all requirements.

In some circumstances, multiple values can be established. In overcoming the problem of setting up reliable and valid values for control, planning, decision making and performance measurement needs, however, further problems may arise. Imagine that a company establishes one target for performance measurement purposes and another, lower value, for planning purposes. The planning value must be kept secret from the divisional manager if it is to motivate since some types of manager may lower aspiration levels to the planned target. Secrecy can have detrimental effects to the coordination and communication objectives of budgeting. Again, the behavioral consequences of establishing values are of paramount importance and the management accountant finds that effective accounting is partly based on setting up sound systems at the technical level and partly based on setting up systems which work for the people within the organization.

(C) Emphasis on cost, profit and investment centre performance in the short term can have detrimental effects on the organization in the long term.


Related Discussions:- Management accounting influence

International transfer pricing, International Transfer pricing Internat...

International Transfer pricing International transfer pricing refers to the determination of prices to be charged between related persons and in particular within a multination

Market value-transfer pricing methods, Market value There is universal ag...

Market value There is universal agreement that in competitive markets a market value based transfer price should achieve optimal results. In this circumstance, it can be expected

What are the principles of management accounting, What are the Principles o...

What are the Principles of management accounting? 1. The procedures and methods to be followed for keeping and analyzing financial statements should have consistency. It enable

Project, Ask question #MRead ALL instructions before getting started! ABC ...

Ask question #MRead ALL instructions before getting started! ABC Corporation is a new company that buys and sells office supplies. Business began on January 1, 2014. Given on th

State the factors of cvp, State the factors of CVP The three factors of...

State the factors of CVP The three factors of CVP analysis I e cost volume and profit are interconnected and dependent on one another . for example profit depends upon sales se

Accounting 601, need help with a master budget and assumptions for project

need help with a master budget and assumptions for project

Explain the techniques of performance budgeting, Explain the techniques of ...

Explain the techniques of performance budgeting It will also be useful to examine the three major aspects of this technique: Structural aspects : the structural aspects inv

Compute the operating cycle, Under this method, approximation is made of pa...

Under this method, approximation is made of payments and cash receipts in the ensuring period. The dissimilarity of these payments and receipts indicates deficiency or surplus of c

Case Study - Labor standards, Case Study Labor standards Geet...

Case Study Labor standards Geeta & Company has experienced increased production costs. The primary area of concern identified by management is direct labor. The compa

How would you characterize the politics of food, Given the persistent probl...

Given the persistent problem with starvation in some parts of the world, and the anticipated population growth in developing nations, do we need genetically modified foods? Is it r

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd