Management accounting for business Essay Example | Topics and Well Written Essays - 1500 words

Management accounting for business - Essay Example It needs to be fully aware of the costs it takes to run the business, to produce and to distribute its products. It also needs to have the knowledge of different methods of cutting down the costs in order to design an effective pricing strategy, to enhance the profit for its business. In this process, the management has to take many decisions upon choosing best suitable alternatives in different situations. These decisions encompass various steps in a business cycle. They range from deciding upon the right quantity to produce, right price for the product, acquisition, liquidation, investment involving several alternative options. All these decisions rely upon the company’s financial records for the current as well as previous years. This is the step where accounting information is required. Therefore, accounting information needs to be evaluated at the first step of the decision making process because management can be enabled to decide upon different alternatives only if the company’s complete accounting information is readily available. The management is the major user of accounting information who uses this information to decide upon choosing different alternatives to influence the product costs so as to fix a price for that particular product. Management uses cost accounting to determine the accurate costs incurred in producing and distributing a product. These costs may be Avoidable costs that can be reduced fully or partially by choosing an alternative or they may be relevant costs that differ between various alternatives and here, the management has to enter into the decision-making process. Therefore, the accounting information required in the management and organisational decision making process must include the following steps to deal with the constraints, as given by Goldratt, E.M. (1990) in the theory of constraints: The accountants should identify the