The Results of Irrelevant

The results of irrelevant

First of all, management accounting reports are of little help to operating managers attempting to reduce costs and improve productivity.

1. As first, the reports decrease productivity because the managers must spend time to trying to understand and explain the reports.

2. Management accounting systems do not provide timely and detailed information on process efficiencies. Or they focus to narrowly on inputs that are insignificant in production environment. And this cause not only fails to provide relevant information to managers, but also it distracts the managers’ attention from the important factors for production efficiency.

Second, the management accounting system fails to provide accurate product costs. The aggregate product costing methods are for financial reporting to satisfy external and auditing requirements. This cause distort on product cost, which misleading to product pricing, product mix, product sourcing.

Third, managers’ horizons contract to the short-term cycle of their monthly profit and loss statement. Some of the managers would cut down the long-term investment in order to meet short-term goals (reduce short-term cost). Management accounting systems provide a misleading target for managerial attention. It makes the managers regardless the potential long-term investment and only focus on return on investment.

Challenge

An organization’s management accounting system must provide timely and accurate information to facilitate efforts to control costs, to measure and improve productivity, and to improve process. Also it needs to provide the accurate product costs to make pricing decision and introductions of new products.

The organization’s management accounting system is a channel