Managerial Functions in Cost Accounting
The managerial functions are carried out by the top management group, the president, vice-presidents and other executives; the middle management group, the division managers, branch managers and department heads; and the lower management group, the foremen and supervisors. These groups require comprehensive analytic cost data
provided on a systematic basis. Essentially the various managerial groups assist in establishing company objectives and determining that the objectives are realized.
There are four basic managerial functions that are common to all activities, no matter how large or small the enterprise:
Planning in Cost accounting
The process of establishing organizational goals (i.e., setting objectives) and a strategy for their accomplishment is known as planning. It is concerned with the future-immediate and/or long range. Middle and lower management planning stem from the goals (i.e., the plan) set by top management. Examples of primary objectives are improvements in market standing, productivity, profitability, managerial performance, and public responsibility.
Once objectives are set and a basic plan is established, the process of organizing involves developing a framework for the activity and making specific work assignments. Authority originates with top management and is delegated to the various management levels. A closely related factor is responsibility-the obligation to work to the best of one’s ability. The supervisor has the authority to require the particular work, the employee has the responsibility for performance. Accountability-a facet of responsibility-is the obligation to report results to higher’ authority. This
is an important feature of budgetary control and standard costing, since it aids in the comparison of actual performance with predetermined standards and analysis of causes of difference.
This is the process by which management achieves its objectives. It requires the ability to supervise and motivate employees in order to obtain optimal levels of productivity conforming to established plans (e.g., budgets or standards for sales, production, costs, etc.),
The modern concept of motivation involves creating a work environment that stimulates superior levels of productivity. On the manager’s part, it means providing subordinates with a clear picture of what is expected, necessary guidance, and the feeling that their work represents an important contribution to the achievement of the enterprise’s ultimate goals. By effectively communicating with employees and encouraging feedback from them, managers are able to satisfy employee needs.
The process of review, evaluation, and reporting monitors the achievement of goals. It also compares actual results
with those projected in planning as well as against actual performance in past periods.
There are two facets to reviewing the enterprise’s activities:
- the comparison of actual to projected results
- individual traits.
This is done because discrepancies on paper can often be traced to employee achievements and/or failures (e.g., good and bad decisions, exceptional or insufficient supervision, and motivation, etc.).
Another kind of appraisal is the internal audit. This is a systematic review and evaluation made by a staff of internal auditors to assure management that established controls are operating as planned.
Internal auditing today covers accounting, financial and other business operations, such as evaluations of policies, managerial performance, methods, etc. An important part of any review is the reporting of deficiencies and effective recommendations for their prompt correction.