Question

Case study title: “Managerial accounting in times of crisis”

The Coronavirus (COVID19) pandemic defined as global health crisis that consider being a great challenge since World War Two. In December 2019, the COVID19 phenomena appeared in a seafood market, Wuhan – China, while registered as a new disease officially on 7th of January 2020 (WHO, 2020)1 . Countries all over the world are battling with the spread of COVID19 through enormous amount of testing kits, mandate/by-choice quarantine of citizen and cancelling large events all over the world (WHO, 2020). Constantly, the battle against the COVID19 stressing all the resources of the countries. In other words, its pandemic goes beyond more than a global health crisis, it influence the social, educational, economic and political dimensions in the world, and creates related crisis in the future that require years to recover (UN, 2020)2 . Many of our great cities and communities are deserted as people stay indoors either by choice or government order, social life changed dramatically, shops theatres and restaurants closed during the pandemic. Assume you are a managerial accountant in a small and medium-sized perfume production company in Doha, which was established five years ago. In the current economic situation, the company is facing some financial challenges. The company's CEO held a meeting with you to discuss ways out of that crisis so that the company could survive and even compete under the current circumstances.

Discuss the various activities that the managerial accountant may be assigned to in the company in order to help the CEO make rational decisions under the current circumstances.

Answer 1

Here is my View on the Managerial accounting Importance in business growth.

Sooner the day WHO declared on 7th Jan 2020 that COVID 19 is a global pandamic and very sooner it affects the social, educational, economic and political dimensions in the world, and creates related crisis in the future that require years to recover . It also place a disaster things in Business world as no business been carried over 6 months which made recission in the market and the financial crisis it brought made pay cuts even temporary suspension of staff .

This made a lot of Importance to the accountants of organisation especially the Managerial accountants to improve business process and make sure it worth survivable in near future with their stragies and implemantatio of new thoughts to top level management like CEO,Chairman etc, .

What is Managerial Accounting :

Managerial accounting (also called  as cost accounting or management accounting) is a branch of accounting that is concerned with the identification, measurement, analysis, and interpretation of accounting information so that it can be used to help managers to make necessary decisions to efficiently manage a company’s operations.

Managerial accounting is very effective in highly competitive and fast-paced business environments where quick decisions need to be made. These decisions might have to do with a sales tactic, budgeting or cash flow management. Managerial accounting will use operational data to make sense of the situation quickly.

Managerial Accountant :

Managerial accountants record financial information for their companies that is used by the organization’s management team to aid in the decision-making process. Managerial accountants develop budgets, perform asset and cost management, and create important reports used by the management team. Managers depend greatly on the information provided by managerial accountants to develop effective business strategies. Small business owners make most of the decisions within their company. The information presented by managerial accountants affects the owner’s ability to make sound business decisions.

  A managerial accountant records and analyzes financial information by means of collecting, interpreting and preparing financial data to the organization or company's management team. The data is then used to form practical financial decisions that can benefit the company's overall growth.

Roles of Management accountant in Organisation are :

Management accountant presents your financial information in a way that will be useful for making operational decisions about your company. Keeping your financial records up to date will help you perform the following managerial accounting tasks that will add value to your company.

1)Margin Analysis

  Managerial accounting analyzes the incremental benefit of increased production – this is called margin analysis. This flows into the breakeven analysis, which involves calculating the contribution margin on the sales mix to determine the unit volume at which the business’ gross sales equal total expenditures. A managerial accountant will use this information to determine the price point for products and services.

2) Constraint Analysis

Constraint analysis indicates the limitations within a sales process or production line. Managerial accountants find out where the constraints occur and calculate the impact on cash flow, profit and revenue.

3) Capital Budgeting

Managerial accountants help a business decide when, where and how much money to spend based on financial data. Using standard capital budgeting metrics, such as net present value and internal rate of return, to help decision makers decide whether to embark on costly projects or purchases.

The process involves reviewing proposals, deciding if there is a demand for products or services, and finding the appropriate way to pay for the purchase. It also outlines payback periods, so management is able to anticipate future costs and benefits.

4) Trend Analysis and Forecasting

Reviewing the trendline for certain costs and investigating unusual variances or deviations is an important part of managerial accounting. Decisions are made by using previous information like historical pricing, sales volumes, geographical location, customer trends and financial data to calculate and project future financial situations.

5) Product costing

Determining the actual costs of products and services is another element of managerial accounting. Overhead charges are calculated and allocated to come up with the actual cost related to the production of a product. These overhead expenses may include the number of goods produced or other drivers related to the production, such as the square foot of the facility. Along with overhead costs, managerial accountants use direct costs to assess the cost of goods sold and inventory that may be in different stages of production.

6)Decision-Making

Managers must often make decisions that require choosing between alternate products. For example, a manager of a manufacturing company may need to determine the best product to manufacture to remain profitable and the price to charge customers for the product. A major factor in determining the price of a product is the cost related to manufacturing the product. Managerial accountants often perform cost analysis for certain products and divisions, which include variable and fixed costs. The production decisions made by managers are a direct result of information received from managerial accountants.

7)Focus on the future

Financial accounting is all about historical information. In the financial statements, we are reporting things that have already happened.

Since managerial accounting deals mainly with planning and decision making, we are looking into the future and trying to predict what will happen based on historical trends. We are always looking for the most up-to-date information to use in these tasks. Managerial accountants are more focused on relevant information, where financial accountants are required to ensure that information is reliable and objective. In order to make decisions in a timely manner, managers must be able to gather information quickly.