Question

Describe what are the three key managerial functions? Provide examples of each function. How does cost accounting impact how managers discharge their duties in each function?

Answer 1

Key managerial functions are Planning, Organizing and Controlling.

Planning function of management involves setting of objectives (long term) and deciding the course of actions to achieve those long term objectives by making short term goals. Planning is one of the vital functions as it decides the vision and mission of the organisation and all other functions of the management depends upon Planning function.

Organizing refers to management of the structure of the company as a whole which includes shuffling and accurate allocation of human resources to maintain proper co-ordination among the processes.

Controlling function of the management deals with creating standards and ensuring compliance with the applicable standards. Controlling is important to ensure that the processes are carried as intended and deviations, if any are corrected in time.

Examples for above mentioned functions :

Planning : A company with high fixed cost and lower variable cost intends to increase its turnover. The planning function would be to think of various methods like decreasing sales price or high advertising to increase the turnover and profitability.

Organizing : In a business based on manual labour, the management function for the manager would be to organise its human resources to get the best yield and ensure that no human resource remains idle and no one gets overburdened.

Controlling : The management planned to increase the sales in units by reducing the sales price and processing cost to increase profitability but the processing cost is more than the standard processing cost as planned. The controlling function will evaluate the deficiencies and take steps to curb the deviations and bring efficiency to operations.

Impact of cost accounting on managerial functions are as followed :

1.) Planning : Planning involves forecasting, making budgets for setting targets and making standards before actual execution. Cost accounting has eased the process of planning for the managers by providing the budgets, cash flow statements and forecast the actual costs to be incrurred.

2.) Organizing : Operation costing, process costing and other techniques of costing have made it very convenient for the managers to organise its human resources, machines and other vital resources of the entity. Further, it becomes slighter easy for the managers to organize the resources efficiently and effectively.

3.) Controlling : Standard Cost and Budgetary control helps the managers compare the actual figures with the standard and budgeted figures and understand the adverse or favourable figures so that the measures of control on the same can be taken which could lead to improvement in the future processes.