Question

select one of the following types of businesses:

• Custom home builder
• Auto repair shop
• Accounting firm
• Lawn service company
• Television show production

Describe how your chosen business might use Managerial Accounting to support internal AND external Stakeholders.

Answer 1

Managerial accounting plays important role in businesses like Custom Home Builders because the construction of custom home is costly in terms of both money and time. Management accounting provides Custom Home Builders the information they need for planning, control and decision making. They can plan their operations by using a managerial accounting tool called budgeting. They can control their operations by conducting variance analysis which is comparing actual performance with standards so that corrective measures are performed to stop the slide in performance. The other tool, the managers in Custom Home Builders can use is cost-volume-profit (CVP) analysis to determine the selling prices of housing units they are producing. Managerial accounting also helps in preparing the U.S. GAAP based financial reports used by external users. Detailed cost information of home units maintained in managerial information system may come handy for sales persons of the company in convincing the prospective customers about the cost of the home units.