Question

As we wrap up our course in principle of managerial accounting, I would like you to discuss how this class could be relevant to your future professional careers. Many of you won't become professional accountants, but there are many concepts that you could see again in your careers. Please take a minimum of 2 paragraphs and discuss at least 2 significant concepts that you have learned that not only caught your attention, but also could be very valuable to take with you as you complete your academic program and enter the business world.

Answer 1

Cost-benefit analysis

Cost-benefit analysis (CBA), also known as benefit-cost analysis, is a systematic approach to estimating the benefits or advantages of implementing a business project or taking a course of action and comparing them with the costs involved.

It is a tool that helps business managers choose the best option from a set of alternatives in terms of benefits in labour, time, and cost savings.

The CBA is a procedure for ascertaining whether benefits outweigh costs or vice versa, and allows managers to determine whether an investment or another decision is justified.

In using CBA, monetary values are assigned to assumed costs of a project and benefits from it. The time taken for the benefits to repay the costs is also calculated.

Balanced Scorecard

A Balanced Scorecard, developed by Robert S. Kaplan and David P. Norton, is a strategy tool that helps clarify the vision or mission statement of a corporation and prepare a development plan that involves all the different wings of the business entity.

In the industrial age, manufacturing companies focused mainly on financial performance, ignoring aspects such as customer satisfaction. For example, a company in those days would not worry too much about cutting down customer service costs to improve profits.

In this current information age, few companies can afford to take such a limited view.

A Balanced Scorecard helps them to view organisational functions from four perspectives and improve each.

The four perspectives are the learning and growth perspective, business process perspective, customer perspective, and finance perspective.

The idea is that by improving the learning and development (human resources) perspective, the business process would improve, leading to better customer satisfaction, which would then bring increased profits. Objectives, measures, targets, and initiatives are identified for action under each perspective.

Since the collection and communication of data for a Balanced Scorecard can be laborious, companies now use custom-made or commercially available software packages.