Question

Alpha LLC a computer design and manufacturing company at Sohar. The Board of directors decided to install a management accounting system in the organization to support critical decisions making. As a management accounting student, critically evaluate, how management accounting system influences the process of critical decision making of Alpha LLC. Justify your answer with appropriate examples.

Answer 1

Critical decision making needs relevant information and appropriate tool for analyzing the information. As the name suggests, the management accounting system is a system that provides relevant information and tools for analyzing such information that facilitates managerial decision making. Thus, the management accounting system plays an important role in managerial decision making. We can understand the importance of management accounting system with the help of the following examples;

Planning: George Inc. deals in automobile parts. It uses the management accounting system to gather the information of the accounts receivables due for more than the last 6 months, and utilize such information in making the plans to get the receivables converted into cash.

Problem-solving: Adam Inc, deals in wall paints. It gathers the data of the sales of the past 8 months with the help of the management accounting system and finds that sales are decreasing every month. The management tries to solve the problem of decreasing sales.

Preparing budgets: John and Dewis an LLC and deals in restaurant services. The management of John and Dew utilizes the management accounting system to gather the amount of sales of the last 3 months, based on which, it creates the budgets for the upcoming quarter.