Question

Module - Management Accounting

The main role of Management Accounting is:
Planning
Control and
Decision making.
Decision making is the selection of the correct cost element and take the right
decision in the best interest of the organization be:
-Make or buy decision
-Accept or reject decision
-Shut down decision
-Limiting factor decision
In relation to Decision making explain the above statement.

It should include limiting factor with several constraint and
making use of linear programing technique).

Word limit-1500

Answer 1

Role of management accounting in relation to decision making:

Make or buy decision:
Production is most expensive part of the business
Management accountants can determine the real cost of the product and by this they can determine if it is appropriate to buy them from the 3rd party or produce it internally.
This decision is very sensitive as this decision can break the business organization
Accept or reject decision:

while deciding whether to accept of reject a decision, management must consider several factors such as

1)whether the price offered Cost of production & or not
2)visions of qualitative factors.
3)Capacity segued to fulfill the order
4) sole of fixed cost.

5)Shut down decision:

Here we will decide whether to continue to shutdown loss making segment the business is very Crucial.
As shutdown will lead to certain problems ,these problems can be simplified by applying the principles as relevant costing
Generally a business should be shout down if the organization do not have enough funds to run it.

6)Limit factor decision:

constraints in production process are the Limiting factors which prevents a business from maximizing its sales. examples of limiting factors are
shortage in labor ,
medicare failure,
shortage of raw materials, etc.
Management has to take decisions on the basis of the various existing limiting factors.
This helps the organization