This paper contains an essay about the role of management accounting in the pricing decisions of firms. This is a research type of essay paper, which makes use of journals and textbooks to show the actual application of management accounting in the firm’s final pricing decisions. The first part is intended for the background on management accounting, to give the readers a bird’s eye view of the topic. Then a slow interconnection of the topic to pricing issues is made as it approaches the middle part of the paper. The existing relationship between the two topics is then illustrated through presentations for further and clearer evaluation of the situation to the reader. This is also a way of showing how management accounting can affect a firm’s pricing decisions. On the last part, the topic is summarized to end the discussion and to give a clear conclusion for the readers.     


Management Accounting


            While other branches of accounting is concerned with the considerations of accounting information of business enterprises for the use of external decision makers, managerial accounting is focused on the realm of enterprise-related accounting information for the use of a different set of decision makers – the enterprise’s management itself. Therefore, managerial accounting is the branch of accounting thought and practice concerned on providing useful information to decision-makers within the enterprise. These decisions are related to the development of resources and the exploitation of the opportunities available for the enterprise.


            The boundaries of managerial accounting are not rigid.  One thing that managerial accounting and financial accounting have in common is their focus on the enterprise and its activities. Their difference, on the other hand, lies on the decision interests of the class  decision makers that they served. Additionally, most of the decision models that have evolved for management use and for accountants supply the necessary information inputs that have been developed within the disciplines of managerial economics and managerial finance. These models are described as part of the managerial accounting due to its vital role in supplying the relevant information for decision-making. Without it, it would be hard to understand the models of management decision.


            Management decisions can be divided into two types. They are the long run and the short-run decisions. Long-run decisions are defined as decisions whose outcomes commit the enterprise or have direct influence on its numerous future-period activities. The long run is thought of as a span of time sufficiently long for the planning, implementation and running of the enterprise’s significant project or program. Short-run decisions, on the other hand, are decisions whose outcomes commit the enterprise or directly influence its actions for perhaps only a year at most. The latitude available in the selection of short-run alternatives is restricted considerably by the commitments made by the enterprise in past long-run decisions.


            Given the objective of profit maximization in the long-run, the success of the enterprise (management) in the long-run hinges on the ability of the management in the identification and implementation of the most promising .



Credit:ivythesis.typepad.com


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