Why We Need a Conceptual Framework for Managerial Costing

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An article titled “Why We Need a Conceptual Framework for Managerial Costing” starts off by mentioning that managerial costing is essentially management accounting which provides internal structure to the company. IMA members are the target audience, as there are several structural benefits that management accounting can offer.

Managerial costing is a framework that allows for an easier and more efficient decision making. A company must be productive, effective and practical in its management. The knowledge of the costs and what type of requirements there are is very important, but the ability to use the information and apply it to practice is a skill that is just as needed, if not more.

The business and the public will be made aware of the financial statements, as a result the system of the business will be aligned to perform with highest output (White et al. 38). At the same time, they have to be specific in the requests and regulations, so that there is a structure and order in the operation. As the accounting is in charge and can take a more global look at the business structure, it has to shape the culture and the inner, as well as outer relations with other workers and the public.

The first sign of ineffective organization is a loss of assets and stability in the company. A disorganized structure will have immediate effects on the functioning of the corporation as a unit. Many times, there is a miscommunication between the management and employees. Ineffective and faulty cost management leads to debts and inability to perform at the needed times. The management has duties that are related to the distribution of roles and finances in the company.

Their main focus is on the creation of conditions, which can be used for the benefit of a business. Employees, in turn, have a goal of making a salary for themselves but also supporting the company, so that it keeps running, thus providing them with a work place. In order to improve, the cost framework must be known to all people involved, as it will leave out any misunderstanding or overlaying of work (Weil 2005).

A business has some basic and concrete general patterns and structure. The fact that there will always be people and organizations which provide a service or a product, makes it one of the oldest professions.

For a very long time, people have been creating cooperative relationships based on cost effectiveness, which would allow for an easier and quicker gain of finances. The crediting system has very much been involved in business, at any time. The banks have always co-existed with the business world but in the present times, their span has grown.

And then, there is the culture of the time, which constantly changes. The article justifiably notes that without an organized and intelligent framework of cost management, the company will be full of wrong decisions. GAAP sets the guideline and presents limitations that must be taken into consideration when managing costs. There are also types of non-financial data and resources that have a direct link to the financial divisions of the business (White et al. 40).

The economy and global market have developed with unexpected rates, together with debts and spending. Accounting management concepts and tools are used in making a decision related to the business and the changes that are made using the numbers that are available, as a representation of the company or data.

Sometimes, cost management is used in critical situations or when a quick and effective decision is needed. Also, when there is conflicting information or uncertainty, the financial numbers prove to be an effective way to get a mathematical analysis of the matters.

This guarantees that the decision made is based on hard evidence and will lead to results. The infrastructure makes a connection with the exterior world or environment of the business. It is the relationships and pathways between people and many different organizations that work together in many fields and situations. As everything is built on finances, it takes up an important part of the corporate world. Its inner set up is directly influenced by the market in the city, country or a part of the world (Stenzel 2003).

I agree with the facts presented because any business must have a reliable financial network. The advantages of a financial decision made within a group can be seen in the effectiveness and productivity of the result. The unification of costing goals and plans makes the work easier and faster. The disadvantages are the conflicts in deciding the right path or direction and lack of education.

Too many ideas might intervene with an adequate choice of one, which will be most efficient. A clear leader must be established to organize the group and provide structure to the work through financial support and back-up.

Overall, the article contains important benefits of effective cost management. It is one of the key aspects of any business, and as a loss would be always unwelcome, proper knowledge and understanding are a must.

Works Cited

Stenzel, Catherine. Essentials of Cost Management. Hoboken, NJ: John Wiley & Sons, 2003. Print.

Weil, Roman. Handbook of Cost Management. Hoboken, NJ: John Wiley & Sons, 2005. Print.

White, Larry, Douglas Clinton, Anton van der Merwe, Gary Cokins, Chuck Thomas, Ken Templin, and Jim Huntzinger. “Why We Need a Conceptual Framework for Managerial Costing”. Strategic Finance. (2011): 36-42. Print.

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Why We Need a Conceptual Framework for Managerial Costing

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