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Essay / Research Paper Abstract
This 7 page paper considers how fixed costs may be a major cause of error in management accounting. The paper looks at how production techniques have changed and traditional cost accounting may be inappropriate due to increased fixed costs and falling direct labour costs leading to distortions and a domino effect. The bibliography cites 4 sources.
Page Count:
7 pages (~225 words per page)
File: TS14_TEfixcst.rtf
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Unformatted sample text from the term paper:
add value to the analysis and decision making processes. The input will determine the quality of the information used and then the quality of the decision made based on that
information. There are many input elements, including variable and fixed costs. It is this later element that may be seen as one source of error that can have far reaching
effects. To understand the way this can occur the first stage is to consider what is meant by management accounting. There are many differences between management and financial accounting,.
The name gives us the clue form which we can work outwards from. Managerial accounting is the accounting system that is used by the management of the company, whereas financial
accounting is that which is used by those who may be interested in the financials of the company, stakeholders such as the shareholders, financial institutions and other investors.
Unlike financial accounting, management accounting is different, the financial accounts include many theoretical costs rather than real costs as seen in the bank accounts. For example depreciation is not
an invoiced charge it is a financial accounting tool (Chadwick, 1998). Management need more that this, they need to have up to date figures on a daily or weekly
basis form which they can monitor a companies performance, control costs and the bank accounts, plan for the future as well as formulate goals, and focus on the specific issues
that require attention. It is also useful to understand that management accounting also allows a greater amount of planning giving costs for different scenarios so it may also be used
as a planning tool (Chadwick, 1998). From this it is apparent that the need for accurate information is very important. When the type of costs such as fixed and variable
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