CHAPTER 1

The Role of Accounting Information in Management Decision Making

imagesIn Brief

Managers use cost accounting information to make different types of decisions, which include developing long-term strategies and creating short-term operating plans. Managers achieve higher-quality decisions by using higher-quality relevant information and decision-making practices. Accounting information systems often focus on the data needed for financial reporting rather than management decision making, so managers need to appropriately identify relevant information for internal decisions. Cost accounting information is also used as part of an organization's control systems to measure and monitor organizational performance and to motivate employees to take actions consistent with organizational strategies. Some controls ensure that operations proceed according to planned strategies, and other controls help managers determine whether strategies should be altered. Controls also include codes of conduct, values statements, and other mechanisms to ensure ethical behavior. Although ethical behavior can be improved through control systems, it ultimately depends on the ability of individuals to recognize ethical dilemmas and consider the well-being of others and society when making decisions.

This Chapter Addresses the Following Questions:

  • Q1 What is the process of strategic management and decision ...

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