Cost accounting a tool of management accounting practice & implement in bangladesh

Cost Accounting as a tool of management accounting Practice, implement & Challenge in Bangladesh

History of Managerial Accounting:Managerial accounting has its roots in the industrial revolution of the 19th century. During this early period, most firms were tightly controlled by a few owner-managers who borrowed based on personal relationships and their personal assets.

Since there were no external shareholders and little unsecured debt, there was little need for elaborate financial reports. In contrast, managerial accounting was relatively sophisticated and provided the essential information needed to manage the early large scale production of textile, steel, and other products.

After the turn of the century, financial accounting requirements burgeoned because of new pressures placed on companies by capital markets, creditors, regulatory bodies, and federal taxation of income.

Many firms needed to raise funds from increasingly widespread and detached suppliers of capital.

To tap these vast reservoirs of outside capital, firms' managers had to supply audited financial reports.

And because outside suppliers of capital relied on audited financial statements, independent accountants had a keen interest in establishing well defined procedures for corporate financial reporting.

The inventory costing procedure adopted by public accountants after the turn of the century had a profound effect on management accounting. As a consequence, for many decades, management accountants increasingly focused their efforts on ensuring that financial accounting requirements were met and financial reports were released on time. The practice of management accounting stagnated.

In the early part of the century, as product line expanded operations became more complex, forward looking companies saw a renewed need for management-oriented reports that was separate from financial reports. But in most companies, management accounting practices up through the mid-1980s were largely indistinguishable from practices that were common prior to World War I. In recent years, however, new economic forces have led to many important innovations in management accounting.

Historical Development:Maher states: Management accounting has a short but exciting history: - While management accounting concepts can be traced back at least to the beginning of the Industrial Revolution, management accounting as a teaching discipline appears to have got off the ground in the late1940’s.

Parker concurs: - Management accounting has historical antecedents that stretch back longer than we might expect and certainly accounting historians have not yet concluded their investigations of its earliest genesis.

Cunagin and Stancil believe: Management accounting with its lack of generally accepted accounting practice has not yet had the exposure afforded to financial accounting. The history of management accounting is one of innovation based on necessity. Innovation therefore continues without constraints imposed by preconceived ideas of what constitutes “proper” accounting.

The historical development of management accounting is of particular importance in answering relevancy questions in a rapidly developing technological environment.

The Evaluation Of Management Accounting Practice Accounting for 1812-1920: Prior to the matching concept. Focus on operating cost and Process efficiency of processes.

Cost 1920-1950: Matching concept developed. Focus on cost determination Accounting and financial control.

Managerial 1950-1980’s: Focus shifted to providing information for management Accounting planning & control.

Lean Enterprise 1980’s: Focus shifted to the reduction of waste, JIT, teamwork, ABC, CAM-1 Cost target costing, quality, investment & product life cycle management.

Management Value based 1990’s: Focus shifted to include the creation of customer value, strategy, Management Balanced scorecards, EVA, and other related concepts.

Management accounting before the First Management Accounting Revolution:According to the International Federation of Accountants (IFAC), the period before the First Management Accounting Revolution is known as the “classical period” and ended in the late 1950s.

Robles and Robles (2000:4) state that contributions to cost accounting during this period (especially from 1820 to 1885) were particularly barren.

After years of merely recording financial information, Johnson and Kaplan mention the emergence of hierarchical organizations that all created a new demand for accounting information. The Industrial Revolution during the 18th and 19th centuries presented new challenges to accountants. Business operations became more complex and information was needed to facilitate those operations.

Manufacturing activities multiplied, and according to Wyatt (2002:4), accountants were expected to provide information to control expenditure and to price manufactured products.

The label “management accounting” was not used in the Anglo-Saxon world prior to the First Management Accounting Revolution. The term “cost accounting” was used to define processes for the computation of costs and for financial control. Although management accounting was not recognized before the 19th century when masses of financial information had to be recorded, it is quite possible that businessmen were already using management accounting concepts at the time.

In Parker’s (2002:1) address to the Chartered Institute of Management Accounting (CIMA) in March of 2002, he stated that there was strong evidence of a full range of cost management practices in the British extractive, iron and textile industries before the 1900s. Yamey, for example, stated that the records of Robert Loders’ farm accounts (1610-1620) showed evidence of calculations for business decision making (Parker 1969:15). Another example is found in the French mathematician, Augustin Cournot’s, records for 1838 in which he pointed out that a monopolist would always stop production when the increase in expenses exceeded the increase in receipts (Parker 1969:17). During this period cost accounting was evidently considered a necessary technical activity to pursue organizational objectives. Associations that were established during this period to disseminate the work performed by accountants emphasized the use of cost accounting.

The first North American organizations that developed cost or management accounting systems were the integrated cotton textile factories that were established after 1812. They used cost accounts to ascertain the direct labor and overhead costs of converting raw material into yarn and fabric.

One of the first publications on the principles of cost accounting, namely Factory accounts, written by the electrical engineer Emile Garcke and the accountant John Manger Fells, appeared in 1887. These two writers would later be recognized as the founders of marginal costing (Parker 1969:20). Another contribution to cost accounting during the period was that of Friederich von Wieser who first formulated the concept of opportunity cost in a paper entitled On the relation of cost to value (written in 1889, but published in 1929).

Among the earliest manufacturing cost records found by American historians were those of the Boston Manufacturing Company. Company records dated as early as 1815 reveal that remarkably sophisticated sets of cost accounts were used.

Overview of Management Accounting: Management accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions.

Unlike financial accountancy information, management accounting information is used within an organization “typically for decision-making” and is usually confidential and its access available only to a select few.

According to The Chartered Institute of Management Accountants (CIMA) - Management Accounting is the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities.

The American Institute of Certified Public Accountants (AICPA) states that management accounting practice extends to the following three areas:

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Strategic Management— advancing the role of the management accountant as a strategic partner in the organization.

Performance Management— developing the practice of business decision-making and managing the performance of the organization.

Risk Management— contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.

The Institute of Certified Management Accountants (ICMA) states - "A management accountant applies his or her professional knowledge and skill in the preparation and presentation of financial and other decision oriented information in such a way as to assist management in the formulation of policies and in the planning and control of the operation of the undertaking."

Management Accountants therefore are seen as the - "value-creators" amongst the accountants.

Management accounting knowledge and experience can therefore be obtained from varied fields and functions within an organization, such as information management, treasury, efficiency auditing, marketing, valuation, pricing, logistics, etc.

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Formulating strategies; Planning and constructing business activities; Helps in making decision & Optimal use of resources; Supporting financial reports preparation; and Safeguarding asset

Management accounting is concerned with the provisions and use of cost accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions. From different significance - management accounting information is used within an organization, typically for decision-making. In contrast to financial accountancy information, management accounting information is:

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Designed and intended for use by managers within the organization, whereas financial accounting information is designed for use by shareholders and creditors.

Usually confidential and used by management, instead of publicly reported; Forward-looking, instead of historical; Computed by reference to the needs of managers, often using management information systems, instead of by reference to financial accounting standards.

The distinction between ‘traditional’ and ‘innovative’ management accounting practices can be illustrated by reference to cost control techniques. Cost accounting is a central method in management accounting, and traditionally, management accountants’ principal technique was variance analysis, which is a systematic approach to the comparison of the actual and budgeted costs of the raw materials and labor used during a production period. While some form of variance analysis is still used by most manufacturing firms, it nowadays tends to be used in conjunction with innovative techniques such as life cycle cost analysis and activity-based costing, which are designed with specific aspects of the modern business environment in mind. Life-cycle costing recognizes that managers’ ability to influence the cost of manufacturing a product is at its greatest when the product is still at the design stage of its product life-cycle, since small changes to the product design may lead to significant savings in the cost of manufacturing the product. Activity-based costing recognizes that, in modern factories, most manufacturing costs are determined by the amount of ‘activities’ and that the key to effective cost control is therefore optimizing the efficiency of these activities. Activitybased accounting is also known as Cause and Effect accounting.

Both lifecycle costing and activity-based costing recognize that, in the typical modern factory, the avoidance of disruptive events reducing the costs of raw materials. Activity-based costing also deemphasizes direct labor as a cost driver and concentrates instead on activities that drive costs, such as the provision of a service or the production of a product component.

Management Accounting Principal: To achieve the above objectives Management Accounting employs three principal devices from cost accounting 1. Forward looking principle: Based on the past and all other available data, forecasting, the future and recommending wherever appropriate the course of action for the future.

2. Target setting principle: Fixation of an optimum target which is variously known as standard, budget etc. and through continuous review ensuring that the target is achieved.

3. The principle of exception: Instead of concentrating on voluminous masses of data management accounting concentrates on deviations from targets and continuous and prompt analysis of the causes of these deviations on which to base management action.

Objectives of Management Accounting:The base objective of management accounting is to assist the management in carrying out its duties efficiently. The objectives of Management Accounting are: -

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The computation of plans and budgets covering all aspects of the business. Example: production, selling, distribution, research and finance.

The systematic allocation of responsibilities for implementation of plans and budgets.

The organization for providing opportunities and facilities for performing responsibilities.

The analysis of all transactions, financial and physical, to enable effective comparison to be made between the forecasts and actual performance.

The presentations of up to date information, at frequent intervals, to management in the form of operating statements.

The statistical interpretation of such statements in a manner which will be of utmost assistance to management in planning future policy and operation.

The fundamental objective of management accounting is to enable the management to maximize profits or minimize losses. The evolution of management accounting has given an approach to the function of accounting. The main objectives of management accounting are as follows: 1. Planning and policy formulation: Planning involves forecasting on the basis of available information, setting goals; framing polices determining the alternative courses of action and deciding on the program of activities. Management accounting can help greatly in this direction. It facilitates the preparation of statements in the light of past results and gives estimation for the future.

2. Interpretation process: Management accounting is to present financial information to the management. Financial information is technical in nature. Therefore, it must be presented in such away that it is easily understood. It presents accounting information with the help of statistical devices like charts, diagrams, graphs, etc.

3. Assists in Decision-making process: With the help of various modern techniques management accounting makes decision-making process more scientific. Data relating to cost, price, profit and savings for each of the available alternatives are collected and analyzed and provides a base for taking sound decisions.

4. Controlling: Management accounting is a useful for managerial control. Management accounting tools like standard costing and budgetary control are helpful in controlling performance. Cost control is affected through the use of standard costing and departmental control is made possible through the use of budgets. Performance of each and every individual is controlled with the help of management accounting.

5. Reporting: Management accounting keeps the management fully informed about the latest position of the concern through reporting. It helps management to take proper and quick decisions. The performance of various departments is regularly reported to the top management.

6. Facilitates Organizing: “Return on Capital Employed� is one of the tools of management accounting. Since management accounting stresses more on Responsibility Centers with a view to control costs and responsibilities, it also facilitates decentralization to a greater extent. Thus, it is helpful in setting up effective and efficiently organization framework.

7. Facilitates Coordination of Operations: Management accounting provides tools for overall control and coordination of business operations.

Budgets are important means of coordination.

Nature and Scope of Management Accounting:Management accounting involves furnishing of accounting data to the management for basing its decisions. It helps in improving efficiency and achieving the organizational goals. The following paragraphs discuss about the nature of management accounting.

1. Provides accounting information: Management accounting is based on accounting information. Management accounting is a service function and it provides necessary information to different levels of management. Management accounting involves the presentation of information in away it suits managerial needs. The accounting data collected by accounting department is used for reviewing various policy decisions.

2. Cause and effect analysis: The role of financial accounting is limited to find out the ultimate result, i.e., profit and loss; management accounting goes a step further. Management accounting discusses the cause and effect relationship. The reasons for the loss are probed and the factors directly influencing the profitability are also studied. Profits are compared to sales, different expenditures, current assets, interest payables, share capital etc.

3. Use of special techniques and concepts: Management accounting uses special techniques and concepts according to necessity to make accounting data more useful. The techniques usually used include financial planning and analyses, standard costing, budgetary control, marginal costing, project appraisal, control accounting ,etc.

4. Taking important decisions: It supplies necessary information to the management which may be useful for its decisions. The historical data is studied to see its possible impact on future decisions. The implications of various decisions are also taken in to account.

5. Achieving of objectives: Management accounting uses the accounting information in such away that it helps in formatting plans and setting up objectives. Comparing actual performance with targeted figures will give an idea to the management about the performance of various departments. When there are deviations, corrective measures can be taken at once with the help of budgetary control and standard costing.

6. No fixed norms: No specific rules are followed in management accounting as that of financial accounting. Though the tools are the same, their use differs from concern to concern. The deriving of conclusions also depends upon the intelligence of the management accountant. The presentation will be in the way which suits the concern most.

7. Increase in efficiency: The purpose of using accounting information is to increase efficiency of the concern. The performance appraisal will enable the management top in-point efficient and inefficient spots. Effort is made to take corrective measures so that efficiency is improved. The constant review will make the staff cost–conscious.

8. Supplies information and not decision: Management accountant is only to guide and not to supply decisions. The data is to be used by the management for taking various decisions. ‘How is the data to be utilized’ will depend upon the caliber and efficiency of the management.

9. Concerned with forecasting: The management accounting is concerned with the future. It helps the management in planning and forecasting. The historical information is used to plan future course of action. The information is supplied with the object to guide management for taking future decisions.

Advantages of Management Accounting:One of the most significant steps to improve managerial performance is the development of the new discipline. Management accounting it is still very much in a state of evolution. However, the following advantages are claimed for it:1. The main contribution of management accounting is the elimination of initiative management.

With the help management accounting, the business activities are regulated systematically by means of efficient planning and organization thereby avoiding over working in busy periods and slackness in slump periods.

2. It enables the business to get the maximum return on capital by helping it in planning, distribution and controlling activities.

3. It helps the management to improve its service to its customers by resorting to a continuous method of comparing the results with the standards.

4. It helps in improving the relations between the management and labor by avoiding unreasonable standard of work which is the main cause of labor unrest.

Limitations of Management Accounting: Management Accounting is in the process of development. Hence, it suffers form all the limitations of a new discipline. Some of these limitations are:

1. Limitations of Accounting Records: Management accounting derives its information from financial accounting, cost accounting and other records. It is concerned with the rearrangement or modification of data. The correctness or other wise of the management accounting depends upon the correctness of these basic records. The limitations of these records are also the limitations of management accounting.

2. It is only a Tool: Management accounting is not an alternate or substitute for management. It is a mere tool for management. Ultimate decisions are being taken by management and not by management accounting.

3. Heavy Cost of Installation The installation of management accounting system needs a very elaborate organization. This results in heavy investment which can be afforded only by big concerns.

4. Personal Bias: The interpretation of financial information depends upon the capacity of interpreter as one has to make a personal judgment. Personal prejudices and bias affect the objectivity of decisions.

4. Psychological Resistance The installation of management accounting involves basic change in organization setup. New rules and regulations are also required to be framed which affect a number of personnel and hence there is a possibility of resistance form some or the other.

5. Evolutionary stage: Management accounting is only in a developmental stage. Its concepts and conventions are not as exact and established as that of other branches of accounting. Therefore, its results depend to a very great extent upon the intelligent interpretation of the data of managerial use.

7. Provide soonly Data: Management accounting provides data and not decisions. It only informs, not prescribes. This limitation should also be kept in mind while using the techniques of management accounting.

8. Broad-based Scope: The scope of management accounting is wide and this creates many difficulties in the implementations process. Management requires information from both accounting as well as nonaccounting sources. It leads to in exactness and subjectivity in the conclusion obtained through it.

Management Accounting Tasks: Management accounting may be said to include all activities connected with collecting, processing, interpreting and presenting information to management. The management accounting satisfies the various needs of management for arriving of appropriate business decisions. They may be described as modification of data, analysis and interpretation of data, facilitating management control, formulation of business budgets, use of qualitative information, and satisfaction of informational needs of management.

Listed below are the primary tasks performed by management accountants generated by different cost accounting tools. The degree of complexity relative to these activities is dependent on the experience level and abilities -

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Variance Analysis Rate & Volume Analysis

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Strategic Planning Strategic Management Advise

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Product Profitability

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Internal Financial Communication

Cost Analysis & Cost Benefit Analysis

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Cost-Volume-Profit Analysis

Sales and Financial Forecasting & Annual Budgeting

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Life cycle cost analysis

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Cost Allocation

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Capital Budgeting

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Resource Allocation and Utilization

Presentation

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Emerging Themes of Management Accounting: •

Customer Orientation

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Advances in Information Technology

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Cross-functional Perspective

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Global Competition

Advances in Environment

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Total Quality Management

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Deregulation and Growth in the Service Industry

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Time as a Competitive Element

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Activity-based Management

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Manufacturing

Code of Conduct for Management Accountants: Practitioners of management accounting and financial management have an obligation to the public, their profession, the organization they serve, and themselves, to maintain the highest standards of ethical conduct. In recognition of this obligation, the Institute of management Accountants has promulgated the following standards of ethical conduct for practitioners of management accounting and financial management. Adherence to these standards internationally is integral to achieving objective of management accounting. Standards of Ethical Conduct for Management Accountants are:•

Competence

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Integrity

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Confidentiality

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Objectivity

Competence: Practitioners of management accounting and financial management have a responsibility to: •

Maintain an appropriate level of professional competence by ongoing development of their knowledge and skills.

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Perform their professional duties in accordance with relevant laws, regulations and technical standards.

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Prepare complete and clear reports and recommendations after appropriate analysis of relevant and reliable information

Confidentiality: Practitioners of management accounting and financial management have a responsibility to:

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Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.

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Inform subordinates as appropriate regarding the confidentiality of information acquired in the course of their work and monitor their activities to assure the maintenance of that confidentiality

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Refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through third parties.

Integrity: Practitioners of management accounting and financial management have a responsibility to: •

Avoid actual or apparent conflicts of interest and advise all appropriate parties of any potential conflict.

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Refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically.

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Refuse any gift, favor, or hospitality that would influence or would appear to influence their actions.

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Refrain from either activity or passively subverting the attainment of the organization's legitimate and ethical objectives.

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Recognize and communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.

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Communicate unfavorable as well as favorable information and professional judgment or opinion.

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Refrain from engaging or supporting any activity that would discredit the profession.

Objectivity: Practitioners of management accounting and financial management have a responsibility to: •

Communicate information fairly and objectively

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Disclose fully all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, comments, and recommendations presented.

Resolution of Ethical Conflicts: In applying the standard of ethical conduct, practitioners of management accounting and financial management may encounter problems in identifying unethical behavior or in resolving an ethical conflict.

When faced with significant ethical issues practitioners of management accounting and financial management should follow the established policies of the organization bearing on the resolution of

such conflict. If these policies do not resolve the ethical conflict, such practitioner should consider the following course of action.

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Discuss such problems with immediate superior except when it appears that superior is involved, in which case the problem should be presented to the next higher managerial level.

If a satisfactory resolution cannot be achieved when the problem is initially presented, submit the issue to the next higher managerial level.

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If the immediate superior is the chief executive officer or equivalent, the acceptable reviewing authority may be a group such as the audit committee, executive committee, board of directors, board of trustees, or owners. Contact with a level above the immediate superior should be initiated only with the superior's knowledge. Assuming the superior is not involved.

Except where legally prescribed, communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate.

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Clarify relevant ethical issues by confidential discussion with an objective adviser to obtain a better understanding of possible course of action

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Consult your own attorney as to legal obligations and rights concerning the ethical conflict.

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If the ethical conflict still exists after exhausting all levels of internal review, there may be no other recourse on significant matters than to resign from the organization and to submit an informative memorandum to an appropriate representative of the organization. After resignation, depending on the nature of the ethical conflict, it may also be appropriate to notify other parties.

Ethics & the Management Accountant:When management accounting information is used for control, management accountants may find themselves in complex situations, fraught with conflict.

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Especially when it is used for performance evaluation

Pressure may be exerted to influence the numbers to make a favored product, customer, or line of business appear more profitable than it actually is. Department managers may distort information so that unfavorable factors are not revealed in a management accounting report.

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The cost of inefficient processes

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The existence of substantial amounts of excess capacity

Senior executives whose incentive compensation is based on the reported financial numbers may put pressure on accountants.

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To recognize revenue from a customer early To defer until subsequent periods the recognition of an expense

In some circumstances, to recognize certain expenses early so that much higher earnings may be reported in future periods.

All of these behaviors were evident in the frauds dominating the financial news in recent years.

Organizational leadership plays a critical role in fostering a culture of high ethical standards.

The way an individual responds to pressure derives from inner values and beliefs, but individuals are strongly influenced by their view of organizational standards. If individuals see unethical or illegal behavior practiced by the organization’s leaders and superiors or coworkers, they may feel that such

behavior is accepted and sanctioned. An individual without a strong set of personal beliefs and values may find it difficult to withstand the pressure to “go along with the flow” and participate in this behavior when a difficult or conflicting situation arises.

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Such as being asked to misrepresent an organization unit’s performance potential when the unit is being offered for sale.

Beyond the example set by senior executives, companies may use two types of control systems to foster high ethical standards among their employees.

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Beliefs systems Boundary systems

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Credos Mission statements

A beliefs system is the explicit set of statements, communicated to employees, of the basic values, purpose, and direction of the organization:

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Vision statements Statements of purpose or values

The statements in a beliefs system are intended to inspire and promote commitment to the organization’s core values and its purpose for being in business.

When conflicting situations arise, however, the lofty rhetoric in the statements will only have true meaning and serve as guides to actions if employees observe senior managers acting according to the statements. In this way, employees learn that the company’s stated beliefs represent deeply rooted and actionable values. Articulate and actionable beliefs systems may inspire people to higher values and aim at higher missions but they may not communicate clearly what behavior and actions are unacceptable.

Companies also need boundary systems that communicate what actions must never be taken.

Boundary systems are stated in negative terms, or in minimal standards of behavior •

Intended to constrain the range of acceptable behavior.

For example, the organization might tell employees in the Purchasing Department that accepting any gifts under any circumstances from suppliers will result in immediate termination. Boundary systems also include clear communication of the laws under which the company operates.

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Examples include antitrust laws; zero tolerance for sexual, racial, and gender discrimination and harassment; environmental, health, and safety laws; and foreign corrupt practices regulations.

Management accountants, like all employees, must be aware of and be deeply committed to act in ways that do not violate their organization’s code of conduct and societal laws governing organizational behavior and actions.

As designers and custodians of the organization’s reporting and control systems, they have an additional obligation to ensure that such boundary systems exist in their organization, and that the boundary systems are clearly communicated throughout the organization.

They should also monitor that senior executives act quickly and decisively when behavior in violation of these standards is detected.

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If violations are detected but not acted upon, management accountants can communicate with the audit committee of the board of directors, who are the shareholders and society’s representatives in the organization.

Management accountants, as members of a profession, also operate with an additional boundary system: the code of behavior promoted or advocated by their industry and professional association.

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ICAB

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ICMA

Professional organizations usually establish ethical norms and codes of professional conduct for their members.

The professional association can monitor and police its norms and codes through peer reviews •

They have procedures for disciplinary action when violations are detected.

Many of the guidelines are phrased in terms of what management accountants should not do, consistent with how boundary systems operate.

Evaluation of management Accounting Technique Chapter Covers By Following Topic:-

Need for Managerial Accounting Information Various Costing Technique Use by Management for Making Decision The Role of Cost Accounting in Managerial Decision Making Tools for Management Support Cost Accounting- A Tool for Managerial Accounting Need for Managerial Accounting Information:Every organization-large and small-has managers. Someone must be responsible for making plans, organizing resources, directing personnel, and controlling operations. Every where, mangers carry out three major activities-planning, directing and motivating, and controlling.

Planning: Planning involves selecting a course of action and specifying how the action will be implemented.

The first step in planning is to identify the alternatives and then to select from among the alternatives the one that does the best job of furthering the organization's objectives. While making choices, management must balance the opportunity against the demands made on the company’s resources.

The plans of management are often expressed formally in budgets, and the term budgeting is applied to generally describe the planning process. Budgets are usually prepared under the direction of controller, who is the manager in charge of the accounting department. Typically, budgets are prepared annually and represent management's plans in specific, quantitative terms.

Directing and Motivating:

In addition to planning for the future, managers must oversee day-to-day activities and keep the organization functioning smoothly. This requires the ability to motivate and affectively direct people.

Managers assign tasks to employees, arbitrate disputes, answer questions, solve on-the-spot problems, and make many small decisions that affect customers and employees. In effect, directing is that part of the manager's work that deals with the routine and the here and now. Managerial accounting data, such as daily sales reports are often used in this type of day-to-day decision making.

Controlling: In carrying out the control function, managers seek to ensure that the plan is being followed.

Feedback, which signals operations are on track, is the key to effective control. In sophisticated organizations, this feedback is provided by detailed reports of various types. One of these reports, which compares budgeted to actual results, is called a performance report. Performance report suggests where operations are not proceeding as planned and where some parts of the organization may require additional attention.

The Planning and Control Cycle: The work of management can be summarized in a model. The model, which depicts the planning and control cycle, illustrates the smooth flow of management activities from planning through directing and motivating, controlling, and then back to planning again. All of these activities involve decision making. So it is depicted as the hub around which the activities revolve.

Management Accounting As a Profession:An understanding of the professional status of the management accountant will clarify the ongoing need to re-evaluate the important role that management accountants fulfill in business. The professional status of the management accountant has always been in dispute. Understanding the different approaches to the study of professionalism and professions would help to determine whether management accounting is a profession or not. According to McMillan, professions survive through the ages despite changes in the environment whereas skills do not. In terms of the statement by McMillan above, it is evident that if management accountants enjoyed professional status, they would have a better chance of survival in the long term. Studies on professionalism utilize a number of theoretical and sociological perspectives, and the Marxist, Weber and Trait approaches are the most prominent. The above approaches endeavor to understand the notion of professionalism within a specific frame of reference.

Various Costing Technique Use By Management For Making Decision: Costing- A strong manager must understand how costs are captured and assigned to goods and services. This is more complex than most people realize. Costing is such an extensive part of the management accounting function that many people refer to management accountants as "cost accountants." But, cost accounting is only a subset of managerial accounting applications. With that in mind, we focus on cost accounting Cost accounting-can be defined as the collection, assignment, and interpretation of cost. It is important to know what products and services cost to produce. The ideal approach to capturing costs is dependent on what is being produced. Some companies produce homogenous products in continuous processes.

For example:- considering the costing issues face by the companies that produce the lumber, paint, bricks or other such homogenous components used in building a home. These types of items are produced in continuous processes where costs are pooled together during production, and output is measured in aggregate quantities. It is difficult to see specific costs attaching to each unit. To deal with these types of situations, accountants might utilize "Process Costing Methods."

Profit is the yard-stick for evaluating performance of any business concern. Since ultimate profit depends upon plan and control, cost accounting plays a vital role for this ground. Cost accounting was mostly engaged in ascertaining costs of products or service on the basis of time-series analysis. Due to competition and technological development, the role has shifted under the managerial accounting to cost reduction which depends upon availability of relevant information well in time. No such restriction is imposed in case of costing accounting since it is used internally for decision making under managerial accounting.

Uses of different techniques: - Absorption, variable and throughput costing are alternative productcosting methods. The difference is treatment of certain cost elementsUnder absorption or full cost method, all manufacturing costs are treated as product costs.

Variable costing covers only variable costs while all fixed costs are treated as period costs. This type is more suitable for operational decisions as fixed cost, being committed, is irrelevant for most decisions.

In present high tech, environment, direct labor has disappeared. The only throughput costs vary with the change in production. This would reduce the incentive to over produce to cut down cost per unit.

The only common feature among the various methods is the focus or stress on providing information for decision-making, since some techniques are used only internally.

The Role of Cost Accounting in Managerial Decision Making: There are various types of costing tools like - Contract costing, marginal costing/variable costing & how this tool helps in managerial decision making, it helps the business to know its BEP means help the business knowing the minimum output required to carry on the business to earn the profits.

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Cost accounting is the process of tracking, recording and analyzing costs associated with the products or activities of an organization.

Managers use cost accounting tools o support decision making to reduce a company's costs and improve its profitability. As a form of management accounting, cost accounting need not follow standards such as GAAP, because its primary use is for internal managers, rather than external auditors, and what to compute is instead decided pragmatically.

Costs are measured in units of nominal currency by convention. Cost accounting can be viewed as translating the Supply Chain into financial values. There are at least four approaches:

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Standardized Cost Accounting Activity-based Costing

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Throughput Accounting Marginal Costing - as a management accounting tool

Cost accounting has long been used to help managers understand the costs of running a business.

Modern cost accounting originated during the industrial revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions. In the early industrial age, most of the costs incurred by a business were what modern accountants call "variable costs" because they varied directly with the amount of production. Money was spent on labor, raw materials, power to run a factory, etc. in direct proportion to production. Managers could simply total the variable costs for a product and use this as a rough guide for decision-making processes.

Some costs tend to remain the same even during busy periods, unlike variable costs which rise and fall with volume of work. Over time, the importance of these "fixed costs" has become more

important to managers. Examples of fixed costs include the depreciation of plant and equipment, and the cost of departments such as maintenance, tooling, production control, purchasing, quality control, storage and handling, plant supervision and engineering. In the early twentieth century, these costs were of little importance to most businesses. However, in the twenty-first century, these costs are often more important than the variable cost of a product, and allocating them to a broad range of products can lead to bad decision making. Managers must understand fixed costs in order to make decisions about products and pricing.

Standard Costing:In modern cost accounting, the concept of recording historical costs was taken further, by allocating the company's fixed costs over a given period of time to the items produced during that period, and recording the result as the total cost of production. This allowed the full cost of products that were not sold in the period they were produced to be recorded in inventory using a variety of complex accounting methods, which was consistent with the principles of GAAP. It also essentially enabled managers to ignore the fixed costs, and look at the results of each period in relation to the "standard cost" for any given product.

For example: If a supplies company normally produced 40 calculator per month, and the fixed costs were still Tk.1000/month, then each calculator could be said to incur an overhead of Tk.25 (Tk.1000/40). Adding this to the variable costs of Tk.300 per calculator produced a full cost of Tk.325 per coach. This method tended to slightly distort the resulting unit cost, but in mass-production industries that made one product line, and where the fixed costs were relatively low, the distortion was very minor.

For example: if the supplies company made 100 calculator one month, then the unit cost would become Tk 310 per calculator (Tk 300 + (Tk 1000/100)). If the next month the company made 50 calculator, then the unit cost = Tk 320 per calculator (Tk 300 + (Tk 1000/50)), a relatively minor difference.

An important part of standard cost accounting is a variance analysis which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc). So managers can understand why costs were different from what was planned and take appropriate action to correct the situation.

Development of Throughput Accounting: As business became more complex and began producing a greater variety of products; the use of cost accounting to make decisions to maximize profitability came under question. Management circles became increasingly aware of the Theory of Constraints, and began to understand that "every production process has a limiting factor" somewhere in the chain of production. Under Managerial accounting - as business management learned to identify the constraints, they increasingly adopted throughput accounting to manage them and “maximize the throughput return� from each unit of constrained resource.

Activity-based costing:Activity-based costing (ABC) is a system for assigning costs to products based on the activities they require. In this case, activities are those regular actions performed inside a company. "Talking with customer regarding invoice questions" is an example of an activity performed inside most companies.

Accountants assign 100% of each employee's time to the different activities performed inside a company. The accountant then can determine the total cost spent on each activity by summing up the percentage of each worker's salary spent on that activity. A company can use the resulting activity cost data to determine where to focus their operational improvement efforts.

For example, a job based manufacturer may find that a high percentage of their workers are spending their time trying to figure out a hastily written customer order. Via ABC, the accountants now have a

currency amount that will be associated with the activity of "Researching Customer Work Order Specifications". Senior management can now decide how much focus or money to budget for the resolutions of this process deficiency. Activity-based management includes the use of activity-based costing to manage a business.

Marginal Costing/ Variable costing:“Marginal costing as a management accounting tool” The current state of standard costing focuses on the methodology of Marginal Costing. Marginal Costing is a type of flexible standard costing that separates fixed costs from proportional costs in relation to the output quantity of the objects. In particular, Marginal Costing is a comprehensive and sophisticated method of planning and monitoring costs based on resource drivers. Selecting the resource drivers and separating the costs into fixed and proportional components ensures that cost fluctuations caused by changes in operating levels, as defined by marginal analysis, are accurately predicted as changes in authorized costs and incorporated into variance analysis.

This form of internal management accounting has become widely accepted in business practice.

However, the demands placed on costing systems by cost management requirements have changed radically. For this reason, we focus on the cost accounting tool- Marginal Costing is currently integrated into management accounting. This method is used particularly for short-term decisionmaking. Its principal tenets are:Revenue (per product) - Variable Costs (per product) = Contribution (per product) Total Contribution - Total Fixed Costs = Total Profit or (Total Loss) Thus it does not attempt to allocate fixed costs in an arbitrary manner to different products. The shortterm objective is to maximize contribution per unit. If constraints exist on resources, then Managerial Accounting dictates that marginal cost analysis be employed to maximize contribution per unit of the constrained resource.

Tools for Management Support: A wide variety of accounting tools address that “why” and “how” of entity success or failure. Many tools are proactive, helping us make sound decisions, and some are predictive, peering into the future.

When one develop an understanding of cost and revenue structure, the interaction of encounters with revenue and expenses, and the amount and rate of change from volume changes.

Cost-Volume-Profit:The single most important concept for management is cost-volume-profit. Understanding the cost structure of an organization allows proper management decisions. Standard financial statements do not provide the proper cost separation, that is - variable costs versus fixed costs.

Variable cost: a cost that moves up or down as volume of service changes Fixed cost: a cost that remains the same despite volume (within a relevant range) A typical fixed cost is space rental. Whether five patients a day or 50 a day for lease is probably the same amount. A typical variable cost is medical supplies. The more patients cause the more supplies use. In real life some of these costs are considered “mixed” but for most management purposes we consider only two cost behaviors.

Break-even point:-

Break-even point becomes a key benchmark; being defined as the point at which fixed and variable costs equal revenue, or the point at which profit is zero. The break-even formula is as follows: (Revenue – variable cost) = fixed costs Contribution margin = fixed costs As volume grows we get to leverage the fixed costs, revenue climbs but variable costs climb little and fixed costs not at all.

CVP is critical for decision making, for example adding a new service. Usually the only relevant numbers are the new revenue versus the new expenses, assuming adequate capacity. Understanding which numbers are relevant is the key to a sound decision. With a relatively low variable cost line, additional services require very little incremental spending.

Cost-Benefit Issues:There are plenty of accounting tools at for one’s disposal, but those tools should only used when there is a positive cost-benefit relationship. Modern systems and one’s own creativity allow us plenty of information options, but not all options are worth the work involved. The ideal is to create enough information to improve management, without spending so much as to wipe out the benefit.

Cash Flows:Any business organization exists for one reason, to generate positive cash flow for the owners. The devil of business is in the details. Effective cash flow management is a key task for senior management, and anticipating cash flow ups and downs is critical.

Budgeting:A budget is a management plan expressed in numbers. Decisions are more important than calculations. Spreadsheets have made budgeting much easier and more flexible. Once a budget model is developed, numerous options can be calculated very quickly. Budgets should be flexible rather than static. If one budget for 10,000 patient visits and you reach 15,000 patient visits, his static budget is worthless.

Cost Accounting- A Tool for Managerial Accounting:Managerial accounting deals with the use of accounting information to managers in the organizations and cost accounting also deals with the same goal. Both branches of accounting helps the companies to make informed business decisions that may allow the managers to be better equipped in management and control functions. Therefore, both accounting fields help the organizations in decision making.

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Managerial accounting deals with the preparation of budgets to determine the allocation of the resources and

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Cost accounting also deals with determining the costs allocated to various operations.

Information derived from both managerial accounting and cost accounting is used by the internal managers. Moreover, cost accounting is a tool of managerial accounting and all concepts used in cost accounting are derived for the managerial purposes. An examination of the meaning and definitions of cost accounting and management accounting indicates that the distinction between the two is quite vague. There are some argues consider about these two areas as similarities & dissimilarities between

the two. One point on which all agree is that two types of accounting do not have clear-cut territorial boundaries. The scope of management accounting is broader than that of cost accounting.

Cost accounting provides cost information for managerial use whereas management accounting provides all types of accounting information i.e. cost accounting as well as financial accounting information. Cost and managerial accounting is the presentation of financial information to the management to be used in decision making while in managerial accounting projections are made based on past trends- Projected cash flows, profit & loss, balance sheet. Financial accounting relates to the information presented based on past events and records.

In cost accounting, the main emphasis is on cost ascertainment and cost control. In management accounting the main emphasis is on decision-making. The various techniques used by cost accounting are:-

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Standard costing Budgetary control Marginal costing

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Cost-volume-profit analysis, Uniform costing and inter-firm comparison etc

Managerial accounting also uses these techniques but in addition it also uses techniques like ratio analysis, funds flow statement, statistical analysis, operations research and certain techniques from various branches of knowledge like mathematics, economics etc., which so ever can help management in making effective management decision & achieving business goals.

Managerial accounting systems are designed to supply information to internal decision makers of a given organization, to facilitate their decision making, to motivate their actions and behavior in a desirable direction, and to promote the efficiency of the organization. The cost accounting system of a firm largely helps shape the decisions made by management accountants.

Analysis of management accounting Technique Chapter Covers By Following Topic:-

Trend in Management Accounting Challenges of Managerial Accounting in Bangladesh Problem Foundations in Management Accounting Challenges for Managerial Accounting System Challenge for Merging Management Accounting Tools with Different Discipline Challenges for Managerial Accounting Research Challenges in Organizational Performance Pushing the Art of Management Accounting Application of Inefficient Techniques in Decision Making Challenges of Managerial Accounting in the Global Context:Trend in Management Accounting:The usefulness of the management accounting information system has been challenged by a changing economic environment coupled with increased global competition and the emergence of new manufacturing technologies. Management accounting contribution is going to loss the competitiveness of Bangladesh in the global economy. It has been said about the management accounting practices utilized in some of the developing economies of the Asian-Pacific region. At present the challenge for management accounting techniques and practices by globally situated manufacturing firms faced critically.

Over the last decade, critics of management accounting have questioned the relevancy of many traditional techniques and practices. Traditional accounting techniques may no longer be valid as the production process changes. These techniques fail to provide relevant, useful, and timely information about processing activities that management needs for planning and control purposes.

Traditional management accounting systems are often considered incompatible with modem production. Also, traditional systems have typically used direct labor as an allocation base, often inappropriately.

Nowadays managerial accounting analysis is considered so crucial in managing an enterprise that in most cases, far from playing a passive role as information providers, managerial accountants take a proactive role in both the strategic and day-to-day decisions that confront an enterprise. Although much of the information they provide is financial, there is a strong trend toward the presentation of substantial non-financial data as well. Moreover, the business environment is changing rapidly. For managerial accounting to be as useful a tool in the future as it has been in the recent past, managerial accounting has to be studied and improved.

In the 21st century the business environment is changing very rapidly. These changes are reflected in global competition, rapidly advancing technology, and improved communication systems, such as the Internet. The activities that make an enterprise successful today may no longer be sufficient next year.

A crucial role of managerial accounting is to continually assess how an organization stacks up against the competition, with an eye towards continuously improving. In fact, moving away from a historical cost accounting perspective and towards a proactive cost management is the challenge that an enterprise has to face. Assigning the costs to a larger number of cost pools that better represent those activities that are responsible for their birth, portrays the general idea upon which future managerial accounting will evolve.

One result of the changing economic environment has been the emergence in the literature of cost management technique. Cost management as an integrative area & combines elements from three other fields: management accounting, production, and strategic planning. This broadening of the traditional management accounting environment involves emphasis on activity based costing, cost management systems, advanced manufacturing technologies, cost planning and control, quality costs, performance measurement, and strategic cost management.

Challenges of Managerial Accounting in Bangladesh: The challenge in implementation of management accounting change constitutes much more than the selection of what may be perceived as being optimal accounting systems and techniques following by a technical process of implementation.

Selecting and implementing the right accounting systems and techniques and the technical aspects of implementation are important, but challenges for change implementation and change management also involves important behavioral and cultural issues that must be understood and addressed.

The challenge of management accounting change is on understanding the processes involved in the implementation of management accounting change and the complexities of and difficulties involved in changing management accounting systems, techniques and roles in the world.

Modern techniques are being used to face complex situation. Bangladeshi manufacturing business firms remain far behind the expected situation due to lack of awareness as to benefit of using the management accounting techniques for better decision making. All concerned people need to realize the situation and take appropriate action from every corner to overcome this unwarranted situation. To keep pace with the world changing management accounting environment, Bangladeshi firms should use the newly developed techniques such as target costing. The soon it is done, the better it will be, otherwise we shall perish in this competitive world.

To solve the problem, a framework need for interpreting and understanding management accounting change as an on-going process and a range of case studies are used to point up both successful and unsuccessful implementations, drawing out the various cause-effect analyses that can be learned and suggesting some pointers for those embark on a program of management accounting change.

Though privatization and authoritative pronouncement has contributed a lot in the development of management accounting in Bangladesh, the practices of management accounting technique in listed manufacturing sector reveals that state of use of developed techniques (like target costing, throughput costing, life cycle costing) is not satisfactory.

Challenges for Managerial Accounting System:The new challenges facing management accounting systems have been a subject of vivid debate in recent years. Much of the literature seems unfortunately to have ignored such noteworthy issues as the specific domestic competitive settings or economic conditions like recessions, which may ultimately prove to be nation specific in their consequences. Moreover, these studies have largely tended to discuss market changes and competition in a new environment Another concern raised here is the interaction occurring between corporate cultural changes and accounting. Cultural change is actually a phenomenon which might be assumed to occur more commonly than is generally assumed, for instance, when companies strive for a true customerorientation. How to successfully implement corporate cultural change, or of how to respond to exceptionally aggressive market attacks by domestic competitors may prove fatal. Modern Management Ideas like TQM, BPR, and ABM have been proposed as feasible solutions to these new challenges.

Especially in conditions of large scale changes, these ideas may indeed possibly provide potential parts for new manuscripts to be used in a novel situation. As regards corresponding information needs, it seems to be justifiable to argue that under these conditions management accounting information plays an even more important role than usual.

The new challenges and requirements for management accounting and control systems are actually experienced by the organizational actors in a complex multidimensional change setting. Another major issue examined was the role of management accounting and control systems, particularly in a cultural-ideological change process.

Challenge for Merging Management Accounting Tools with Different Discipline:With the competitiveness of today’s business world, several of new model going to developed for using many useful management accounting tools with human resource management, that create the challenges for management accounting tools as self-governing technique . For some insufficiency of management accounting technique, merging developed by following process:Step 1: Identifying relevant product profitability models. Product profitability models come in all shapes and sizes. The relevant product profitability models to use in human resource management should involve sales productivity as a key element in determining total profitability.

Step 2: Applying marginal profitability to actual sales results. Product profitability models that break down the product's profitability on per unit of sales basis can then be applied to actual sales production.

Step 3: Using regression techniques to analyze trends and predict future sales. Historical sales and profitability information provide a basis for careful examination of trend. Regression analysis, especially represented in a graphical format, enables management to quickly grasp the true trend direction of sales production and efficiencies

Step 4: Comparing regression forecasts to management objectives. If the forecasted sales production developed by the regression analysis falls short of management objectives, then management needs to take pro-active steps to meet revenue objectives or revise their projections downward.

Step 5: Working with human resources to resolve projected revenue variances. Recognizing revenue variances using management accounting tools is one thing; identifying the cause of the variances is quite another.

Carefully analyzing the characteristics surrounding sales production trends could suggest reasons behind the variances. Different management accounting tools is used to help better understand business, but we shouldn't limit using our tools to just management accounting. Many techniques used to other functional areas, but certainly not limited at one root, in fact, the applications are limitless.

Taking the initiative to use these tools outside of the accounting and finance area can have a profoundly positive impact on the value of the management accounting profession.

Challenges for Managerial Accounting Research: With the continuing development of business processes, whether the change in various manufacturing processes, or the automation of most business activities, the cost accounting procedures that companies use to calculate for the cost of an individual product, service or activity have also become outdated.

From a managerial accounting perspective, the changes in the economy, in industries and individual firms alike, must be supported by the firm's accounting and control infrastructure. Accounting is a financial model of business. When changes occur in the business, accounting should change to reflect them. Managers of companies that fail to make appropriate modifications in their accounting systems will find they have inaccurate product/service/activity cost figures and lack data for making decisions.

They may lose their competitive edge because they do not have the necessary information for operating in the constantly changing business environment.

Systems for accounting for costs date back several centuries. Accounting for management accounting done for management to meet its information needs. One basic difficulty in costing is that an individual product, service or activity does not drive all the company expenses. Even within a factory, there are many questionable costs, not directly driven by the type, number or volume of products. In addition, there are costs that are driven by substantial material vendors and customers.

How to go about calculating the cost of an individual product, service or activity, in par with the marked changes in the field of management accounting to maximize the benefits that effective costing has to offer.

New Challenges for Managerial Accounting Research:- The traditional cost accounting model developed for mass production of standardized products needs to be updated to support new operating concepts such as just-in-time, zero defects, zero inventory, a cooperative workforce, flexible manufacturing systems, computer aided design and manufacturing, and computer - integrated manufacturing.

Management accounting must serve the strategic objectives of the company & emphasizes on financial measurements, needs to include an explicit recognition of the need for information and measurements in such soft areas as product quality, productivity, product innovation, employee morale, and customer satisfaction. If management accounting research is to progress, information needs to be collected from company various updated sources.

Challenges in Organizational Performance:Under the discipline of management accounting - how budgets, cost models, management control panel and continuous improvement are used today and what needs to change:-

The challenges in organizational performance related to budgets, cost models, management control panel and continuous improvement experienced at present by a variety of firm & how effective the management accounting techniques contribute to organizational performance management.

The rationale for the management accounting techniques tended to hold the objectives of organization by the four techniques – •

Budgets were frequently used solely to project financial results; their contribution to the implementation of corporate strategy was very weak.

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The cost models were reduced to simple pricing systems intended to evaluate inventories, rather than true models representing the organization's activities.

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Indicators found in management dashboards are identified and developed by the company functions and are in no way integrated in financial management.

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The same is true of continuous improvement projects or Kaizen projects, which are implemented completely outside the finance function.

The challenge in this regard was to encourage organizations to use budgets to apply corporate strategy. Two major roles associated with budgets: monitoring financial projections and managing strategy, it involve - in forecasts and plans. The budget also has an impact on manager motivation in that budget targets are often used to establish compensation.

Budgets are used to monitor financial results in nearly all companies. Only when the anticipated results are stable and easily predictable were, this would not change anything. The budget thus contributes to managing financial resources by tracking financial projections. One such practice that was evaluated favorably is that of the continuous budget, whereby at the end of each month, not only are the projections of the following months adjusted but the budget of the twelfth following month is added.

However, the data we gathered shows that, for the majority of companies, costs are calculated as part of financial accounting, and companies haven't developed or implemented a system of management accounting distinct from financial accounting. In addition, in the context of an innovation and growth strategy that centers on acquisitions, executives aren't aware of the potential benefits of a cost model that goes beyond associating direct production costs with products. In addition, executives at companies that have implemented an integrated management information system don't feel the need for other cost-related information.

Problem Foundations in Management Accounting:Fundamental objective of management accounting is to facilitate and support all the aspects of an organization's decision making. To accomplish this objective, management accountants should be aware of the kinds and levels of problems and decisions involved in order to identify those particular areas where management accounting techniques and information would be most relevant and useful.

For this purpose, different conceptual frameworks for viewing problems, decisions, and decision systems have been proposed in the management, accounting, and information systems literature. They provide a good basis for viewing the types of problems, decisions and decision systems, the types of information needed, and the useful role of management accounting.

It is a fact that accounting executives spend a great proportion of their time defining, formulating, classifying, and solving problems The concept of a problem in business, management accounting, or any other context lends itself to three major phases - Problem definition, Problem formulation, and Problem classification, which precede the problem solving. The way executives approach each of these phases can substantially affect information processing, decision making, and behavior. A moderating effect on this impact is management accounting playing a crucial role of facilitator by providing the right information needed

for the execution of each of the three stages. Without the right execution of three phases management accounting facing challenges to exist their acceptance.

Faced with new wealth creation standard, triggered by technology and relentless globalization of markets, increasing number of companies are becoming knowledge-based enterprises. Internet and ecommerce have changed forever the way companies conduct their businesses. Virtual enterprise and efficient supply chain management systems will shape the future of these enterprises. Organizations are trying to become agile enterprises with the help of strategic alliances of firms and integration using information technologies.

Five challenges are identified for management accounting, and in particular for planning and control•

The first is to foster multiple perspectives

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The second is the coordination of complexity

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The third concerns competitor analysis and

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The fourth concerns resource allocation

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The fifth is to overcome centrifugal tendencies, developing a clarity of strategic intent, binding managers together worldwide and rewarding behavior in the corporate, as opposed to local interest.

Traditional performance and cost measures are no longer suitable for developing and managing enterprises in the so-called new environment. In order to remain relevant and to add value, cost and performance measures must be designed and systematically evaluated to reduce the often-unnoticed mismatch between strategic goals and operational tactics. Managerial accounting researchers and practitioners should develop new costing and Performance Measurement Systems (PMS) taking into account the new enterprise environment.

Pushing the Art of Management Accounting: Management accounting practice has developed substantially over the past century, but it suggests that the practice is no longer making the strides that it once did. Unless management accountants take a hard look at the effectiveness of current practice, this situation isn’t likely to improve. In some companies, radical changes are needed to the structure of the finance function, the nature of the interactions management accountants have with other managers and the performance metrics used to guide the function itself.

Today’s management accounting information, driven by the procedures and the cycle of the organization’s financial reporting system, is too late, too aggregated and too distorted to be relevant for managers’ planning and control decisions. Management accounting reports are of little help to operating managers as they attempt to reduce costs and improve productivity.

Strategic cost management techniques, such as attribute costing, seem little known outside academia. The majority of firm’s measures apparently don’t use them significantly.

Balanced Scorecard researchers have concluded that most users make little attempt to link their non-financial performance to strategy and that only a small minority attempt to validate the cause and effect linkages included in their models. Moreover, Balanced Scorecard practice seems to have developed an independent momentum, excluding the finance function altogether in some organizations. There is even pressure for management accountants to do less.

These indications of a slowing pace of management accounting change may be due to a range of factors. In some cases, new management accounting tools aren’t adapted to organizational strategy or structure and can’t be used. And in some cases, innovation has failed due to implementation-related factors. However, the main problems aren’t technical or structural; they lie in the need for a better management of the management accounting process itself.

Last the management accounting process requires new metrics. Most accounting functions measure timeliness, in terms of the delay between the end of the reporting cycle and the issuing of the report, and many measure the cost of the finance function relative to revenues. Few organizations measure the use or the usefulness of the management accounting information provided. The absence of such measures guarantees that things will remain the same.

Application of Inefficient Techniques in Decision Making: As time went on, standard cost lost its usefulness for management decision making due to a variety of reasons:The practice of paying workers on a set-piece basis changed in favor of paying on an hourly rate.

Modern companies tend to have relatively low truly variable costs and very high fixed costs.

Equipment has become more complex and specialized and may be a very significant proportion of total costs. Changes in the level of full cost inventory create swings in profitability that is difficult to explain or understand.

An increase in inventory can "absorb" costs of production and increase profits, while a decrease in inventory level will decrease profits. Organizations with a wide range of products or services have processes which are common to several finished items, making cost allocation irrelevant or misleading.

As a result of the above, using standard cost accounting to analyze management decisions can distort the unit cost figures in ways that can lead managers to make decisions that do not reduce costs or maximize profits.

Weaknesses of management accounting: - Management accounting discipline is still very much in a state of evolution. It comes across the same obstacle as a relatively new discipline has to face sharpening of analytical tools and improvements of techniques creating uncertainty about their application.

1. There is always a temptation to make an easy course of arriving at decisions by intuition rather than taking the difficulty of scientific decision making.

2. It derives its information from financial accounting, cost accounting and other records. Therefore strength and weakness of management accounting depends upon the strength and weakness of basic records.

3. It is one thing to record, interpret and evaluate an objective historical event converted into money figures, while it is something quite different to perform the same function in respect of past possibilities, future opportunities and unquantifiable situation. Execution of the conclusions drawn by the management accountant will not occur automatically. Therefore, a continuous effort to achieve the goal must be made at all levels of management.

4. Management Accounting will not replace the management and administration. It is only a tool of management. Of course, it will save the management from being immersed in accounting routine and process the data and put before the management the facts deviating from the standard in order to enable the management to take decision by the rule of exception.

An alternative view of management accounting: - A very rarely expressed alternative view of management accounting is that it is neither a neutral or benevolent influence in organizations, rather a mechanism for management control through observation. This view locates management accounting specifically in the context of management control theory. Stated differently Management Accounting information is the mechanism which can be used by managers as a vehicle for the overview of the whole internal structure of the organization to facilitate their control functions within an organization.

Throughput Accounting: - The most significant, recent direction in managerial accounting is throughput accounting; which recognizes the interdependencies of modern production processes. For any given product, customer or supplier, it is a tool to measure the contribution per unit of constrained resource.

Transfer pricing: - Management accounting is an applied discipline used in various industries. The specific functions and principles followed can vary based on the industry. Management accounting principles in banking are specialized but do have some common fundamental concepts used whether the industry is manufacturing based or service oriented.

For example, transfer pricing is a concept used in manufacturing but is also applied in banking. It is a fundamental principle used in assigning value and revenue attribution to the various business units.

Essentially, transfer pricing in banking is the method of assigning the interest rate risk of the bank to the various funding sources and uses of the enterprise.

Findings of the Study Chapter Covers By Following Topic:-

Extent of Use of Management Accounting Techniques Extent of Use of Management Accounting Information by the Sample Enterprises for Various Decision Making The Respondents as to Use Status of Management Accounting Information Techniques in Sample Firms Reasons for Low Use of Management Accounting Techniques Suggestions to Overcome the Problem of Low Use Summary of the Findings Problem-Solving Tools for the Challenge of Management Accounting Findings:Management decisions are basically based on some measures/techniques traditionally designed based on quantitative data. However, in recent past to cope with global business environment, change in business, increase in competition and complexity of decision making some advanced quantitative techniques like Activity – based Costing and Target Costing and some improved programs like Justin-Time (JIT), Total Quality Management (TQM), Process Reengineering and Theory of Constraints (TOC) have been introduced for application. Now both traditional and advanced management accounting techniques are shown in the following chart:Traditional Techniques

Advanced Techniques

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Financial Statement Analysis Fund Flow Analysis Cash Flow Analysis Marginal Costing Absorption Costing Differential Costing Standard Costing Opportunity Costing Budgetary Control Inter-firm Comparison Cost-Volume-Profit Analysis Management Reporting

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Activity-Based Costing Target Costing Just-in-Time (JIT) Total Quality Management (TQM) Process Reengineering The Theory of Constraints(TOC)

Chart Showing the Management Accounting Techniques Extent of Use of Management Accounting Techniques Against the background of identification of generally used management accounting techniques the following table shows the use of management accounting techniques in the sample manufacturing business firms in Bangladesh. A list of techniques was provided to the respondents and they were asked to point the techniques they use and which they do not use. The responses have been tabulated and the summarized picture is shown in the table.

The table shows the extent of use of different management accounting techniques in sample firms. It is seen that the traditional techniques like financial statement analysis, cash flow analysis, budgetary control and management reporting are being widely used (100%) by all types of firms followed by standard costing and absorption costing (80% in public, 90% in private and 100% in MNC). Marginal costing and cost-volume-profit analysis are used to some extent by the 50% in public sector enterprises, 60% by private sector and 70% by multinational corporations (MNC). Some enterprises of public (30%) and private (20%) sectors use fund flow statement analysis though it has now been almost replaced by cash flow statement analysis. Modern techniques yet to be introduced by Bangladeshi firm – both in public and private sector. Few MNC uses JIT (40%) and TQM (20%).

None of public or private Bangladeshi enterprises or MNC found to use some traditional technique like differential costing, opportunity costing and inter-firm comparison as well as the modern techniques like activity-based costing, target costing, process reengineering and the TOC. Thus it is seen that management accounting techniques yet to get a firm footing in Bangladeshi firms and thus depriving these firms in better decision making.

Techniques PB (N = 15) PV (N = 15) MNC (N = 5) Financial Statement Analysis 100% 100% 100% Cash Flow Analysis 100% 100% 100% Budgetary Control 100% 100% 100% Management Reporting 100% 100% 100% Standard Costing 80% 80% 80% Absorption Costing 80% 80% 80% Marginal Costing 50% 50% 50% Cost- Volume-Profit Analysis 50% 50% 50% Fund Flow Analysis 30% 30% 30% Just-in-Time (JIT) ------Total Quality Management (TQM) - - ----Differential Costing ------Opportunity Costing ------Inter-firm Comparison ------Activity-Based Costing ------Target Costing ------Process Reengineering ------The Theory of Constraints (TOC) ------No sample (PL = Public enterprises, PV= Private enterprises, MNC = Multinational Enterprise) “Table Showing the Summarized Picture of Management Accounting Techniques Used by the Sample Enterprises” Now a discussion about the techniques in brief and extent of the use of the same is being examined below: i) Financial Statement Analysis Financial statement is essentially historical document which provides organized data according to logical and consistent accounting procedure and conveys an understanding of some financial aspects of a business firm. Careful analysis of financial statements can help decision makers to evaluate an organization’s past performance and predict its future financial health. Financial statement therefore, refers to such a treatment of the information contained in the Income Statement and the Balance Sheet so as to afford full diagnosis of the profitability and financial soundness of the business. This analysis is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios. All the sample firms use it. ii) Fund Flow Analysis Fund flow analysis does not carry any extra meaning basically after the implementation of International Accounting Standards (IAS)–7 in revised form. Nevertheless, some business organizations are still considering this as an important tool for managerial and financial decision making. Working capital being life-blood of the business, analysis of fund flow is thus extremely useful. Financial analysts also have an understanding of changes in the distribution of resources between two balance sheet dates by analyzing the fund flow statements. Few sample firms (30% in public and 20% in private sector) still use this statement. iii) Cash Flow Analysis Until recently, many decision makers focused primarily on the income statement and the balance sheet. But in the IAS-7 (revised), FASB has prescribed for compulsory reporting of another important statement, the statement of cash flows. A statement of cash flows reports the cash receipts and cash payments of an organization during a particular period. It is widely used as a tool for assessing the

financial health of an organization. Other important purposes of maintaining this statement are to predict future cash flows, to evaluate management’s generation and use of cash and to determine a company’s ability to pay interest, dividends, and to pay debts when they are due. All the sample enterprises found to use it. iv) Marginal Costing Marginal costing is a technique where only the variable costs are considered while computing a cost of a product. The fixed costs are met against the total fund arising out of excess of selling price over total variable cost. This fund is known as ‘contribution’ in marginal costing. Marginal costing system is however not a system of cost finding such as job, process or operating costing, but it is a special technique concerned particularly with the effect of fixed overheads on running the business. It is an important decision making tool. However, it is found not being widely used in sample enterprises.

Over 50% of public and 60% of private sector enterprises and 70% of MNC found to use it. v) Absorption Costing Though absorption costing is a traditional approach for costing products for the purposes of valuing inventories and cost of goods sold, the vast majority of companies throughout the world use this technique for managerial accounting purposes. Absorption costing, which is also known as Total, or Full costing, treats all costs of production as product costs, regardless of whether they are variable or fixed. It allocates a portion of fixed manufacturing overhead cost to each unit of product, along with the variable manufacturing costs. It is found widely used in sample firms (80% in public, 90% in private and all MNC) followed by some traditional techniques like financial statement analysis, cash flow analysis etc. vi) Differential Costing In decision-making, the management always compares two or more alternative courses of action.

Making or buying decision, accepting or rejecting certain orders, deciding whether to discontinue an existing product or launce new one, expanding the existing business etc. are the decisions required to be taken by the management. In such a case the best alternative that will maximize profit or minimize loss can be obtained by determining the differential costs and revenues. Differential cost (revenue) is the difference in total cost (revenue) between two alternatives. The use of this technique found absent in sample enterprises. vii) Standard Costing A standard is a benchmark or “norm” for measuring performance. Standards are found everywhere and are also widely used in managerial accounting where they relate to the quantity and cost of inputs used in manufacturing goods or providing services. Standard costing is a budgetary control technique with three components: a standard, or predetermined, performance level; a measure of actual performance; and a measure of the difference, or variance, between the standard and the actual. All sample MNCs, 90% of private sector enterprises and 80% of public sector enterprises reported to use it. viii) Opportunity Costing Sometimes a proposed investment project may use the existing resources of the firm for which explicit, or adequate, cash outlays may not exist. The opportunity costs of such projects should be considered. Opportunity costs are the expected benefits which the company would have derived from those resources if they were not committed to the proposed project. In addition to the accounting costs that are explicit as labor, raw materials, supplies, rent, interest and utilities, some implicit costs are also required for managerial decision making purpose. The objective in such case is to determine the present and future costs of resources associated with various alternative courses of action. Such an objective requires that one considers the opportunities foregone/ sacrificed whenever a resource is used in a given course of action. The implicit costs, however, consist of the opportunity costs of time

and capital that the owner-manager has invested in producing the given quantity of output. But none of sample enterprises use it. ix) Budgetary Control Budgetary control is the system of management control in which all the operations, as sales, purchase, production etc. are forecasted in advance and the results, when known, are compared with the planned targets. The difference between the planned targets and actual results are analyzed and corrective steps are taken according to the original causes. By budgetary control attempts are made to make the best uses of resources under the circumstances and all efforts are coordinated by pin-pointing responsibility. The Budget Performance and Variation Reports act as communication in between top management and financial management as also in between functional management and sub-ordinate management. The system makes everyone conscious and responsible, and thus it is also termed as Responsibility Accounting. All the sample enterprises reported to use it. But some research report indicated that this technique is not rigorously followed and thereby the enterprises are deprived of its benefit. x) Inter-firm Comparison (IFC) IFC is another technique of Management Accounting which is made by some inter-firm comparison ratios based on the financial and other records of the business. Top management can make decision by applying this technique and comparing the performance of two or more similar types of industry. The idea of inter-firm comparison was felt in the year 1889 when the National Association of stove manufacturer in U.S.A introduced first the scheme of Uniform Costing. In order to know whether one business/firm is making sufficient profit or not; whether it is efficient in purchase, sales and production, it is required to compare its own performance with the performances of other similar concerns and it is easily possible by applying the technique IFC. But this technique is found not in use by the sample enterprises. xi) Cost-Volume-Profit Analysis The relationship between cost-volume-profit is ascertained by the technique “Cost-Volume- Profit Analysis”. This technique attempts to find out the impact of change in price, cost, and volume on the profitability of the business. It aids management to take its decision on planning and control. The CVP analysis is also termed as Break-even Analysis which determines the equilibrium point of cost and revenue. The equilibrium point indicates “no profit no loss” stage. 50% of sample public sector enterprises, 60% of private sector enterprises and 70% of MNC reportedly use the technique. xii) Management Reporting Management reporting acts as a ‘media’ which helps the management to take its decision accordingly.

It is an organized method of providing each manager with all the data which he needs for his decisions. A good management reporting will include six factors: a) Evaluation of each manager’s area of responsibility, b) Proper flow of information, c) Proper form & Proper time, d) Cost benefit analysis, and e) Flexibility. Large concerns found to have a separate Management Information Division.

This division may be headed by the Accountant himself or the Management / Cost Accountant or Information Manager, depending on the size of the business. All the samples reported to use it in the form of performance report. But the contents found to vary and in many cases one report includes a variety of information like production, procurement, sales, financial aspects i.e. these are not

segregated and thus pin point reporting for specific responsible persons is being hampered. This adversely affects intent of the reporting. xiii) Activity-Based Costing Activity-based costing (ABC) developed to provide more accurate ways of assigning the costs of indirect and support resources to activities, business processes, products, services, and customers (Kaplan and Atkinson, 2001:97). Activity-based costing is a method of assigning costs that calculates a more accurate product cost by identifying all of an organization’s major operating activities. The goal of ABC is not to allocate common costs to products but to measure and then price out all the resources used for activities that support the production and delivery of products and services to customers. For this why, ABC is important to activity-based management. Since its introduction as a viable cost allocation technique, organizations in the United States and throughout the world have adopted ABC. This modern technique is found not in use by sample enterprises. xiv) Target Costing Target costing is a costing tool for decision making. Stratton defined target costing as a cost management tool for making reduction a key focus throughout the life of a product. They added that the target cost is based on the product’s predicted price and the company’s desired profit. Managers must then try to reduce and control costs so that the product’s cost does not exceed its target cost.

Target costing is most effective at reducing costs during the product design phase when the vast majority of costs are committed. None of the sample firms use this modern technique. xv) Just-in-Time (JIT) One of the management-forged operating philosophies for the new manufacturing environment is JIT. The JIT approach can also be used in merchandising companies. The JIT operating philosophy requires that all resources, including materials, personnel, and facilities, be acquired and used only as needed. It has most profound effects on the operations of manufacturing companies, which maintain three classes of inventories – raw materials, work-in-process, and finished goods. That means according to JIT concept raw materials are received just in time to go into production, manufactured parts are completed just in time to be assembled into products, and products are completed just in time to be shipped to customers. Only 40% of sample MNCs use it and none of Bangladeshi sample firms found to use it. xvi) Total Quality Management (TQM) The most popular approach to continuous improvement is known as total quality management. There are two major characteristics of total quality management (TQM): (I) a focus on serving customers and (ii) systematic problem solving using teams made up of front-line workers. TQM is an approach to improving the competitiveness, effectiveness and flexibility of a whole organization. It is essentially a way of planning, organizing and understanding each activity, and depends on each individual at each level. TQM is also a way of ridding people’s lives of wasted effort by bringing everyone into the process of improvement, so that results are achieved in less time. The methods and techniques used in TQM can be applied throughout any organization. They are equally useful in the manufacturing, public service, health care, education and hospitality industries. Only 20% of sample MNCs reported to use it but none of Bangladeshi sample firms use it. xvii) Process Reengineering Process reengineering focuses on simplification and elimination of wasted effort. A central idea of process reengineering is that all activities that do not add value to a product or service should be eliminated. Basically, in process reengineering a business process is diagrammed in detail, questioned, and then completely redesigned in order to eliminate unnecessary steps, to reduce opportunities for errors, and to reduce costs (Garrison and Noreen, 2004-2005:20). None of sample enterprises use it.

xviii) The Theory of Constraints (TOC) A constraint is anything that prevents one from getting more of what he/she wants. Every individual and every organization faces at least one constraint. The Theory of Constraint (TOC) maintains that effectively managing the constraint is a key to success (Garrison and Noreen, 2004-2005:22). In TOC, an analogy is often drawn between a business processes – the weakest option is always identified first and then improvement efforts are shifted over to that option in order to bring the biggest benefit. This simple sequential process provides a powerful strategy for continuous improvement. None of sample enterprises reported to use it.

The above findings reveal that some traditional techniques are being used by sample enterprises.

Modern techniques are yet to be introduced. In the use of management techniques MNCs rank high followed by private sector and public sector enterprises. Due to utmost importance of use of modern techniques, concerned authorities need to pay attention to this. Against the backdrop of the extent of use of management accounting techniques, means status of management accounting practice in Bangladesh, now an attempt is made below to show the attitude of concerned management personnel, the reasons for low use and prospect of improving the situation in the following: Extent of Use of Management Accounting Information by the Sample Enterprises for Various Decision Making

Decision areas MAI (%) FAI (%) OI (%) Production 10 30 60 Purchase 5 30 65 Sales 10 25 65 Control 30 20 50 Direction 20 10 70 Motivation 10 15 75 (MAI=Management accounting Information, FAI=Financial accounting Information, OI= Other Information) The Respondents as to Use Status of Management Accounting Information Techniques in Sample Firms It was desired to know from the respondents as to whether management accounting information systems are satisfactorily used in Bangladesh, what are the problem of optimum use and suggestions they can offer for adequate use of the techniques. The summarized version of their opinion is tabulated below.

Quite Satisfactory -

Satisfactory Moderate 15(14.28%) 30(28.57% )

Unsatisfactory Not at all satisfactory 45(42.85%) 15(14.28%

The table above clearly depicts that the respondents consider the use of management accounting techniques in our manufacturing business firms as very much unsatisfactory. Only 14.28% of them consider it satisfactory and 28.57% considers it moderately satisfactory and seemingly most of them belong to MNC group. The majority (42.85%) considers it unsatisfactory and 14.28% considers the position as precarious/worse. They put forwarded some reasons for low use of management accounting techniques.

Reasons for Low Use of Management Accounting Techniques Respondents recognize the importance of the use of management accounting techniques in the factories. But they pointed out some reasons that act as barriers to this. The reasons pointed out by them are shown in the following table.

The above table indicates that reluctance of use is the main cause. This contradicts the opinion as to considering the importance of management accounting as an important tool of decision- making. This indicates that actually our business firms do really not feel the importance of management accounting information for decision-making. Only lip service is given to it.

Suggestions to Overcome the Problem of Low Use The respondents also offered some suggestions in the way to overcome the flaws and improvement of the positions. These are now shown in the following table.

Suggestions Organizing seminar, symposium of professional bodies Creating awareness by respective Manufacturing Association Ensuring training and skill development Introducing management audit more extensively Creating awareness among top management (N = Frequency) (%= To total respondents)

N 70 40 40 30 30

% 93.33 53.33 53.33 40 40

Summary of the Findings:After the analysis and review the role of various management accounting costing technique in various Bangladesh industries the following findings are observed during the study:•

Rather than Textile & food manufacturing industries, the percentage of implementation of new management accounting technique in Bangladesh is very poor.

•

Chemical & Pharmaceutical industries are unaware of the new useful technique. Electronics, Construction, Telecom & beverage industries use little bit of new technique, whether this sector is the most useful prospect for using other costing technique.

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Lacking of using the wrong or inefficient technique, almost fifty percent of the respondent business under the survey faced high risk for the competition in their business at home & abroad, they are poorly satisfied with their current management accounting technique.

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Whether the users who use new costing techniques are highly satisfied & they express that this is very much efficient, & they strongly agreed that they will stay with new costing techniques.

Almost all the respondent company under the survey agreed with that a developed management accounting technique helps in achieve business growth.

•

Majority percent of respondent who don’t use new costing techniques mention that they are unknown about the all developed new technique, others mention that new are costly & take excessive time.

Problem-Solving Tools for the Challenge of Management Accounting:Management accountants should conduct frequent analyses of their communications processes.

Tools for the challenge of management accounting, the management accountant mush solve the following questions include: •

What changes to management accounting practice initiated in the recent years?

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How many accounting personnel are committed to real change & do accounting personnel regard themselves as members of the operating team?

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How much time do management accountants spend with non-financial personnel?

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Is management accounting personnel physically located in such a way as to bring them in regular contact with non- financial managers?

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Do management accountants have a reporting responsibility to operational managers?

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Are accountants given responsibilities that can only be discharged by working with operational people & the accountants who have these responsibilities have sufficient status to maintain working relationships on the basis of mutual respect?

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How many accounting personnel do not have significant routine reporting responsibilities?

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How much financial training is provided for operating management? Does this training explain the links between financial and operational events?

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Are operating managers required to systematically prepare and present the financial analysis of their unit?

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Do performance measures other than cost and timeliness exist for the management accounting function?

The more management accountants can respond positively to these questions, the better organizations will become at managing the communications processes that underlie management accounting. This will create a better understanding of the role that management accountants can play in achieving success and it is in this context that significant management accounting change will occur.

Every organization wants to initiate an accounting system and strategies for effective decision on derive profit by maintain the organization’s capability, strength and competitiveness. The dramatic changes and advances in communications and information technology facilitated the way towards a sustained progress in the international business and finance environment. The low cost and the efficiency as well as the attractiveness of conducting and entering any business venture – local or international in nature were made available by these technological advances which characterize the global marketplace. Today, greater challenges are faced by accountants as opportunities for growth as well as possibilities of risks increase in the current and more attractive business world.

Management accounting generates the proper flow of accounting information that are accumulated, analyzed, and presented in the organization. Furthermore, this information are used in making imperative decisions, served as basis for predicting and solving specific problems, and utilized in the daily operations in business management. Management accounting is more oriented toward internal decision making and purposively channels relevant and timely information to internal managers. As to its relationship with financial management, both are production processes of different accounting data for different problem-solving situations.

Management accounting, however, reflects the use of techniques from different disciplines, including accounting, for internal problem solving. Therefore, management accounting techniques may differ from Generally Accepted Accounting Principles techniques and from one firm to another. They do not conform to any set of prescribed rules, and much may be left to the decision-maker's philosophies.

Management accounting should go beyond cost accounting and integrate various materials from organization theory, behavioral sciences, information theory, and so on, in a multidisciplinary approach aimed at facing challenge & facilitating the production of information for internal decision making.

Recommendation:-

To enhance the management accounting technique practices and to gain competitiveness of the Bangladeshi companies the following recommendations have been made after analyzing all major and associated findings. The key results of this evaluation study regarding the application level of costing technique in various Bangladeshi industries can be show as follows: •

A higher percentage of firms in all sectors use cost plus principle for product costing but this costing is not useful for product costing. So it is suggested to use other new costing for product costing.

•

The companies applying new costing or having a similar process have narrow market analysis and marketing information systems. They follow balanced competition strategies They must give more importance to determine the customer expectations before the product design, in order to fully provide the expected benefit from some new costing technique Their pricing of the new products by depending on cost usually poses an obstacle to the successful application of new costing technique.

Rather than textile industries, over the fifty percent other industries such as food, cement etc use full costing for product costing, but this costing technique is not appropriate for product costing.

So it is suggested to use target costing for product costing.

• • •

• • •

The weak relationships between these companies and their suppliers are transformed to a more collaborative structure and if the integration degree of the design processes is increased, the benefits to be gained from the other costing process will increase evenly.

Majority of these companies operate in competitive market conditions. New management costing technique should be used to increase the competitiveness of the firms within the industry and in the global market.

Higher percentage of workforce in Jute, Paper, and Printing, Tannery, and Textile sectors implies that the factory is not automated enough. So, automation is recommended in order to reduce production costs and to increase profitability by implementing some new management accounting technique.

Conclusion:The world has become a global village. Competition has become serious. To survive and grow, every enterprise need to be cost conscious, and management must ensure better decision for all aspects of management. For better decision making adequate and timely information is sine qua non.

Management Accounting techniques have been designed since long to provide relevant information.

Strategic management accounting is taking a more central role in companies’ decision making plans than ever before. The study shows that though privatization and authoritative pronouncement has contributed a lot in the development of management accounting in Bangladesh, the survey result of the present practices of management accounting technique in listed manufacturing sector reveals that state of use of developed techniques (like throughput costing, life cycle costing, target costing,) is not satisfactory.

Modern techniques are being used to face complex situation. Bangladeshi manufacturing business firms remain far behind the expected situation due to lack of awareness as to benefit of using the management accounting techniques for better decision making. All concerned people need to realize the situation and take appropriate action from every corner to overcome this unwarranted situation. To keep pace with the world changing management accounting environment, Bangladeshi firms should use the newly developed techniques such as target costing. The soon it is done, the better it will be, otherwise we shall perish in this competitive world.

References:Books:-

• Management and Cost Accounting By -Colin Drury • Accounting Best Practices By- Steven M. Bragg • Effective business intelligence systems By -Robert J. Thierauf Journal & Articles:•

Application of Management Accounting Techniques in Decision Making, By- Bidhan Chandra Mazumder, Vol. 35, No. 1, pp. 5-18

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Management Accounting Development And Practices In Bangladesh, Brac University Journal, Vol. Iii, No.2, 2006, Pp. 113-124

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The Evaluation of Management Accounting Innovations - By Martijn Schoute & Eelke Wiersma”

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Accounting History Research: Traditional and New Accounting History Perspectives -By Salvador Carmona , Mahmoud Ezzamel & Fernando Gutiérrez

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Conceptual Foundations of Management Accounting -By Belkaoui

Internet:• • • • • •

www.accountingweb.co.uk www.icmab.org.bd www.cimaglobal.com www.focusmag.com.au www.scribd.com www.allbusiness.com