Accounting for Managerial Decision Making Research Paper

Accounting for Managerial Decision devising - Research Paper ExampleTraditionally, there are two things which are calculated while playacting the cost volume profit analysis. These are calculating the parcel margin and contribution margin ratio. (Navaro, 2005) division Margin = Sales Variable costsContribution Margin Ratio = Contribution / SalesThe above calculations whence focus on the overall fixed and variable costs of the firm while at the same time providing insight into how the costs vary with the output. However, when this technique was developed, firms were more than labor intensifier and had diametrical manufacturing costs break up. The new firms have more constant costs which normally do not wary because most of the modern organizations are now capital intensive organizations with fixed labor costs. For example, a supervisor whitethorn be paid the same wages regardless of the fact that whether the machine working at its full capacity or not. As such many argue th at the maximization of the contribution margin may no longer be relevant for the modern organizations. (Luther, and ODonovan., 1998)... Further, since the capital intensive firms have higher fixed cost ratio in their total cost structure therefore capital intensive firms may not be able to clearly identity their breakeven point ground on the CVP analysis as this may be misleading. In a capital intensive firm, more costs goes to the management and operations of the capital intensive equipment with little costs going towards the labor and other overheads. The excessive contribution by the manufacturing overheads therefore makes it irrelevant for the capital intensive firms to actually use the CVP analysis. 2) The handed-down theory on corporate finance and account suggests that the major task of the managers is to ensure that their actions result into the genesis of value for the shareholders. Thus the common objective of the firm or the business has been focused upon the profit maximization and the maximization of the shareholders value. Any business activity which does not result into the above two therefore may not be considered as the real objectives of the firm. The traditional accounting therefore seems to portray only the above basic aims of the firm i.e. capturing how value and profitability can be maximized and based on these principles different accounting estimates and procedures are made. The latest trends however suggest that the firms only objective cannot be restrict to just the maximization of the profits or the shareholders value. Now firms also being viewed as larger vocalisation of the society with different other objectives too including sustainability of the environment as well as corporate affectionate responsibility.( Islam, and Dellaportas,