MANAGEMENT ACCOUNTING'S ROLE IN ASSIGNING
DECISION-MAKING AUTHORITY
To achieve organizational goals, managers are assigned decision-making authority for some of the firm's assets. For example, plant managers typically are responsible for decisions about equipment in the plant, employees at the plant, the physical plant layout, and sources of raw materials, among other things. Within the plant, the materials inventory manager may be delegated decision-making responsibility for reordering materials, and the production supervisor may be delegated decision-making responsibility for assigning employees to jobs on the production line. The point is that all members of an organization have some decision-making authority. Employees within a corporation know their decision-making responsibilities because they are outlined in a variety of ways, such as in job descriptions, verbal instructions from their supervisors, and management accounting system documents and reports. Just as you have received a course syllabus that outlines your instructor's standards for you to follow to earn an A or B in this course, managers receive management accounting reports that outline expected outcomes to help achieve the organization's goals. Just as you have decision-making responsibility over the "assets" necessary to achieve an A or B (the time you allocate to studying), managers have decision-making responsibility over the assets included in their management accounting reports
MANAGEMENT ACCOUNTING'S ROLE
IN DECISION MAKING
Managers need reliable and timely information on which to base their decisions. For example, the plant manager needs information to help assess if equipment is inefficient or if certain work arrangements and plant layouts are more productive than others. Thus, managers need both historical information (for example, the current equipment's cost and productivity) and projected information (for example, the productivity and cost of other available equipment). They need information oriented both toward their specific operations and toward other parts of the organization's value chain. A value chain is the linked set of activities and resources necessary to create and deliver the product or service to the customer. Therefore, plant managers will require information from other parts of the value chain such as engineering or sales. They need information from both internal operations and externally oriented benchmark sources. More and more organizations are sharing information. It is very common for organizations to participate in and undertake benchmark studies . Independent consulting companies often create benchmark reports by collecting information from companies in the same industry. These studies show an organization how its costs and processes compare with others in its industry. Organizations also share information with customers and suppliers in their value chain. For example, in order for shipments from suppliers to arrive at the exact
time they are needed for use in production, buyers and suppliers share their production information. Customers often require or are voluntarily provided quality information. As shown in Exhibit 16-1 , the management accounting system provides past-, current-, and future- oriented information for users both inside and outside the firm.