1. Can you think of any direct examples of where contribution margin can be used in a business?
2. The main purpose of managerial accounting is to guide management in future decisions with their company. There are many aspects of managerial accounting but if a business follows all of these aspects it will help them maximize their success in the future. It is more of a process than anything else but a process that could help a business become and stay successful. Many times when people who are outside of accounting look at managerial accounting do not understand that there is a difference between managerial and financial accounting. The main difference is who uses accounting. Managerial is for internal users and financial is for external users. Can you go through some of the other differences between managerial and financial accounting?
3. Respond to the following:
Managerial accounting as "the generation and analysis of relevant information to support managers' strategic decision-making activities" This simple and broad definition provides a framework that allows the finance or accounting department to employ logic and analysis that will drive or navigate a business effectively and accurately. To be able to make informed decisions that are in the best interest of a company, information must be sound and provided in a timely manner. Managerial accounting would be employed by myself or staff after starting a company to ensure our actions are provided the intended results and aid in my ability to plan, control, evaluate and make decisions. To properly manage business results, I will need managerial accounting information to best manage the strategy and implement the vision of my organization. This isn't to say that to open or start a business, one must have this information, but to last long-term and remain viable, this information provides an enhanced probability in most situations. Also, it should be noted that to obtain loans from the SBA, or other creditors, it is likely necessary to have a business plan, which would likely include financial support and information to expected sales, break-even sales, margin, etc.
This solution helps to find out the difference between financial and managerial accounting.