In our previous unit we briefly mentioned that different people in a company will use the information prepared by managerial accountants. Managers inside of the organization will need and use different types of information, depending on their job function.

Marketing Department Managers

The managers in the marketing area, need to have an understanding of managerial accounting concepts. Some of the tasks they will use the information for include:

Planning

• How much should we budget for various types of advertising?
• How many salespeople do we need to hire and how should we compensate them?

Controlling

• If we cut the price on our product to increase sales, has that happened as expected?
• Is our inventory too high in various seasons of the year?

Making Decisions

• Should we increase or decrease prices?
• Should we bundle our products at a discount or sell them separately?
• Should we sell directly to customers or work through a distributor?

Manufacturing Department Managers

These are the managers involved in the day to day manufacturing process. These managers will be responsible for determining the manufacturing schedule, staffing, and operating expenses, such as utilities and supplies. They may use managerial accounting information for:

Planning

• How many widgets do we need to produce next quarter?
• What should we budget for gas and electric for next quarter?

Controlling

• Did we spend what we thought we would on production last quarter?
• Are we achieving our utility savings as budgeted?
• Are we making defect free products?

Making Decisions

• Should we make a particular component for our widget in house, or should we have someone else make it?
• Should we buy a newer piece of equipment that can make 100 widgets per hour, or should we stay with the equipment we have that makes 80 widgets per hour?

Human Resources Managers

These folks are tasked with making sure a company has enough trained staff to make all of the product or provide all of the services offered. Planning is huge, especially if training staff takes time. Knowing how many people they need and creating a plan to implement the hiring and training of these people is crucial to excellent product or service delivery.

Planning

• How many employees do we need to hire and how much training is required?
• How much should we budget for recruiting quality talent?

Controlling

• What is our employee retention rate and how can we improve it?
• What is our safety record, and is our safety training effective?

Making Decisions

• Should we hire temporary or full-time employees?
• Should we keep our current health care plan or evaluate going to a self-insured plan?

Top Management

As you can clearly see, each department in any business will use the information provided by managerial accounting data. The CEO may look at the big picture stuff, such as:

• We budgeted sales of $11 million, but only sold $10 million. How can we bring sales up next year?
• We planned for 100 full time employees, but currently employ 110. Is there a way to lower payroll costs, while still meeting sales and production goals?

These questions would then be filtered down to the department responsible. Without comparing budget to actual, and projecting into the future, these questions and knowing how to answer them, would not be available!  Managerial accounting data is useful to everyone in an organization for planning, controlling and making decisions.