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What three guidelines help management accountants provide the most value to managers?
Three guidelines that help management accountant to provide the most value to managers are: (1) employ a cost\u2013benefit approach, (2) give full recognition to behavioral and technical considerations, and (3) use different costs for different purposes.
- Cost-Benefit Approach: Managers continually face resource-allocation decisions, such as whether to purchase a new software package or hire a new employee. They use a cost-benefit approach when making these decisions. Managers should spend resources if the expected benefits to the company exceed the expected costs. Managers rely on management accounting information to quantify expected benefits and expected costs.
- Behavioral and Technical Considerations: When utilizing the cost\u2013benefit approach, managers need to keep in mind a number of technical and behavioral considerations. Technical considerations help managers make wise economic decisions by providing desired information (for example, costs in various value-chain categories) in an appropriate format (for example, actual results versus budgeted amounts) and at the preferred frequency (for example, weekly or quarterly).
- Different Costs for Different Purposes: Managers use alternative ways to compute costs in different decision-making situations because there are different costs for different purposes. A cost concept used for the purposes of external reporting may not be appropriate for internal, routine reporting.
Three guidelines that help management accountant to provide the most value to managers are: (1) employ a cost-benefit approach, (2) give full recognition to behavioral and technical considerations, and (3) use different costs for different purposes.