The role of managerial accounting consists in detailing, analyzing, and interpreting the information provided by the general accounting, presenting it in a form that is accessible to the company management. Financial information is confidential, addressed to the internal environment of the company and presented as no standardized periodical reports adapted to the internal management needs. Costs play a determinant role in substantiating the decisions regarding the optimum production system and its adjustment in any competitive economic environment, as a special instrument determining the management of the company both as a whole and for each internal subdivision. But cost will only be able to play its true role if determined in a realistic and pertinent way. Consequently, the final objective of management from the point of view of forecasting, rational organization, information, analysis, prompt decision, and constant control is to obtain production at minimum cost.
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The economic management as a process administrating the assets forming an economic entity’s patrimony and managing the activity carried out based on that patrimony is conditioned by the way in which the entire economic potential is organized, turned to profit and made to act toward the fulfilment of the budgetary commitments with maximum efficiency (Florou & Pope, 2012).
Moreover, economic and financial management “is a tool in the decision-making relating to the collection and analysis of information in order to increase the performance level of the economic entity” (Barth, Landsman & Lang, 2008).
The foundation of the economic management – as management vehicle – is the achievement of the budget objectives with minimum costs so that when the activity is completed the revenue exceeds the costs, namely there is a profit that ensures a level of profitability as high as possible both at general level and by product, department or service performed (Ahmed, Neel & Wang, 2013; Andon, Baxter & Chua, 2007; Barth, 2013; Byard, Li & Yu, 2011; Chen, Qu & Sun, 2017).
The decision-making process is one of the manager’s main functions:” a decision is a person or group of persons’ social and deliberate act defining the purpose and the objectives of a certain action, the directions and the ways to achieve that action, all of them determined, according to a certain need, by a process of obtaining information, deliberation, and assessment of the means and consequences of carrying out that action” (Parker, 2012).
Managers are constantly faced with situations when they need to decide what products should be sold, what production method should be used, whether to produce or to buy certain product component parts, what the price should be, what distribution channels should be used (Richardson, 2011). This is why the decision-making process is a difficult and complex managerial task.
The difficulty of the task is increased by the various types of situations the company may be faced with at a given moment (Ahrens, 2008).
To be successful in their decision-making activity, managers must have at their disposal all the required instruments, to be able to distinguish between the relevant costs and the irrelevant ones and eliminate the latter from the decision-making process (Ball, 2013).
Costs may be relevant for one decision and irrelevant for another. In other words, a manager must have at his disposal different costs for different objectives. A group of costs may be relevant for a certain objective but if the company’s objective changes, relevant costs may also change. For each decision, the manager must examine the data placed at his disposal and isolate the relevant costs. If not, the manager assumes the risk of using irrelevant data (Arsenault & Faerman, 2014).
Such an information system is not efficient unless the way in which it has been conceived responds to certain rules both in point of its operation and in point of its content (Bettner & Kate, 2013). The way in which the information is presented may vary but it must observe certain restrictions as to concision and pertinence. In this respect, the companies’ dashboards for example incite to dialogue and motivate those responsible (Cahan & Sun, 2015).