There is an extended number of business processes used by major and small companies to develop, increase their performance, and achieve higher success in the market. One such process is known as managerial accounting, and numerous companies consider it rather effective when applied at different levels of an organization. Overall, managerial accounting is used for providing managers, CEOs, business owners, and other stakeholders with valuable statistical information regarding the firm’s financial progress (Graybeal et al., 2018). It also assists in analyzing business performance and then offering strategic insights and new ideas for future or everyday decisions (Graybeal et al., 2018). In order to understand this process and its benefits better, it is necessary to explore how it works on the example of a major company, namely, Apple Inc. Thus, the purpose of this paper is to provide information about the company’s reports and their purpose, managerial accounting concepts for making decisions, and application of those accounting concepts.
To begin with, it is essential to notice that the company prepares and uses several reports, including Current Reports on Form 8-K, Quarterly Reports on Form 10-Q, and Annual Report on Form 10-K. The latter and its effectiveness is analyzed in this paper. The purpose of Apple’s Form 10-K is to give the investors a detailed and comprehensive overview of the firm’s current financial situation, business condition, and possible future risks and achievements (Apple Inc, 2020). Earnings per share, financial statements, sales revenue and deferred revenue, accounts receivable and payable, and other essential components of Apple’s business processes are mentioned in the report (Apple Inc, 2020). Among other benefits, they also allow gaining an understanding of the firm’s future potential and perspectives. What is more, since the Form 10-K prepared by Apple provides information about both total net sales and sales of each of their product, managers can analyze and understand which of them bring in the maximum revenues.
As for the critical management accounting concepts, they are based on tracking and estimating costs and typically involve cost behavior, cost analysis, and cost variances. All these concepts are used by Apple Inc. when making decisions and planning future operations. First of all, the company’s managers always consider the ways in which various changes in business activity impact expenses (which is cost behavior) and use this information when constructing the annual budget. Second, cost analysis is applied when the company needs to ensure that its services and product costs are determined correctly. Finally, cost variances show the difference between the budgeted amount of costs the company planned to incur and the ones that have actually been incurred. This concept allows Apple Inc. to control its costs and risks and also assess whether data related to operations has been retrieved and analyzed correctly and sufficiently.
Further, it is vital to discuss in detail how Apple Inc. applies managerial accounting to make decisions and enhance their success and productivity. Overall, the company uses activity-based costing as a specific method for identifying its activities and then assigning their costs to all services and products based on their actual consumption (“Activity-based costing definition,” 2021). Precisely this method is used by the company’s management for planning and decision-making, and it appears to be rather efficient because of the steps and components it involves and the results it typically achieves.
Activity-based costing influences Apple’s products and services’ final pricing and selects the best production line for each of the firm’s products. Certain calculations and analyses performed by managers play an essential role in further decision-making. Specifically, managers identify the primary steps in the manufacturing process, use the hierarchy of their costs to classify them into various groups, and then calculate the total sum of all costs (“Activity-based costing definition,” 2021). Further, Apple’s management can determine applicable activity rate and costs drivers’ value. All these steps are rather essential and can finally allow the company’s managers to apply each activity’s cost to the final product. Precisely this is the decision-making method used by Apple Inc., and its effectiveness makes it possible for the company to make sure its pricing is both reasonable and profitable.
Overall, it is possible to say that this accounting method is appropriate and beneficial for several reasons. First of all, it makes the manufacturing overhead costs higher. Then, it limits the correlation between these costs and machine working hours and the direct labor inputs (“Activity-based costing definition,” 2021). Further, this method contributes to the diversification of the tastes of customers and the services and products Apple provides. Additionally, it also becomes possible and convenient to manage the rate of production and make it either faster or slower for certain products.
Finally, data analysis also becomes better and easier thanks to activity-based costing. The company is able to monitor and control operations costs during all the production processes (“Activity-based costing definition,” 2021). In other words, from the moment manufacturing begins and to the time the service or product gets to its buyer, the whole process is managed by Apple. The reaction of customers to the product’s quality or pricing is also received by managers. Thus, all these benefits provided by this managerial accounting method are incredibly valuable. To conclude, it is possible to say that the company’s reports and calculations are effective because they allow Apple Inc. to make proper and correct decisions to remain competitive and successful.
Activity-based costing definition. (2021). Accounting Tools. Web.
Apple Inc. (2020). Form 10-K [PDF document]. Web.
Graybeal, P., Franklin, M., & Cooper, D. (2018). Principles of accounting, volume 2: Managerial accounting. OpenStax.