Explain An Aid To Management In Costing?


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abdul rehman answered
Planning is thinking in advance i.e. Looking ahead and deciding in advance what to do, how to do it, when to do it and who is to do it. In planning, the management is concerned with laying down objectives and determining the courses of actions to be followed out of the several alternatives available to achieve those objectives. Thus, planning is concerned with future activity and formulates budgets to meet the objectives of the organization. Since management has to make a choice of one course of action out of the several alternative courses of action available, it involves decision-making.                    All rational decisions are based on accounting information. Decisions may relate to various problems like fixation of price, whether or not price should be reduced for increased level of sales, whether a change in production should be followed, whether or not factory should operate at full capacity, determination of the most profitable levels of production, whether to make or buy a spare part, whether a new product should be discontinued to avoid the present loss and whether or not an investment in a particular asset will be worth while. Controlling is that part of management activity whereby managers compare actual performance against the planned performance, find out the deviations and take remedial steps to remove the deviations.

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