The assignment - Background information - You are the financial Essay

The assignment - Background information - You are the financial director of a large, ficticious company called Manac plc, which - Essay Example The target profit of the company is not being achieved and as a result of that it is impacting the entire organization. The company has also adopted several cost cutting methods, which impacted the production and reduced competitive advantage of the firm. The report will mainly focus on three areas of strategic management accounting. In the first part, it will mainly emphasize on the models and concepts on pricing decision. In the second part, the study will primarily focus on role of standard costing and variance analysis in management accounting. The third part is about uncovering the pros and cons of activity based costing. The report will then conduct an in depth analysis of the strategic management accounting. On the basis of that a conclusion will be drawn and some recommendations will be made. Models and Concepts on Pricing Decision The organization is currently dealing or facing challenge pertaining to the issue of profit maximization. The problem is that company is not achie ving its target profit. According to several authors, maximization of profit is only possible only when the organizations are able to implement the models and concepts used in pricing decision. ... In order to cite an example, if the products of a company are priced higher than its competition; it may suffer losses and slow income growth. Such firms ignore the impact of pricing, but later understand when it gets actually affected. Similarly, if the prices of products and services of a company are extremely low, their return of profit will be also low. Hence it is important for every firm that they should consider adopting some of the best models or principles based on which they can make pricing decisions. The model should also satisfy the two objectives of pricing. The first one is to achieve maximum profit and the second objective is to meet the market demand. One of the most common models that are considered by the companies is consumer’s preferences and behaviour. According to this model, it is the consumers who make the purchasing decision and other factors hardly play any role (Heidhues and K’oszegi, 2005). Therefore if the firms closely monitor the buying b ehaviour of the consumers, companies will be able to take its pricing decisions with ease. For example, if the study of consumer behaviour reflects that consumers prefer products that are priced low, the companies will be able to make the prices of their products low by reducing the overall cost. The next model pertaining to pricing decision of a firm is about the market equilibrium. Market equilibrium is actually a situation considered by the firms while developing the pricing strategies. This is actually the stage where the market demand and market supply overlaps with each other. The market equilibrium (demand and supply) is highly responsible for driving price changes (Vives, 2010). For example, if the price of a 3D TV is low in a particular market, the