Traditionally, accountants used control techniques to meet the goals established by a few people at the top
Question:
Traditionally, accountants used control techniques to meet the goals established by a few people at the top of the organization. Usually top management’s principal objective was profit maximization. Further, these managers assumed that employees had the capacity to act in only limited ways and were not adaptive to specific situations. They believed employees were motivated primarily by economic forces. In turn, managers assumed the needs which the workers wanted to satisfy were those at the bottom of the hierarchy of needs. Self-esteem and self-actualization were not included. According to this traditional view, work was an unpleasant task that employees avoided whenever possible. A company needed tight controls to achieve any level of productivity. Thus, according to classical theories of control, the primary function of accounting is to achieve profit maximization. The accounting system serves as a control device reflecting unfavorable performance through unfavorable variances in comparing actual results to standards. The accounting system is designed to be objective and neutral in its evaluation since managers compare performance against overall organizational goals.
Managers view this comparison with a high degree of certainty and rationality because they assume that accountants have only one correct way to report financial data.
Required:
Write a memo to an associate with limited business background contrasting traditional and modern concepts of cost control; include discussions of employee behavior, the organization’s objectives, and accounting’s role.
Step by Step Answer:
Cost Accounting Using A Cost Management Approach
ISBN: 9780256174809
6th Edition
Authors: Letricia Gayle Rayburn, Martin K. Gay