- At planning level management accounting helps to entity in making budgets relating to materials, labor, and other costs. It helps entity to set target costs in manufacturing and target selling prices keeping in mind market factors like laws, economic conditions and competitors.
- Data gathered by cost accounting helps entity to make important decisions. These decisions include limiting factor decision where entity has limited sources to invest. Management accounting in this area helps entity to decide to use these limited resources in particular way. Other decisions include make vs buy decisions , shutdown decisions etc
- Budget make by the entity is based to ideal conditions. In actual, conditions are not exactly the same, so obvious differences are there in actual and budgeted costs. These differences lead to decrease in profits as higher costs will result in lower profits. At performance control area, popular area relating area is standard costing including comparison of target prices with the actual ones . Analysis of these differences lead to understanding of reasons behind differences helping entity to minimize these differences
In contrast to old concepts of its application to manufacturing concerns , management accounting today applies to every entity including banks, colleges, services companies , government sector etc