How does management accounting facilitate the carrying out management function?

Management accounting is largely used in the manufacturing industry and looks at the various cost items to manufacture a product. Budgets are set beforehand for the various cost items (direct materials, direct labour, factory overheads etc). These are then compared to the various actual costs incurred.

It provides management with a planning tool for the future, to allocate more precise budgets, but it also provides management with a monitoring and measuring tool to see which areas of production are running efficiently, where cost cutting can be done, where efficiency needs to be increased, what wastage is, what the cost of wastage is etc.

As you can see it is very important for manufacturing businesses to use this type of accounting, because when the costs of manufacturing can be held as low as possible, there will be either a larger profit margin for the company, or the company will be able to hold the sales price down, which may be attractive for consumers purchasing the product.