The objective of managerial costing is to provide a monetary reflection of the utilization of business resources and related cause-and-effect insights into past, present, or future enterprise economic activities. Managerial costing aids managers in their analysis and decision making and supports optimizing the achievement of an enterprise’s strategic objectives.
The framework presented in this SMA defines the principles, concepts, and constraints that must be considered when performing costing in order to fulfill the information needs of managers and employees who require insights for making decisions about their operations.
A useful cost model must efficiently:
- Take a manager from a monetary effect to an operational cause and
- Provide the manager with clear and direct insight into the monetary effect of a particular operational action (cause) being considered.