Management Accounting Systems Design
The General Electric Company has had its financial ups and downs. Recently, the CFO for General Electric helped turn its problems around by analyzing the amount of value each product was providing to the company’s bottom line. The analysis ultimately determined which programs were making or losing money for General Electric . Based on the analysis, key operational metrics were established and reported to managers on a regular basis. These performance metrics detailed the company’s progress toward reducing inventory, reducing costs, and streamlining operations. Managers were evaluated based on these metrics.
Explain how the above description of activities at General Electric Company is consistent with the three principles that govern how management accounting systems are designed and used in companies.
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