Financial Management: Theory & Practice - Example

Management accounting Mountainous road, tunnels to link use regions the recent decision to construct the 25 kilometers dual two lane road between the khor fakkan and the main town of diftah which is linked to western side of peninsula through the high and spear range of hajar mountains and through the wadi dry riverbed which may flood at the time of heavy rain follows serious management accounting skills and decision making. The project comprises of cost benefit analysis (CBA) as well as the cost volume profit analysis (CVP). The profit is the benefit that the new road and tunnel construction will bring to the country, which are the opening up of the city and widening the means of transport as well as improving the economy. The engineer must evaluate the cost of project construction ($1.3 billion) and the benefit that the project will bring in to the town of diftah. One of the serious and complex management account decision to be is the design of the highway through complex terrain in which access is constrained and the current site information is n it available. these are some of the serious challenges that hinders management accountant in deriving at the best cost estimate of the project as well as forming the best decision making subset, management accountant are responsible for financial planning and analysis, cost control, financial reporting and accounting information systems. the design team in the project were able to access only the initial point and the end point of the project ad this points required a research which must be done be foot which will be time consuming and some places required the sue of helicopters which is costly sine, the decision makers must factor in the cost of hiring and helicopter and time factor[Jop12]. It was impractical to bring machines to the site of the tunnel to bore the appropriate holes, rather the design team depended heavily on the geological mapping as well as input in geological engineering geologist. The management accountant furthermore factored in much aspect in the construction. For instance, since the runway crosses the wadi at many localities, diverse appraisals were mandatory to secure the route at the time of rain. For instance, close to the tunnel portal, the wadi run off from the design rainstorm in which it is anticipated to happen once after every twenty years. This is another serious concern that just be factored in management accounting decision to ensure that the project will last long[Car16]. As result, the key design that management accounting arrived after consultation with the engineers is the additional cost of reinforced Calvert (100 meters long) that will be constructed beneath the road embankments. the culvert will be the twin box cell and will be beneath the embankments that crosses the wadi at oblige angle furthermore, the cost of accommodating the hydraulic situation, it is anticipated that the Calvert will be big to ensure that access to the maintenance car that will clear the debris and re-grading the wadi at the time of dry seasons. other than cost, there some factors that the management accountant avoided in the construction project even though many of the route will not pass through the unpopulated regions, the small farmers and the irrigation system should be avoided to ensure that the project doest interfere the economic progression and farming progress in the mountain region around the diftah and the shis region[Kho04]. The road will just cut into the mountainside with more complication on the diftah regions since; narrow channel of the wadi floor at the foot of the mountain is cultivated. the design team hence conclude on locating the roadway directly over the wadi which will be covered with the culvert and the farming land edge will be lost but the damages will not be detrimental compared it the benefit of the project and thus, the cost of foregoing the small piece of farmland to construct the road is deem as an opportunity cost. In this regards, the management accountant must therefore focus on sub-units based on a combination of historical data, estimates, & projections in order to ascertain the economic implication of the project and co firm the viability of the construction of the road and tunnels in the mountain to open up the economy of wadi town. Another cost to be factored in was the cost of fire protection system, which comprised of the smoke detectors, fire extinguishers, emergency telephones, as well as the CCTV monitors but the locality was considered very remote for dependable sprinklers system. The construction of the road and the tunnel demand consideration of many cost drivers involved in the project. establishment of relate cost driver that has turn to be important in the current management accounting principles which is the case for construction of mountain roads and tunnels in use. the support cost entails the large part of the net cost and the recognition of the many diverse aspect might be driving the support cost instead of one or even tow factors like the direct labor or the machine cost used in the project and thus, a great concern for identification of the support cost that must relate to the relevant cost driver[Mar06]. It Is evident that the construction project uses the multiple allocation basis in allocating the overhead cost hence managers must use the activity based costing system since, ABC is a methodology of allocating overhead cost in which an activity is an event that incur cost and the cost driver is a factor or an activity that depict a direct implication that impacts the association with the resource sued in the project. The benefit that the project managers gets in using the ABC system in the construction of the mountainous road and Tunnels in UAE is that the activity based costing system makes use of the activities for gathering cost and redistribution of the cost, ask activities that is been undertaken by the resource of the service division and the resource cost is allotted to activities on the basis of how much the resource is needed or used it undertake the activities. Effect in United Arab Emirates UAE The construction of road depicts undeniable social advantage that is often underestimated in dissimilarities to its negatives implications. The benefit of the road to the society within the economy is substantial, not just in quantitative terms but as well in economic terms like the source of income, employment as well as the terms of support provided to other economic activities[Hok16]. Through many tools, venture in the road networks in UAE will benefit the entire community through the provision of access to the town and permitting poverty alleviation to take place. As results, the road network creates and stimulates positive synergy and improves societal cohesion as well as integrations by provision the community with the access to the similar opportunities. The government of the United Arab Emirates considers that roads are the centre of the social economic progression. Providing support to the road construction implies a contribution to the process. The sheer reach of road network ensures it a universal land transport infrastructure. As a result, the government in UAE must ensure that there is equilibrium between the social and economic development. In every procedure of developments, road network develops the positive as well as the negative implications in terms of the negative effects, it is mainly recognized that ineffectiveness designed transport system might negative affect the environment in which people live and work and may threaten safety of the people. Roads transport depicts substantial effects on environments like the accidents, Noise, and Air pollution, which must be considered in ascertaining the cost benefit analysis of the project. Nevertheless, the current projects in compliance with the emission and noise standards on road design which have been broadcasted, road linked externalities in UAE is reducing[Sco16]. Furthermore, feasible effective solution to mainly hence road safety is existing and must be executed for instance, investment in road constructions, repair or upgrade, maintenance as well as road equipping and development of road user civics. Bibliography Jop12: , (Coetzee, 2012), Car16: , (Hsiao, 2016), Kho04: , (Karim, 2004), Mar06: , (Ranganatham, 2006), Hok16: , (Min, 2016), Sco16: , (Herriott, 2016), Read More