Ford the Organization and Its Research Paper

Excerpt from Research Paper :

What the accountant manager basically does is to assess the costs, inputs and processes associated with the organizational products and services. They then organize this gathered information in a way that managers know the costs per unit and the labor per unit incurred in the making of a respective product or service, as well as the number of vehicles employed in the distribution of the products or services (Williamson, 2003).

Overall, the role of accounting management is that of providing the organizational leaders with sufficient and adequate information to be used in the decision making process. This is true in all organizations, including Ford Motors Company, where managers use accounting data to reach the established desiderates, but also to assess the microenvironmental situation and establish SMART goals (Specific, Measurable, Attainable, Realistic and Time framed).

An actual analysis of the management accounting function within Ford is quite a difficult task for the simple reason that the process is generally designed for internal usage. Otherwise put, the means of collecting, processing and using the accounting data is subjected only to the interest of managers and is not made public to the shareholders and other stakeholder categories. Nonetheless, a look at the company's public documents will manage to shed some light into the function of accounting management.

Ford Europe is headquartered in Spain and the manager of this entity has released some information vital to the current endeavor. Through extrapolation, it can be believed that the accounting function at the Spanish headquarters is very much similar to the accounting function in all Ford facilities. In this order of ideas, the Ford headquarters centralize cost information from numerous plants, meaning then that the accounting system is very comprehensive and complex -- Ford Spain for instance centralizes cost information from 28 European plants. The information collected is structured into six systems, which are in fact the pillar elements in the accounting process. These systems are the materials information system, the finished products information system, the standard costs and deviation information system, the non-productive materials information system, the budgetary control system and the system for cost and variance analysis (Bhimani, 1996).

The model used in management accounting at Ford is based on standard cost, which also includes indirect costs. "Management accounting is based on a standard cost model. The availability of standard costs for each part of the production process enables variance calculations at different stages of production. Indirect costs included as part of standard costs are applied using a rate proportional to labor input. It is to be noted that the proportion of input decreases in relation to indirect manufacturing costs. This is also the case for inventories -- both work in process and finished products" (Bhimani, 1996).

Once the information is adequately collected and processed by the accounting manager, he is able to draw an informed conclusion relative to the topic of inquiry. The opinion will then be sent to other managers within the organization, which will base their decisions on the findings of the accounting department. Other organizational divisions that would make use of the information include engineering, IT, marketing, manufacturing or executive management. Take for instance the recent case in which the Japanese manufacturers were increasing their presence and popularity within the American market by selling small size and fuel efficient engines. The accounting managers at Ford Motors would have assessed the implications of Ford's movement towards this type of vehicles and the renunciation to large size and luxurious cars. The findings probably indicated that the costs of such an endeavor are tremendous and the estimated figures would be sent to all organizational departments. The executive managers could then have held meetings with representatives of all departments and discussed the findings. The actual course of events is undisclosed to the public but fact remains that, at that stage, Ford decided to maintain their product line of luxurious and large size vehicles, facing now the consequences of this decision.

References:

Bhimani, A., 1996, Management Accounting: European Perspectives, Oxford University Press, ISBN 0198289669

Williamson, D., 2003, Introduction to Management Accounting, St. Martin College, Retrieved from http://www.staff.ucsm.ac.uk/mpratt/Introduction%20to%20Management%20Accounting.ppt on July 14, 2009

2009, Despite Record Losses, Ford Refuses TARP, Directorship, http://www.directorship.com/ford-won-t-take-tarp-money last accessed on July 14, 2009

2009, Ford Motor Company, Hoovers, http://hoovers.com/ford-motor/--ID__10597 -- /free-co-factsheet.xhtml last accessed on July 14, 2009

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