Introduction
Managerial accounting is a branch of accounting that provides information to management for decision-making. Managers need to make informed decisions in order to ensure the sustainability of the business. The importance of managerial accounting in a multinational environment can not be over-emphasized. This is due to the complexity of the multinational business environment (Hansen & Mowen, 2006). There are various decisions that need to be made and they require the use of relevant information. This paper reviews the use of relevant information for decision-making in a multinational organization.
Discussion
Toyota Motor Corporation is a multinational organization with many subsidiaries across all parts of the world. The headquarters of the company is in Japan but the company has many business units and subsidiaries in many other parts of the world (Toyota Motor Corporation, 2011). Relevant information for decision-making is important to Toyota Motor Corporation since it operates in a multinational environment. The use of relevant information for decision-making in Toyota Motor Corporation has been reviewed from its financial statements from 2000 to 2010. The information has been compiled from financial statements, audit reports and any other press releases from the company.
From the findings, the management of Toyota Motor Corporation has to make the typical decisions which are sales mix, discontinuation of operations, incorporation of additional business, make or buy decisions, scrap or rework and sell or process further. The organization has to determine the most profitable sales mix in terms of models in order to maximize sales revenue. This decision is made depending on the contribution margin of each model and the demand for the model. Discontinuation of operations in Toyota Motor Corporation is done on the basis of regions. The organization determines whether to close down a subsidiary or manufacture a certain product depending on the revenues and costs from the subsidiary or the product (Adair, 2007).
In making its make or buy decisions in regard to raw materials and parts used in assembling cars, Toyota Motor Corporation uses relevant information on incremental costs and incremental revenues. The same case applies in making scrap or reworks decisions on the waste products of the company. In venturing into a new market or adopting the production of a new model, Toyota Motor Corporation considers relevant information on incremental costs and incremental revenues. The same case applies in deciding on whether to sell a product or to process the product further. In making all the above decisions, the general rule to Toyota Motor Corporation is to compare the relevant incremental costs with the relevant incremental revenues (Drury, 2007).
In 2000, Toyota Motor Corporation had to make a decision as to whether to adopt a new Lexus RX 330 Line for Toyota Motor Manufacturing Canada. This was a decision on a new line of business that needed relevant information. Another major decision made by the company was the recalling of 1.7 million vehicles from all over the world in 2011 which had some defects. Other decisions included opening a manufacturing plant in China in 2001 and rolling out new operations in France in 2001 (Toyota Motor Corporation, 2011).
Relevance of costs and revenues to Toyota Motor Corporation means that the cost or revenue must be applicable to the decision that is being made. The cost should have a bearing or an impact on the decision that the managers are making. Relevance also means that the cost could be avoided by making the decision. The cost must not be a sunk cost meaning that it should have to be incurred in the future for it to be relevant. The decisions made by the organization are evaluated for quality in terms of the effect on staff morale, effect on supplier and customer relationships and effect on the total value of the organization (Crosson & Needles, 2007). Relevance of information is an important concept for decision-making in Toyota Motor Corporation.
Conclusion
Decisions made by organizations have a long-term effect on the success and strategic position of the organization. It is, therefore, necessary for an organization to consider all relevant information before making decisions. This makes managerial accounting very important to the success of any organization and especially multinational organizations. Managerial accounting should aim at providing relevant information which would result in quality decisions for organizations (Crosson & Needles, 2007).
References
Adair, J. (2007). Decision-making and problem-solving strategies. Philadelphia, Phila: Kogan Page Publishers.
Crosson, N. & Needles, B. (2007). Managerial accounting. New Jersey, NJ: Cengage Learning.
Drury, C., (2007). Management and cost accounting. Derby: Cengage Learning EMEA.
Hansen, D. & Mowen, M. (2006). Managerial accounting. New Jersey, NJ: Cengage Learning.
Toyota Motor Corporation. (2011). Toyota Motor Corporation. Retrieved on July 8, 2011 from www.toyota.com