Vijay Govindarajan, Anup Srivastava [Archive.org URL]

A big thrust of managerial accounting is to determine the costs of production, which are broken into subcategories, such as variable, fixed, overheads, direct, or indirect costs. Managerial accounting then determines the optimal mix of resources to lower production costs. Those concepts become less and less applicable as digital companies operate largely on a fixed cost structure with very few variable costs. A future challenge for managerial accounting is to determine which portions of digital companies’ costs are required to support current operations and which portions improve a firm’s future value — for example, how to divide employee training costs into maintenance and investment components.

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