CH 1, 2, 3, 4
Management accounting measures, analyses and reports (non)-financial info that are
intended primarily to assist managers in fulfilling the goals of the organisation.
Key questions:
- how will this info help managers do their jobs better?
- do benefits of producing this info exceed the costs?
- does the info recognise what is specific about the organisational context?
Differences FA and MA
Regulations: MA reports are prepared for only internal regulations and have no rules. FA has
rules.
Range and detail info: MA is very detailed, FA broad.
Reporting interval: MA is frequently reported, FA annually.
Time period: MA historically, current and future, FA only historically.
Cost accounting = measures (non)financial info related to organisation’s acquisition or use of
resources.
Cost management = actions in sr and lr planning and control of costs that increase value for
customers and lower costs of products and services. → about reducing costs and incur
additional costs for more profit.
Info from accounting systems helps managers to managers to manage costs, but info and
accounting systems themselves are not cost management.
Cost leadership strategy = profit by quality products for low prices.
Product differentiation strategy = profit by unique products for higher prices.
Purpose accounting systems:
1. Formulating overall strategies and long-range plans
2. Resource allocation decisions such as product and customer emphasis and pricing
3. Cost planning and cost control of operations and activities
4. Performance measurement and evaluation of people
5. Meeting external regulatory and legal reporting requirements where they exist.
Control covers both action that implements planning decision and deciding on performance
evaluation and related feedback that will help future decision making.
Understanding reasons for differences in budgeted results is important in management by
exception.
Use of feedback: tracking growth, searching alternative means of operating, changing
methods, making prediction, changing operations, changing reward system.
Scorekeeping = accumulation data and reporting reliable details to all levels of management.
Attention directing = make visible both opportunities and problems on which managers need
to focus.
Problem solving = comparative analysis undertaken to identify best alternatives for the
goals.
, Value chain of business functions:
MA: R&D, product design, production, marketing, distribution, customer service.
Customer relationship management (CRM) = to integrate people and tech in all business
functions and deepen relationships with customers, partners and distributors.
Key success factors:
- cost
- quality
- time
- innovation
- sustainability
- continuous improvement and benchmarking
Costing system:
1. It accumulates costs by some natural classification such as materials, labour, fuel,
advertising or shipping.
2. It assigns these costs to cost objects.
Cost accumulation is the collection of cost data in some organised way through an
accounting system. Cost assignment that encompasses
(1) tracing accumulated costs to object→ direct costs
(2) costs that are allocated to cost object → indirect costs
Factors affecting cost classification:
- Materiality of cost in question → if the costs are bigger, it is more likely to be direct
cost.
- Available info gathering technology
- Design of operations
Cost-reduction:
1. Focusing on value-added activities
2. managing use of costs drivers in those value-added activities.
When item is variable cost → total costs change with changes in level of cost driver.
→ unit costs remain the same with changes in level of cost driver.
When item is fixed cost → total costs remain the same with changes in level of cost driver.
→ unit costs change with changes in level of cost driver.
Manufacturing costs:
- Direct materials costs = acquisition costs of all material that eventually become part
of cost object and can be traced to cost object in economically feasible way.
- Direct manufacturing labour costs
Management accounting measures, analyses and reports (non)-financial info that are
intended primarily to assist managers in fulfilling the goals of the organisation.
Key questions:
- how will this info help managers do their jobs better?
- do benefits of producing this info exceed the costs?
- does the info recognise what is specific about the organisational context?
Differences FA and MA
Regulations: MA reports are prepared for only internal regulations and have no rules. FA has
rules.
Range and detail info: MA is very detailed, FA broad.
Reporting interval: MA is frequently reported, FA annually.
Time period: MA historically, current and future, FA only historically.
Cost accounting = measures (non)financial info related to organisation’s acquisition or use of
resources.
Cost management = actions in sr and lr planning and control of costs that increase value for
customers and lower costs of products and services. → about reducing costs and incur
additional costs for more profit.
Info from accounting systems helps managers to managers to manage costs, but info and
accounting systems themselves are not cost management.
Cost leadership strategy = profit by quality products for low prices.
Product differentiation strategy = profit by unique products for higher prices.
Purpose accounting systems:
1. Formulating overall strategies and long-range plans
2. Resource allocation decisions such as product and customer emphasis and pricing
3. Cost planning and cost control of operations and activities
4. Performance measurement and evaluation of people
5. Meeting external regulatory and legal reporting requirements where they exist.
Control covers both action that implements planning decision and deciding on performance
evaluation and related feedback that will help future decision making.
Understanding reasons for differences in budgeted results is important in management by
exception.
Use of feedback: tracking growth, searching alternative means of operating, changing
methods, making prediction, changing operations, changing reward system.
Scorekeeping = accumulation data and reporting reliable details to all levels of management.
Attention directing = make visible both opportunities and problems on which managers need
to focus.
Problem solving = comparative analysis undertaken to identify best alternatives for the
goals.
, Value chain of business functions:
MA: R&D, product design, production, marketing, distribution, customer service.
Customer relationship management (CRM) = to integrate people and tech in all business
functions and deepen relationships with customers, partners and distributors.
Key success factors:
- cost
- quality
- time
- innovation
- sustainability
- continuous improvement and benchmarking
Costing system:
1. It accumulates costs by some natural classification such as materials, labour, fuel,
advertising or shipping.
2. It assigns these costs to cost objects.
Cost accumulation is the collection of cost data in some organised way through an
accounting system. Cost assignment that encompasses
(1) tracing accumulated costs to object→ direct costs
(2) costs that are allocated to cost object → indirect costs
Factors affecting cost classification:
- Materiality of cost in question → if the costs are bigger, it is more likely to be direct
cost.
- Available info gathering technology
- Design of operations
Cost-reduction:
1. Focusing on value-added activities
2. managing use of costs drivers in those value-added activities.
When item is variable cost → total costs change with changes in level of cost driver.
→ unit costs remain the same with changes in level of cost driver.
When item is fixed cost → total costs remain the same with changes in level of cost driver.
→ unit costs change with changes in level of cost driver.
Manufacturing costs:
- Direct materials costs = acquisition costs of all material that eventually become part
of cost object and can be traced to cost object in economically feasible way.
- Direct manufacturing labour costs
