The document discusses key concepts in management accounting such as direct and indirect costs, product versus period costs, cost behavior analysis of variable, fixed, and mixed costs, and how managerial accounting differs from financial accounting in focusing on future decisions rather than past financial reporting. It also covers management accounting tools like just-in-time production, total quality management, process reengineering, and the theory of constraints.

1. Management Accounting
A. F. M. Rubayat-Ul-Jannat
ID: BBA080160714

2. Chapter 1

3. Work of Management
Planning
Directing and
Motivating
Controlling

4. Comparison of Financial & Managerial Accounting
Financial Accounting Managerial Accounting
Accounting system by which
Accounting is an information system
information are presented and supplied
that identifies records and
Definition to management in appropriate manner
communicates the economic events
to operate business smoothly and
of an organization to interested user
efficiently
External persons who makes financial Managers who plan for and control an
User
decision organization
Time focus Historical perspective Future emphasis
Verifiability Emphasis on relevance for planning
versus Emphasis on verifiability
and control
relevance
Precision Vs.
Emphasis on precision Emphasis on timeliness
timeliness
Primary focus is on the whole Focuses on segments of an
Subject
organization organization
Must follow GAAP and prescribed Need not follow GAAP and prescribed
GAAP
formats formats
Requirement Mandatory for external reports Not Mandatory

5. Line and Staff Relationships
Line positions are directly related to
achievement of the basic objectives of
an organization.
• Example: Production supervisors in a
manufacturing plant.
Staff positions support and assist line
positions.
• Example: Cost accountants in the
manufacturing plant.

6. The Changing Business Environment
• Just-in-time production
• Total quality management
• Process reengineering
• Theory of constraints

7. Just-in-Time (JIT) Systems
Receive
customer Complete products
orders. just in time to
ship customers.
Schedule
production.
Receive materials Complete parts
just in time for just in time for
production. assembly into products.

8. JIT Consequences
JIT purchasing
Fewer, but more ultra reliable suppliers.
Frequent JIT deliveries in small lots.
Defect-free supplier deliveries.

9. Benefits of a JIT System

10. Total Quality Management (TQM)
TQM improves productivity by encouraging
the use of fact and analysis for decision
making and if properly implemented, avoids
counter-productive organizational infighting.

11. Process Reengineering
Anticipated results:
1. Process is simplified.
2. Process is completed in less time.
3. Costs are reduced.
4. Opportunities for errors are reduced.

12. Process Reengineering versus TQM
Process Reengineering Total Quality
Management
1. Radically overhauls 1.Tweaks existing
existing processes. processes to realize
gradual improvements.
2. Likely to be imposed
from above and to 2.Uses a team approach
use outside involving people who
consultants. work directly in the
process.

13. Theory of Constraints
A constraint (also called a bottleneck) is
anything that prevents you from getting more of
what you want.

14. Chapter 2

15. Manufacturing Cost
Manufacturing cost are those cost that
are used to manufacture goods directly.
There are three types of manufacturing
cost; which are:
1. Direct Material
2. Direct Labor
3. Manufacturing overhead

16. Direct Materials
Raw materials that become an integral
part of the product and that can be
conveniently traced directly to it.
Example: A radio installed in an automobile

17. Direct Labor
Those labor costs that can be easily
traced to individual units of product.
Example: Wages paid to automobile assembly workers

18. Manufacturing Overhead
Manufacturing costs that cannot be traced
directly to specific units produced.
Examples: Indirect materials and indirect labor
2-18

19. Nonmanufacturing Costs
Administrative
Costs
Marketing/
Selling
Costs
All executive,
organizational, and
clerical costs.
Costs necessary to
secure the order and
deliver the product.
2-19

20. Product Costs Versus Period Costs
Product costs include Period costs include all
direct materials, direct selling costs and
labor, and administrative costs.
manufacturing
overhead.
Inventory Cost of Good Sold Expense
Sale
Balance Income Income
Sheet Statement Statement
2-20

21. Cost Classifications for Predicting Cost Behavior
How a cost will react to
changes in the level of
activity within the relevant
range.
• Total variable costs change
when activity changes.
• Total fixed costs remain
unchanged when activity
changes.
• A mixed cost is One that
contains both variable and
fixed cost elements.

22. Variable Cost
Your total texting bill is based on how
many texts you send.
Total Texting Bill
Number of Texts Sent

23. Fixed Cost
Your monthly contract fee for your cell phone is
fixed for the number of monthly minutes in your
contract. The monthly contract fee does not change
based on the number of calls you make.
Monthly Cell Phone
Contract Fee
Number of Minutes Used
Within Monthly Plan

24. Mixed Cost
In case of a Telephone bill Line Rent is
fixed cost and Call Charge is variable
cost.