Here are the matches between the terms and definitions:
Cost - Any item for which a manager wants to measure a cost
Expense - A cost charged against revenue
Cost Object - Any item for which a manager wants to measure a cost
Direct Cost - Costs directly related to a cost object
Opportunity Cost - The return that could not be realized from the best forgone alternative use of a resource
Indirect Cost - Costs not directly related to a cost object
The document provides an introduction to accounting, including:
1) Accounting is called the "language of business" as it communicates financial information. It has evolved over time to meet the changing needs of business and society.
2) Accounting records transactions, protects assets, and communicates financial results to various interested groups, including managers, investors, creditors, and the government.
3) Accounting includes several branches that provide different types of financial information for various users, such as financial accounting, management accounting, and cost accounting.
This document summarizes a research paper that evaluated the effects of accounting history on financial accounting. It discusses how studying accounting history can help accounting practitioners better understand financial accounting in practice and their roles. It explores the implications of both mainstream and critical approaches to accounting history. Regarding the mainstream approach, the document states that practitioners gain a broader perspective on topics like capital markets, accounting standards, double-entry bookkeeping, and taxation. Regarding the critical approach, it notes that practitioners can recognize how accounting has been used to advantage some groups over others and look for alternative accounting systems. The document recommends emphasizing accounting history education for practitioners.
Management accounting provides accounting information to managers within organizations to help them make informed business decisions. It focuses on forward-looking information for decision-making, rather than historical financial reporting. Management accounting involves identifying, measuring, analyzing, and communicating financial and non-financial information about resources, risks, and performance. The goal is to help managers strategically plan, evaluate, and control operations to make efficient use of resources.
Management accounting is a recent term that was coined in the 1950s to describe accounting as an effective management tool. [1] It involves techniques like budgeting, standard costing, and analyzing performance to provide information to assist management with planning, control, and decision making. [2] The objectives of management accounting are to compile plans and budgets, allocate responsibilities, analyze transactions, and present up-to-date financial information to help management evaluate performance and plan for the future. [3] Its scope encompasses financial accounting, cost accounting, budgeting, cost control, statistical analysis, and other areas that provide tools to help managers increase productivity.
This document discusses recent developments in management accounting. It covers the evolution of management accounting from a focus on cost determination and financial control to value creation. It also discusses how management accountants have transitioned from being "bean counters" to business partners and consultants. Additionally, the document outlines factors driving changes in management accounting, including technology, globalization, and a focus on customers. It notes a gap between management accounting theory and practice and the role of professional bodies in addressing this.
This document discusses the functions of a financial controller. It begins by explaining how management accounting has evolved and led to the segregation of accounting functions from other secretarial and financial activities. This allows for more accurate accounting control over complex business operations. As a result, the role of a financial controller has emerged. The controller is a skilled business analyst, qualified through training and experience, to perform several key functions:
1. Overseeing the establishment and maintenance of an adequate system of internal control.
2. Preparing budgets and assisting management in comparing actual performance to budgets to aid decision making.
3. Analyzing variances and reporting on them to management.
In short, the financial controller is
Management accounting involves collecting and presenting relevant economic information to help with planning, controlling, and decision making for an enterprise. It has characteristics like being useful for decision making, focusing on internal use and the future, and allowing flexibility in presenting financial and cost information. The scope of management accounting includes tasks like budgeting, cost control, analysis, and reporting to management to aid in functions like planning, controlling, decision making, and communication.
The document provides an introduction to accounting, including:
1) Accounting is called the "language of business" as it communicates financial information. It has evolved over time to meet the changing needs of business and society.
2) Accounting records transactions, protects assets, and communicates financial results to various interested groups, including managers, investors, creditors, and the government.
3) Accounting includes several branches that provide different types of financial information for various users, such as financial accounting, management accounting, and cost accounting.
This document summarizes a research paper that evaluated the effects of accounting history on financial accounting. It discusses how studying accounting history can help accounting practitioners better understand financial accounting in practice and their roles. It explores the implications of both mainstream and critical approaches to accounting history. Regarding the mainstream approach, the document states that practitioners gain a broader perspective on topics like capital markets, accounting standards, double-entry bookkeeping, and taxation. Regarding the critical approach, it notes that practitioners can recognize how accounting has been used to advantage some groups over others and look for alternative accounting systems. The document recommends emphasizing accounting history education for practitioners.
Management accounting provides accounting information to managers within organizations to help them make informed business decisions. It focuses on forward-looking information for decision-making, rather than historical financial reporting. Management accounting involves identifying, measuring, analyzing, and communicating financial and non-financial information about resources, risks, and performance. The goal is to help managers strategically plan, evaluate, and control operations to make efficient use of resources.
Management accounting is a recent term that was coined in the 1950s to describe accounting as an effective management tool. [1] It involves techniques like budgeting, standard costing, and analyzing performance to provide information to assist management with planning, control, and decision making. [2] The objectives of management accounting are to compile plans and budgets, allocate responsibilities, analyze transactions, and present up-to-date financial information to help management evaluate performance and plan for the future. [3] Its scope encompasses financial accounting, cost accounting, budgeting, cost control, statistical analysis, and other areas that provide tools to help managers increase productivity.
This document discusses recent developments in management accounting. It covers the evolution of management accounting from a focus on cost determination and financial control to value creation. It also discusses how management accountants have transitioned from being "bean counters" to business partners and consultants. Additionally, the document outlines factors driving changes in management accounting, including technology, globalization, and a focus on customers. It notes a gap between management accounting theory and practice and the role of professional bodies in addressing this.
This document discusses the functions of a financial controller. It begins by explaining how management accounting has evolved and led to the segregation of accounting functions from other secretarial and financial activities. This allows for more accurate accounting control over complex business operations. As a result, the role of a financial controller has emerged. The controller is a skilled business analyst, qualified through training and experience, to perform several key functions:
1. Overseeing the establishment and maintenance of an adequate system of internal control.
2. Preparing budgets and assisting management in comparing actual performance to budgets to aid decision making.
3. Analyzing variances and reporting on them to management.
In short, the financial controller is
Management accounting involves collecting and presenting relevant economic information to help with planning, controlling, and decision making for an enterprise. It has characteristics like being useful for decision making, focusing on internal use and the future, and allowing flexibility in presenting financial and cost information. The scope of management accounting includes tasks like budgeting, cost control, analysis, and reporting to management to aid in functions like planning, controlling, decision making, and communication.
This document discusses management accounting and compares it to financial accounting. It defines management accounting as providing both financial and non-financial information to support strategic, operational and control decision making within an organization. Examples of management accounting information include departmental expenses, product costs, and customer profitability measures. The document also provides a brief history of management accounting and discusses common management accounting systems and the roles of key financial players in organizations.
Management accounting provides information to assist managers in planning, directing operations, and controlling the organization. It involves recording, analyzing, and reporting financial and operational data to help managers make informed business decisions. The management accountant's role is to identify, measure, analyze, interpret, and communicate financial and non-financial information relevant for decision-making, planning, and control. Key tools used include budgets, variance analysis, costing techniques, and reports to help managers with tasks like setting objectives, allocating resources, and evaluating performance.
International Journal of Business and Management Invention (IJBMI)inventionjournals
This document summarizes a study on accounting practices and the perceived performance of accounting information systems (AIS) among 103 small and medium-sized enterprises (SMEs) in Morocco. Previous studies on accounting practices in SMEs have shown mixed and sometimes contradictory findings. The objective of this study is to understand if Moroccan SMEs have formalized financial and accounting systems, and to evaluate managers' perceptions of AIS performance. The study develops a conceptual framework for analyzing AIS, defining it as any information system based on accounting and financial data. It also defines perceived performance as a manager's subjective assessment of satisfaction with their company's AIS. The study involves principal component analysis and factor analysis to validate research constructs
This document provides an overview of accounting concepts, principles, and the accounting cycle. It discusses key topics such as [1] the purpose of accounting and accounting information systems, [2] the basic accounting model involving journal entries, ledgers, and trial balances, and [3] financial statements including the income statement, balance sheet, and statement of cash flows. It also covers [4] adjusting entries, worksheets, and closing entries to prepare the adjusted trial balance and financial statements at the end of each accounting period.
This document contains definitions of accounting and finance terms. It includes over 100 terms defined in 1-2 sentences each, organized alphabetically from A-C. Some key terms defined include accounting period, accrual, amortization, balance sheet, breakeven analysis, capital, capital asset, and capital budgeting. The definitions provide brief explanations of concepts and terminology commonly used in accounting and corporate finance.
Accounting is a wider term and includes recording, classifying and summarizing of business transactions in terms of money, preparation of financial reports and analysis and interpretation of these reports for the information and guidance of management.
The business accounting system consists of three parts:
Financial Accounting
Cost Accounting
Management Accounting
The document provides an overview of business and its environment. It discusses [1] the nature of business, goals of business, and trends in modern business. It then covers [2] the importance of corporate governance, social responsibility, and business ethics. Finally, it analyzes [3] the different factors in a business environment and how businesses must analyze and respond to changes in their external environment.
There are three main streams of accounting:
1) Financial accounting records business transactions and prepares financial statements.
2) Cost accounting classifies and records expenditures to determine costs and facilitate cost control.
3) Management accounting analyzes financial and cost accounting information to assist management with decision making, policy creation, and day-to-day operations. It is based on the other two streams.
Management Cost accounting book @ bec domsBabasab Patil
The document discusses the basics of cost accounting including the evolution of cost accounting, differences between financial accounting and cost accounting, and the relationship between cost accounting, financial accounting, and management accounting. It provides examples to illustrate how cost accounting can provide internal managers with product-level cost information to help with decision making, which financial statements alone cannot provide. This additional insight from cost accounting helps management evaluate product profitability and make decisions to improve overall business efficiency and profits.
This document provides an overview of management accounting. It defines management accounting as the process of analyzing business costs and operations to prepare internal financial reports and records to aid managerial decision making. Some key points:
- Management accounting focuses on internal reporting for managers, while financial accounting focuses on external reporting.
- Management accounting helps managers with budgeting, decision making, planning, and controlling costs. It provides modified and analyzed financial data to managers.
- An example is given of tasks that would be assigned to a management accountant (budgeting, taxes) vs. a financial accountant (preparing financial statements, cash flows, stockholder equity changes).
- The functions of management accounting include providing data,
The presentation is part of a lecture series on Management Information Systems. It is an overview of the General Ledger and Financial Reporting System (GLFRS) as part of the Accounting Information system (AIS). It also covers an assessment of the role of accounting software and Extensible Business Reporting Language (XBRL).
DOI: http://dx.doi.org/10.13140/RG.2.2.22328.47369
Updated at: https://www.researchgate.net/publication/353851801_General_Ledger_and_Financial_Reporting_System_GLFRS
Management accounting assists management in decision making and day-to-day operations by presenting accounting information. It has evolved from a traditional focus on financial markets and securities to incorporate modern techniques like mathematical models and computer technology. Management accounting aims to help with planning, controlling operations, decision making, and reporting financial performance to management. It covers areas like cost accounting, budgets, investments, and management information systems.
Cost accounting is the process of recording, classifying, allocating and reporting costs to provide information to managers. It determines unit costs to help set prices and control costs. Management uses cost information to make production policy decisions. Managerial accounting provides internal data for management while financial accounting provides external data for outsiders. Both use the same accounting principles but differ in purpose and scope. Cost accounting controls costs through standard costing and budgeting.
Bba ii cost and management accounting u 5 management accountingRai University
Management accounting provides internal accounting information to assist management in planning, decision-making, and controlling operations. It identifies, measures, analyzes, interprets, and communicates financial and non-financial information to help the organization achieve its goals. Management accounting focuses on the future and is aimed at helping managers make decisions, while financial accounting provides external reporting focused on the past to parties outside the organization like shareholders and regulators.
This document provides an overview of accounting concepts for managers. It defines accounting as recording, classifying, and summarizing financial transactions and events. Accounting serves to guide and control business activities, analyze results, and provide information for decision making. It distinguishes between bookkeeping and accounting, and describes the branches of accounting. The accounting cycle and basic principles like the accounting equation and double-entry system are also summarized.
This document provides an introduction to cost and management accounting. It discusses key concepts such as cost accounting, management accounting, costing, and the differences between financial accounting and management accounting. The objectives of cost accounting are to ascertain costs, control costs, aid decision-making, determine selling prices, and more. Management accounting builds on cost and financial accounting data to provide information for planning, control, and decision-making. It focuses on the internal needs of management rather than external reporting.
Management Accounting and its Roles and PrinciplesImran Butt
Management accounting provides specialized data and reports for internal managers to help with decision making, while financial accounting provides standardized financial statements for external stakeholders like investors. Management accounting focuses on future trends and does not need to follow GAAP, whereas financial accounting focuses on past data and must follow GAAP. Effective management accounting implements four principles - influence through relevant and valuable communication that builds trust. It covers areas like cost accounting, inventory management, job costing, and price optimization to help managers with tasks like budgeting, analysis, forecasting, and costing.
1) Cost accounting information is used by managers for decision making and performance evaluation in organizations. It provides internal reporting for segments, divisions, and responsibility centers.
2) Financial accounting provides external reporting according to GAAP, while cost accounting provides internal reporting not governed by GAAP for managerial decision making.
3) Managers use cost data on costs that change between alternative courses of action, like expanding operations, to make decisions. They also use cost data to evaluate performance of responsibility centers.
Management accounting assists managers in planning, organizing, and controlling business operations. It provides accounting data and analysis to help managers make informed decisions. Management accounting focuses on future forecasts and helps evaluate options such as whether to invest in new equipment or acquire another company. Management accountants use tools like ratio analysis and investment appraisal to assess financial performance and identify opportunities to improve and grow the business.
Managerial accounting provides internal managers and external parties with financial and non-financial information to make informed business decisions. It involves tracking costs and revenues, preparing budgets and forecasts, and analyzing variances. An effective accounting system balances costs with benefits, adheres to regulatory standards, and considers behavioral implications on managers. Budgets and performance reports are key tools that facilitate planning, control, and evaluation of business activities. Accountants play an important role across an organization's value chain functions from research to customer service.
Assessing Empirical Research In Managerial Accounting A Value-Based Manageme...Andrea Erdman
This document provides an overview and critical review of empirical research in managerial accounting using a value-based management framework. It discusses how managerial accounting practice and research has evolved over time, from a traditional focus on cost determination and budgetary control to a more strategic emphasis on value creation. The paper outlines a six-step value-based management framework and discusses how it relates to prior conceptual models in managerial accounting research. It notes that empirical research in managerial accounting has been driven by changes in practice, leading to both benefits and limitations in the literature.
This document provides an overview of accounting and its branches. It defines accounting as a specialized information system that records transactions and provides economic information. The main branches are financial accounting, cost accounting, and management accounting. Financial accounting records money transactions between an entity and third parties. Cost accounting determines costs of products, processes, and projects. Management accounting assists management in formulating policies and planning operations. The document also discusses the history and evolution of cost accounting and its contributions to functions like planning, controlling, decision making, inventory management, and financial analysis.
This document discusses management accounting and compares it to financial accounting. It defines management accounting as providing both financial and non-financial information to support strategic, operational and control decision making within an organization. Examples of management accounting information include departmental expenses, product costs, and customer profitability measures. The document also provides a brief history of management accounting and discusses common management accounting systems and the roles of key financial players in organizations.
Management accounting provides information to assist managers in planning, directing operations, and controlling the organization. It involves recording, analyzing, and reporting financial and operational data to help managers make informed business decisions. The management accountant's role is to identify, measure, analyze, interpret, and communicate financial and non-financial information relevant for decision-making, planning, and control. Key tools used include budgets, variance analysis, costing techniques, and reports to help managers with tasks like setting objectives, allocating resources, and evaluating performance.
International Journal of Business and Management Invention (IJBMI)inventionjournals
This document summarizes a study on accounting practices and the perceived performance of accounting information systems (AIS) among 103 small and medium-sized enterprises (SMEs) in Morocco. Previous studies on accounting practices in SMEs have shown mixed and sometimes contradictory findings. The objective of this study is to understand if Moroccan SMEs have formalized financial and accounting systems, and to evaluate managers' perceptions of AIS performance. The study develops a conceptual framework for analyzing AIS, defining it as any information system based on accounting and financial data. It also defines perceived performance as a manager's subjective assessment of satisfaction with their company's AIS. The study involves principal component analysis and factor analysis to validate research constructs
This document provides an overview of accounting concepts, principles, and the accounting cycle. It discusses key topics such as [1] the purpose of accounting and accounting information systems, [2] the basic accounting model involving journal entries, ledgers, and trial balances, and [3] financial statements including the income statement, balance sheet, and statement of cash flows. It also covers [4] adjusting entries, worksheets, and closing entries to prepare the adjusted trial balance and financial statements at the end of each accounting period.
This document contains definitions of accounting and finance terms. It includes over 100 terms defined in 1-2 sentences each, organized alphabetically from A-C. Some key terms defined include accounting period, accrual, amortization, balance sheet, breakeven analysis, capital, capital asset, and capital budgeting. The definitions provide brief explanations of concepts and terminology commonly used in accounting and corporate finance.
Accounting is a wider term and includes recording, classifying and summarizing of business transactions in terms of money, preparation of financial reports and analysis and interpretation of these reports for the information and guidance of management.
The business accounting system consists of three parts:
Financial Accounting
Cost Accounting
Management Accounting
The document provides an overview of business and its environment. It discusses [1] the nature of business, goals of business, and trends in modern business. It then covers [2] the importance of corporate governance, social responsibility, and business ethics. Finally, it analyzes [3] the different factors in a business environment and how businesses must analyze and respond to changes in their external environment.
There are three main streams of accounting:
1) Financial accounting records business transactions and prepares financial statements.
2) Cost accounting classifies and records expenditures to determine costs and facilitate cost control.
3) Management accounting analyzes financial and cost accounting information to assist management with decision making, policy creation, and day-to-day operations. It is based on the other two streams.
Management Cost accounting book @ bec domsBabasab Patil
The document discusses the basics of cost accounting including the evolution of cost accounting, differences between financial accounting and cost accounting, and the relationship between cost accounting, financial accounting, and management accounting. It provides examples to illustrate how cost accounting can provide internal managers with product-level cost information to help with decision making, which financial statements alone cannot provide. This additional insight from cost accounting helps management evaluate product profitability and make decisions to improve overall business efficiency and profits.
This document provides an overview of management accounting. It defines management accounting as the process of analyzing business costs and operations to prepare internal financial reports and records to aid managerial decision making. Some key points:
- Management accounting focuses on internal reporting for managers, while financial accounting focuses on external reporting.
- Management accounting helps managers with budgeting, decision making, planning, and controlling costs. It provides modified and analyzed financial data to managers.
- An example is given of tasks that would be assigned to a management accountant (budgeting, taxes) vs. a financial accountant (preparing financial statements, cash flows, stockholder equity changes).
- The functions of management accounting include providing data,
The presentation is part of a lecture series on Management Information Systems. It is an overview of the General Ledger and Financial Reporting System (GLFRS) as part of the Accounting Information system (AIS). It also covers an assessment of the role of accounting software and Extensible Business Reporting Language (XBRL).
DOI: http://dx.doi.org/10.13140/RG.2.2.22328.47369
Updated at: https://www.researchgate.net/publication/353851801_General_Ledger_and_Financial_Reporting_System_GLFRS
Management accounting assists management in decision making and day-to-day operations by presenting accounting information. It has evolved from a traditional focus on financial markets and securities to incorporate modern techniques like mathematical models and computer technology. Management accounting aims to help with planning, controlling operations, decision making, and reporting financial performance to management. It covers areas like cost accounting, budgets, investments, and management information systems.
Cost accounting is the process of recording, classifying, allocating and reporting costs to provide information to managers. It determines unit costs to help set prices and control costs. Management uses cost information to make production policy decisions. Managerial accounting provides internal data for management while financial accounting provides external data for outsiders. Both use the same accounting principles but differ in purpose and scope. Cost accounting controls costs through standard costing and budgeting.
Bba ii cost and management accounting u 5 management accountingRai University
Management accounting provides internal accounting information to assist management in planning, decision-making, and controlling operations. It identifies, measures, analyzes, interprets, and communicates financial and non-financial information to help the organization achieve its goals. Management accounting focuses on the future and is aimed at helping managers make decisions, while financial accounting provides external reporting focused on the past to parties outside the organization like shareholders and regulators.
This document provides an overview of accounting concepts for managers. It defines accounting as recording, classifying, and summarizing financial transactions and events. Accounting serves to guide and control business activities, analyze results, and provide information for decision making. It distinguishes between bookkeeping and accounting, and describes the branches of accounting. The accounting cycle and basic principles like the accounting equation and double-entry system are also summarized.
This document provides an introduction to cost and management accounting. It discusses key concepts such as cost accounting, management accounting, costing, and the differences between financial accounting and management accounting. The objectives of cost accounting are to ascertain costs, control costs, aid decision-making, determine selling prices, and more. Management accounting builds on cost and financial accounting data to provide information for planning, control, and decision-making. It focuses on the internal needs of management rather than external reporting.
Management Accounting and its Roles and PrinciplesImran Butt
Management accounting provides specialized data and reports for internal managers to help with decision making, while financial accounting provides standardized financial statements for external stakeholders like investors. Management accounting focuses on future trends and does not need to follow GAAP, whereas financial accounting focuses on past data and must follow GAAP. Effective management accounting implements four principles - influence through relevant and valuable communication that builds trust. It covers areas like cost accounting, inventory management, job costing, and price optimization to help managers with tasks like budgeting, analysis, forecasting, and costing.
1) Cost accounting information is used by managers for decision making and performance evaluation in organizations. It provides internal reporting for segments, divisions, and responsibility centers.
2) Financial accounting provides external reporting according to GAAP, while cost accounting provides internal reporting not governed by GAAP for managerial decision making.
3) Managers use cost data on costs that change between alternative courses of action, like expanding operations, to make decisions. They also use cost data to evaluate performance of responsibility centers.
Management accounting assists managers in planning, organizing, and controlling business operations. It provides accounting data and analysis to help managers make informed decisions. Management accounting focuses on future forecasts and helps evaluate options such as whether to invest in new equipment or acquire another company. Management accountants use tools like ratio analysis and investment appraisal to assess financial performance and identify opportunities to improve and grow the business.
Managerial accounting provides internal managers and external parties with financial and non-financial information to make informed business decisions. It involves tracking costs and revenues, preparing budgets and forecasts, and analyzing variances. An effective accounting system balances costs with benefits, adheres to regulatory standards, and considers behavioral implications on managers. Budgets and performance reports are key tools that facilitate planning, control, and evaluation of business activities. Accountants play an important role across an organization's value chain functions from research to customer service.
Assessing Empirical Research In Managerial Accounting A Value-Based Manageme...Andrea Erdman
This document provides an overview and critical review of empirical research in managerial accounting using a value-based management framework. It discusses how managerial accounting practice and research has evolved over time, from a traditional focus on cost determination and budgetary control to a more strategic emphasis on value creation. The paper outlines a six-step value-based management framework and discusses how it relates to prior conceptual models in managerial accounting research. It notes that empirical research in managerial accounting has been driven by changes in practice, leading to both benefits and limitations in the literature.
This document provides an overview of accounting and its branches. It defines accounting as a specialized information system that records transactions and provides economic information. The main branches are financial accounting, cost accounting, and management accounting. Financial accounting records money transactions between an entity and third parties. Cost accounting determines costs of products, processes, and projects. Management accounting assists management in formulating policies and planning operations. The document also discusses the history and evolution of cost accounting and its contributions to functions like planning, controlling, decision making, inventory management, and financial analysis.
The Role of Balanced Scorecard for Measuring Competitive Advantage of Contain...inventionjournals
This document discusses using the Balanced Scorecard (BSC) framework to measure the competitive advantage of container terminals. The BSC is a strategic planning and management system that incorporates both financial and non-financial metrics. It can help container terminal managers better understand strategic vision and employee contributions to strategic goals. The document outlines the key components of the BSC - financial, customer, internal business process, and learning & growth perspectives. It also discusses how the BSC has been applied to measure performance at Iranian container terminals, optimize terminal operations, and identify core competencies that provide sustainable competitive advantages.
Management accounting provides accounting information to assist management in planning, controlling, and decision-making. It focuses on the future and internal reporting needs of management rather than the past and external reporting emphasized in financial accounting. Management accounting uses both financial and non-financial quantitative and qualitative data accumulated from financial and cost accounting systems. It involves tasks like financial statement analysis, cash flow analysis, budgeting, variance analysis, and generating customized reports to meet the specific information needs of management for decision-making.
A New Model For Balanced Score Cards (BSC)Amber Ford
This document proposes a new 6-perspective balanced scorecard model that adds social/environmental, risk
management, and employee perspectives. It reviews literature on balanced scorecards including traditional
models with financial, customer, internal processes, and learning/innovation perspectives. Kaplan and Norton's
original balanced scorecard model is described. Benefits of balanced scorecards in communicating strategy and
aligning performance measures are outlined.
Please review the below essays for completion 21 July 2011 midnigh.docxLeilaniPoolsy
Please review the below essays for completion 21 July 2011 midnight. Price 200 dollars for 15 pages minimum double space courier new 12 font. Kindly accept and separate each acc501cs1, cs2, cs3, cs4, and cs5.
ACC501CS1 (3 to 5 pages double spaced courier new 12 pt font)
Case assignment expectations:
This case will give you experience in the format of our case method.
You will begin by learning about financial accounting standards and current trends. Further, you are introduced to the annual report, which typically includes the audited financial statements. The submission should be 3-5 pages typed and double-spaced.
The following items will be assessed in particular:
There are two parts to this case.
Part I. Search the Internet. Discuss each of the following terms or concepts and their significance for the preparation of financial statements. In addition, comment on how the five terms or concepts below relate to each other.
1. Generally Accepted Accounting Principles (US GAAP)
2. International Financial Reporting Standards (IFRS)
3. Norwalk Agreement (October 2002)
4. Generally Accepted Auditing Standards
5. International Auditing and Assurance Standards
Part II. Refer to the following three sets of annual reports which contain the financial statements. Use the latest financial statements -- for the year 2010, if available. First read an overview of the company so you are familiar with the company, its products/services and markets and then review the annual report and supplemental financial statements.
1. Apple, Inc. http://investor.apple.com/financials.cfm
2. Swatch Group http://www.swatchgroup.com/en/investor_relations/annual_and_half_year_reports
3. Nikon http://www.nikon.com/about/ir/ir_library/ar/index.htm
Required:
1. Briefly comment on the companies, the appearance and presentation of the annual reports.
2. How the terms and concepts defined in Part I affect the information reported the financial statements listed above?
3. Make three comparisons and reach three conclusions about each company from the financial information you find in the annual report. Prepare a table to summarize your findings.
4. Briefly comment on the ability to compare and contrast the information in your table.
ACC501CS2 – (3-5 pages typed and double-spaced courier new 12 font)
Case assignment expectations:
Cost Volume Profit Analysis and Costing for the 21st Century
Read all the required readings in the background materials about Cost Volume Profit Analysis. Make sure you understand this method and the breakeven analysis which goes with these concepts.
(n.a.) Calculating the Break-Even Point and the Contribution Margin, Tripod.com. Retrieved from: http://members.tripod.com/devryproject/BreakEven.htm
These site have detailed slide presentations of cost-volume-profit analysis.
Cost-Volume-Profit-Analysis, Retrieved from:
http://www.slideshare.net/brianna1405/cost-volumeprofit-relationship
http://www.slideserve.com/presentation/24847/Cost-Volume-Profit-.
Management accounting is an internal accounting system designed to support managers' information needs. It focuses on providing information for costing products and services, continuous improvement, planning, evaluation, controlling, and decision making. Management accounting is not bound by GAAP and produces both financial and non-financial information for internal users such as management. It emphasizes future events and performance at the entity, department, and manager level. Current focuses of management accounting include activity-based management, customer orientation, strategic positioning, value chain analysis, quality management, and a cross-functional perspective. The role of management accountants is one of support to staff functions like production, finance, and internal audit.
This document outlines a management accounting course. The course will cover four units: introduction to management, financial, cost, and managerial accounting; budgetary control and variances; costing and profit planning; and managerial decision making. Key topics include comparative financial statements, ratio analysis, budget preparation and variance analysis, cost-volume-profit analysis, and using accounting information for decisions around product mix and make-or-buy analysis. The course will utilize lectures, case studies, presentations, exercises and a project. It aims to help students understand how managerial accounting can assist management functions like planning, organizing and controlling through tools like standard costing, budgeting and qualitative analysis.
The document proposes a new 6 perspective model for balanced scorecards that adds social/environmental, risk
management, and employee perspectives. It reviews literature on traditional BSC models and their limitations. The
proposed new model aims to address these limitations by providing a more holistic framework that integrates additional
key areas of corporate strategy and performance.
To assist the management in promoting efficiency. Efficiency includes best possible services to customers, investors and employees.
To prepare budgets covering all functions of a business (i.e, production, sales, research and finance).
To analyze monetary and non-monetary transactions.
To compare the actual performance with plan for identifying deviations and their causes.
To interpret financial statement to enable the management to formulate future policies.
To submit to the management at frequent intervals operating statements and short term financial statements.
To arrange for the systematic allocation of responsibilities.
To provide a suitable organization for discharging the responsibilities.
MODULE 4: The Big Picture
The Objectives of this Module are:
-To refresh and build knowledge about the unique aspects of financial reporting in Microfinance
-To understand why organizations, particularly Microfinance organizations, need a financial and operational reporting system
-To review accounting system examples
1C: ERP is a flagship 1C solution for enterprise level companies.
Look at it online - https://app01.risebiz.co.za/ERPDemo/
Find out more on https://risebiz.co.za
This document provides an overview of a course on corporate accounting. It discusses why accounting is an interesting field, why financial accounting information is needed, and the course objectives of making students sophisticated financial statement users. An overview of financial statements is also provided, including the balance sheet, income statement, statement of retained earnings, and statement of cash flows.
This document defines and compares cost accounting, management accounting, and financial accounting. It also discusses the objectives, nature, and scope of cost accounting and how cost accounting aids management. Cost accounting is defined as classifying, recording, and allocating costs to determine cost and profitability. Management accounting provides accounting information to aid management decision making. Financial accounting deals with financial resources and obligations to external parties. The document outlines key differences between cost accounting, management accounting, and financial accounting.
A FINANCIAL STATEMENT USING RATIO ANALYSIS AT MAHINDRA AND MAHINDRA LTDMurali RN
Accounting serves to provide financial information to various stakeholders through three categories: financial accounting, cost accounting, and management accounting. Financial accounting records business transactions and presents financial statements including the profit and loss account and balance sheet. Cost accounting provides detailed cost information for internal management use. Management accounting assists management with planning, decision-making, and control by using techniques like budgeting, variance analysis, and ratio analysis that draw from financial and cost accounting information. It aims to optimize profit through tools and analysis of both past financial data and future projections.
Management Accounting Unit 1 for B.Com(Hons)/BCom/BBA.pdfUmakantAnnand
Management Accounting
B.Com (Hons) Semester - 4th
Unit -1
University of Lucknow, Lucknow
Meaning of Management Accounting:
The term Management Accounting consists of two words “Management” and “Accounting”. It is the study of managerial aspects of accounting. It is a tool in the hands of management to exercise decision making. The emphasis of management accounting is to redesign accounting in a manner which is helpful to the management in framing the policies and control of their execution.
Management accounting is of recent origin. The term was first used in 1950 by a team of accountants visiting U.S.A. under the auspices of Anglo-American Council on productivity. The terminology of cost accounting had no reference to the word ‘management accountancy’ before the visit by this study group. Intensive competitions, large scale production, dynamic developments in technology, and complexities of modern business have led to the development of management accounting-to solve many of the problems.
“Management accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and in the day-to-day operations of an undertaking”. I.C.M.A. – the definition recently incorporated into the terminology.
Characteristics of Management Accounting:
The objective of Management accounting is to record, analyse and present financial data to the Management in such a way that it becomes useful and helpful in planning and running business operations systematically and effectively.
The following are the main characteristics of management accounting:
1) Providing Financial Information:
The main emphasis of management accounting is to provide financial information to management. The information is provided in a manner suitable to various levels of management for reviewing policies and decision making.
2) Cause and Effect Analysis:
Financial accounting confines itself to presentation of P&L account and Balance Sheet. Management accounting analyses the cause and effect of the facts and figures thereon. If there is loss causes for the losses are investigated. If there is profit the variable affecting the profit are also analysed. The amount of profit is compared with expenditure, sales, capital employed, etc., to draw appropriate conclusions relating to the effect of those items on profit.
3) Use of Special Techniques and Concepts:
Management accounting employs special techniques like standard costing, budgetary control, marginal costing, fund flow, cash flow, ratio analysis, responsibility accounting, etc. to make accounting data more useful and helpful to the management. Each of these techniques or concepts is a useful tool for specific purpose in analysis and interpretation of data, establishing control over operations, etc.
4) Decision Making:
Main objective of management accounting is to provide relevant information-to management to take various important decisions.
Management accounting involves partnering with management in decision making, planning, and performance management. It has evolved from traditional cost accounting to also include strategic management, performance management, and risk management. Management accountants analyze financial data and costs, prepare budgets and forecasts, report to management, and perform tasks like cost control, internal auditing, and tax planning to assist managers in making informed decisions. Specific methodologies used include activity-based costing, standard cost accounting, and transfer pricing.
Meaning of management accounting & it objectivesDr. Ravneet Kaur
Management accounting is the study of accounting aspects that help management make decisions. It provides tools to help management plan, organize, direct, and control operations. Management accounting modifies and rearranges accounting data to be more useful for decision making through techniques like budgeting, standard costing, and reporting. Its main objectives are to help management perform functions efficiently and make effective decisions.
This document provides an overview of managing corporate performance using the balanced scorecard approach. It discusses key components of performance management including identifying strategic objectives and key performance indicators across four perspectives: financial, customer, internal processes, and learning and growth. Strategy maps are presented as a framework to translate strategies into objectives and measures across each perspective. Examples are also given of strategy maps tailored for different corporate functions like HR, IT, finance and marketing.
Walmart Business+ and Spark Good for Nonprofits.pdfTechSoup
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The webinar may also give some examples on how nonprofits can best leverage Walmart Business+.
The event will cover the following::
Walmart Business + (https://business.walmart.com/plus) is a new shopping experience for nonprofits, schools, and local business customers that connects an exclusive online shopping experience to stores. Benefits include free delivery and shipping, a 'Spend Analytics” feature, special discounts, deals and tax-exempt shopping.
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Spark Good (walmart.com/sparkgood) is a charitable platform that enables nonprofits to receive donations directly from customers and associates.
Answers about how you can do more with Walmart!"
This slide is special for master students (MIBS & MIFB) in UUM. Also useful for readers who are interested in the topic of contemporary Islamic banking.
How to Manage Your Lost Opportunities in Odoo 17 CRMCeline George
Odoo 17 CRM allows us to track why we lose sales opportunities with "Lost Reasons." This helps analyze our sales process and identify areas for improvement. Here's how to configure lost reasons in Odoo 17 CRM
A review of the growth of the Israel Genealogy Research Association Database Collection for the last 12 months. Our collection is now passed the 3 million mark and still growing. See which archives have contributed the most. See the different types of records we have, and which years have had records added. You can also see what we have for the future.
The simplified electron and muon model, Oscillating Spacetime: The Foundation...RitikBhardwaj56
Discover the Simplified Electron and Muon Model: A New Wave-Based Approach to Understanding Particles delves into a groundbreaking theory that presents electrons and muons as rotating soliton waves within oscillating spacetime. Geared towards students, researchers, and science buffs, this book breaks down complex ideas into simple explanations. It covers topics such as electron waves, temporal dynamics, and the implications of this model on particle physics. With clear illustrations and easy-to-follow explanations, readers will gain a new outlook on the universe's fundamental nature.
How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
How to Fix the Import Error in the Odoo 17Celine George
An import error occurs when a program fails to import a module or library, disrupting its execution. In languages like Python, this issue arises when the specified module cannot be found or accessed, hindering the program's functionality. Resolving import errors is crucial for maintaining smooth software operation and uninterrupted development processes.
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
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4. 4
What are we going to discuss?
Management accounting in an organization
Cost Management Concepts and Cost Behavior
Full (absorption) costing
Strategic cost management
Life-cycle, target and kaizen costing
Differential cost analysis for marketing and
production decisions
Budgeting, responsibility centers, and
performance evaluation
Balanced scorecard
5. 5
Textbooks
Blocher, Chen, Cokins, Lin. Cost
Management: A Strategic Emphasis. 2005.
Drury C. Cost and Management
Accounting. 2006.
Reference textbooks (Introduction of
Management Accounting)
6. 6
Case studies
Cases in Management Accounting: Current
Practices in European Companies. T.Groot
and K.Lukka (eds.)
HBS case studies
Russian case studies
7. 7
Case studies
Wilkerson Company: Introducing ABC
Denim Finishing: Using ABC Information for
Decision Making
Kemps LLC: Introducing Time-Driven ABC
AB SKA (Sweden): Management Accounting of
R&D Expenses
Microsoft Latin America: Balanced Scorecard
8. 8
Presentations: some examples
Operational and strategic activity-based
management
“Beyond budgeting”
Using Balanced Scorecards for Universities
Management accounting in transitional
economies
Using balanced scorecards in the public
sector
Management accounting in France
9. 9
Grading Policy
Case studies (based on your input) – 20%
Presentations – 10% (presentation +
report).
Mid-term exam – 20%
Final exam – 50%
Discussion questions
Problems and mini cases
12. 12
Learning Objectives
Distinguish between managerial & financial
accounting.
Understand how managers can use
accounting information to implement
strategies.
Identify the key financial players in the
organization.
Understand managerial accountants’
professional environment.
Master the concept of cost.
13. 13
Compare Financial
& Managerial Accounting
Financial Accounting
Deals with reporting
to parties outside the
organization
Highly regulated
Primarily uses
historical data
Managerial
Accounting
Deals with activities
inside an
organization
Unregulated
May use projections
about the future
14. 14
Management Accounting Information (1)
The Institute of Management Accountants
has defined management accounting as:
A value-adding continuous improvement
process of planning, designing, measuring and
operating both nonfinancial information
systems and financial information systems that
guides management action, motivates
behavior, and supports and creates the
cultural values necessary to achieve an
organization’s strategic, tactical and operating
objectives
15. 15
Management Accounting Information (2)
Be aware that this definition identifies:
Management accounting as providing both
financial information and nonfinancial
information
The role of management information as
supporting strategic (planning), operational
(operating) and control (performance
evaluation) management decision making
In short, management accounting
information is pervasive and purposeful
It is intended to meet specific decision-making
needs at all levels in the organization
16. 16
Examples of management accounting
information include:
The reported expense of an operating
department, such as the assembly department of
an automobile plant or an electronics company
The costs of producing a product
The cost of delivering a service
The cost of performing an activity or business
process – such as creating a customer invoice
The costs of serving a customer
Management Accounting Information (3)
17. 17
Management Accounting Information (4)
Management accounting also produces
measures of the economic performance of
decentralized operating units, such as:
Business units
Divisions
Departments
These measures help senior managers
assess the performance of the company’s
decentralized units
18. 18
Management Accounting Information (5)
Management accounting information is a
key source of information for decision
making, improvement, and control in
organizations
Effective management accounting systems
can create considerable value to today’s
organizations by providing timely and
accurate information about the activities
required for their success
19. 19
Changing Focus
Traditionally, management accounting
information has been financial information
Management accounting information has now
expanded to encompass information that is
operational and nonfinancial:
Quality and process times
More subjective measurements (such as customer
satisfaction, employee capabilities, new product
performance)
Three dimensions:
Financial / Non-financial information
Internal / External information
Operational / Strategic information
20. 20
Financial v. Management Accounting
Financial Accounting
Deals with reporting
to parties outside
the organization
Deals with the
organization as a
whole
Highly regulated
Primarily uses
historical data
Management Accounting
Deals with activities
inside an organization
Deals with
responsibilities centers
within the organization
as well as with the
organization as a whole
Unregulated
May use projections
about the future
21. 21
A Brief History(1 of 4)
In the late 19th century, railroad managers
implemented large and complex costing systems
Allowed them to compute the costs of the
different types of freight that they carried
Supported efficiency improvements and pricing
in the railroads
The railroads were the first modern industry to
develop and use broad financial statistics to
assess organization performance
About the same time, Andrew Carnegie was
developing detailed records of the cost of
materials and labor used to make the steel
produced in his steel mills
22. 22
A Brief History(2 of 4)
The emergence of large and integrated
companies at the start of the 20th century
created a demand for measuring the performance
of different organizational units
DuPont and General Motors are examples
Managers developed ways to measure the return
on investment and the performance of their units
After the late 1920s management accounting
development stalled
Accounting interest focused on preparing
financial statements to meet new regulatory
requirements
23. 23
A Brief History(3 of 4)
It was only in the 1970s that interest
returned to developing more effective
management accounting systems
American and European companies were under
intense pressure from Japanese automobile
manufacturers
During the latter part of the 20th century
there were innovations in costing and
performance measurement systems
25. 25
A Brief History(4 of 4)
The history of management accounting comprises
two characteristics:
1. Management accounting was driven by the
evolution of organizations and their strategic
imperatives
When cost control was the goal, costing systems became
more accurate
When the ability of organizations to adapt to
environmental changes became important, management
accounting systems that supported adaptability were
developed
2. Management accounting innovations have usually
been developed by managers to address their own
decision-making needs
26. 26
Work Activities
That Will Increase In Importance
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
QUALITY SYSTEMS & CONTROLS
FINANCIAL & ECONOMIC ANALYSIS
INTERNAL CONSULTING
EDUCATING THE ORGANIZATION
PROJECT ACCOUNTING
MERGERS, ACQUISITIONS & DIVESTMENTS
COST ACCOUNTING SYSTEMS
COMPUTER SYSTEMS & OPERATIONS
LONG-TERM, STRATEGIC PLANNING
PERFORMANCE EVALUATION
PROCESS IMPROVEMENT
CUSTOMER & PRODUCT PROFITABILITY
PERCENT
Source: The Practice Analysis of Management Accounting, 1996, p.14; Counting More, Counting Less…, 1999, p. 17.
x 3
4 5
2 1
3 4
1 x
5 2
x x
2000+3yrs
More Most
time critical
New!
New!
New!
New!
28. 28
Key Financial Players
President and
Chief Executive Officer
Finance
Vice-President (CFO)
Other
Vice-Presidents
Treasurer Controller Internal Audit
Management
Accounting
Financial
Reporting
Tax
Reporting
29. 29
Finance function:
Russian companies (traditional)
General Director
Chief
Accountant
Finance Director
Finance
Department
Planning
Department
Wages
Department
Accounting
Department
30. 30
Finance function:
Russian companies (modern)
General Director
Chief
Accountant
Finance Director
Finance
Department
Management
Accounting /
Budgeting
Department
Accounting
Department
31. 31
Professional Environment
Institute of Management Accountants (IMA)
Sponsors Certified Management Accountant &
Certified Financial Management programs
Publishes a journal, policy statements and
research studies on management accounting
issues
www.imanet.org
Chartered Institute of Management
Accounting (CIMA)
Leading professional organization in England and
Wales
Sponsors certificate and diploma programs
www.cimaglobal.org
34. 34
Match Terms & Definitions
Cost
Expense
Cost Object
Direct Cost
Opportunity
Cost
Indirect Cost
The return that could not be
realized from the best forgone
alternative use of a resource
A cost charged against revenue
Costs not directly related to a
cost object
Any item for which a manager
wants to measure a cost
Costs directly related to a cost
object
A sacrifice of resources
36. 36
Opportunity Cost
An opportunity cost is the sacrifice you make
when you use a resource for one purpose instead
of another
Opportunity costs = explicit costs + implicit costs
that do not appear anywhere in the accounting
records
Machine time used to make one product cannot
be used to make another, so a product that has a
higher contribution margin per unit may not be
more profitable if it takes longer to make.
Management accountants often use the concept
of opportunity cost for decision making
Economic Profit v. Accounting Profit
37. 37
Classification of Costs
Variable / Fixed costs
Direct / Indirect costs
Prime costs / Overheads
Cost hierarchy (types of activities and
their associated costs) New!
38. 38
Nature of Fixed & Variable Costs
Variable costs - change in total as the level of activity
changes
There is a definitive physical relationship to the activity
measure
Fixed costs - do not change in total with changes in activity
levels
Accounting concepts of variable and fixed costs are short
run concepts
Apply to a particular period of time
Relate to a particular level of production
Relevant range is the range of activity over which the firm
expects cost behavior to be consistent
Outside the relevant range, estimates of fixed and variable
costs may not be valid
39. 39
Types of Fixed Costs (1)
Capacity costs- fixed costs that provide a firm
with the capacity to produce and/or sell its goods
and services
Also know as committed costs and typically relate to a
firm’s ownership of facilities and its basic organizational
structure
Capacity costs may cease if operations shut down, but
continue in fixed amounts at any level of operations
Examples: property taxes, executive salaries
40. 40
Types of Fixed Costs (2)
Discretionary costs - need not be incurred in the
short run to operate the business, however,
usually they are essential for achieving long-run
goals
Also referred to as programmed or managed
costs
Examples: research and development costs,
advertising
41. 41
Semifixed Costs
Refers to costs that increase in steps
Example: A quality-control inspector can
examine 1,000 units per day. Inspection costs
are semifixed with a step up for every 1,000
units per day
Distinction between fixed and semifixed is
subtle
Change in fixed costs usually involves a change in
long-term assets: a change in semifixed costs often
does not
42. 42
Cost Object
A cost object is something for which
we want to compute a cost:
A product
A pair of pants
A product line
Women’s boot cut jeans
An organizational unit
The on-line sales unit of a clothing retailer
43. 43
Direct Cost
A cost of a resource or activity that is
acquired for or used by a single cost
object
Cost object = A dining room table
Cost of the wood that went into the dining
room table
Cost object = Line of dining room tables
A manager’s salary would be a direct cost if a
manager were hired to supervise the
production of dining room tables and only
dining room tables
44. 44
Indirect Cost
The cost of a resource that was acquired
to be used by more than one cost object
The cost of a saw used in a furniture
factory to make different products
It is used to make different products such as
dining room tables, china cabinets, and dining
room chairs
45. 45
Direct or Indirect?
A cost classification can vary as the chosen cost
object varies
Consider a factory supervisor’s salary
If the cost object is a product the factory supervisor’s
salary is an indirect cost
If the factory is the cost object, the factory supervisor’s
salary is a direct cost
A cost object can be any unit of analysis including
product, product line, customer, department,
division, geographical area, country, or continent
46. 46
Types Of Production Activities
Traditional cost systems classified activities
into those that varied with volume and
those that did not
This simple dichotomy does not capture the
variety of the types of activities that take
place in organizations
A new classification system, developed
originally for manufacturing operations,
gives a broader framework for classifying
an activity and its associated costs
47. 47
New Classification System
The new classification system places
activities and their associated costs into
one of the following categories:
Unit related
Batch related
Product sustaining
Customer sustaining
Business sustaining
49. 49
Unit-Related Activities
Unit-related activities are those whose volume or
level is proportional to the number of units
produced or to other measures, such as direct
labor hours or machine hours that are
themselves proportional to the number of units
produced
Unit-related activities apply to more than just
production activities
Loading shipments onto a truck is an example of a unit-
related activity because it is proportional to the volume
of shipments
50. 50
Batch-Related Activities
In a production environment, batch-related
activities are triggered by the number of batches
produced rather than by the number of units
manufactured
E.g., Machine setups are required when beginning the
production of a new batch of products
Indirect labor for first-item quality inspections involves
testing a fixed number of units for each batch produced
and is, therefore, associated with the number of batches
Many shipping costs may be batch related if the
organization pays the shipper a charge per container or
truckload
51. 51
Product-Sustaining Activities
Product-sustaining activities support the production and sale
of individual products
These activities provide the infrastructure the enables the
production, distribution, and sale of the product but are not
involved directly in the production of the product
Examples include:
Administrative efforts required to maintain drawings and
labor and machine routings for each part
Product engineering efforts to maintain coherent
specifications such as the bill of materials for individual
products and their component parts and their routing
through different work centers in the plant
Managing and sustaining the product distribution channel
The process engineering required to implement
engineering change orders (ECOs)
52. 52
Customer-Sustaining Activities
Customer-sustaining activities enable the
company to sell to an individual customer
but are independent of the volume and
mix of the products and services sold and
delivered to the customer
Examples of customer-sustaining activities
include:
Sales calls
Technical support provided to individual
customers
53. 53
Business-Sustaining Expenses
Business-sustaining expenses are other resource
supply capabilities that cannot be traced to
individual products and customers:
The cost of a plant manager and administrative staff
Channel-sustaining expenses, such as the cost of trade
shows, advertising, and catalogs
The expenses can be assigned directly to the
individual product lines, facilities, and channels,
but should not be allocated down to individual
products, services, or customers
54. 54
Business-Sustaining Activities
Business-sustaining activities are those required
for the basic functioning of the business
For example, organizations need only one CEO
irrespective of their size, and they need to
perform certain basic functions, such as
registration or reporting, that also are
independent of the size of the organization
These core activities are independent of the size
of the organization, or the volume and mix of
products and customers
55. 55
Using The Cost Hierarchy
The cost hierarchy just discussed is a
model of cost behavior that can be used in
two ways:
To predict costs
To develop the costs for a cost object such as a
product or product line
If we understand the underlying behavior
of costs, we have a basis to predict costs
and to understand how costs will behave
as volume expands and contracts
57. 57
Indirect Costs Allocations
Traditional cost accounting systems
assign indirect costs to products with a
two-stage procedure:
1. Indirect costs are assigned to production
departments
2. Production department costs are
assigned to the products
58. 58
Cost Pools
Cost pools are groups of costs
Three major types of cost pools:
Plant (traditional)
Department (traditional)
Activity center (activity-based costing)
59. 59
Cost Driver Rates
A cost driver is a factor that causes or “drives” an
activity’s costs
All costs associated with a cost driver, such as
setup hours, are accumulated separately
Each subset of total support costs that can be associated
with a distinct cost driver is referred to as a cost pool
Each cost pool has a separate cost driver rate
The cost driver rate is the ratio of the cost of a
support activity accumulated in the cost pool to
the level of the cost driver for the activity
Activity cost driver rate =
Cost of support activity / Level of cost driver
60. 60
Determination Of Cost Driver Rates
Determining realistic cost driver rates has
become increasingly important in recent years
Support costs now comprise a large portion of the total
costs in many industries
Many firms now recognize that several different
factors may be driving support costs rather than
one or even two factors, such as direct labor or
machine hours
Firms are now taking greater care in identifying which
support costs should relate to what cost driver
61. 61
Number of Cost Pools
The number of cost pools can vary
Some German firms use over 1,000
Henkel-Era-Tosno
The general principle is to use separate cost pools
if the cost or productivity of resources is different
and if the pattern of demand varies across
resources
The increase in measurement costs required by a
more detailed cost system must be traded off
against the benefit of increased accuracy in
estimating product costs
If cost and productivity differences between resources
are small, having more cost pools will make little
difference in the accuracy of product cost estimates
62. 62
Effect Of Departmental Structure
Many plants are organized into departments that are
responsible for performing designated activities
Departments that have direct responsibility for converting
raw materials into finished products are called
production departments
Service departments perform activities that support
production, such as:
• Machine setup
• Production engineering
• Production scheduling
– All service department costs are indirect support
activity costs because they do not arise from direct
production activities
• Machine maintenance
63. 63
Two-Stage Cost Allocation(1)
Conventional product costing systems assign
indirect costs to jobs or products in two stages
1. In the first stage:
System identifies indirect costs with various
production and service departments
Service department costs are then allocated
to production departments
2. The system assigns the accumulated indirect
costs for the production departments to
individual jobs or products based on
predetermined departmental cost driver rates
65. 65
Final Word on Two-Stage Allocation
The fundamental assumption of the two-stage allocation
method is the absence of a strong direct link between the
support activities and the products manufactured
For this reason, service department costs are first allocated
to production departments using one of the conventional
two-stage allocation methods previously described
Activity-based costing rejects this assumption and instead
develops the idea of cost drivers that directly link the activities
performed to the products manufactured and measure the
average demand placed on each activity by the various
products
Activity costs are assigned to products in proportion to the
average demand that the products place on the activities,
usually eliminating the need for the second step in Stage 1
allocations
67. 67
Activity-Based Costing
”Today’s management accounting
information, driven by the procedures and
cycles of the organisation’s financial
reporting system, is too late, too
aggregated and too distorted to be
relevant for manager’s planning and
control decisions”
Kaplan & Johnson, Relevance Lost: The Rise and
Fall of Management Accounting, HBS Press
1987
68. 68
Problems With Simple Cost Accounting
Systems: An Example
Product mix
Size
Small Large
Volume
Low P1 P2
High P3 P4
How about our competitive advantage (in terms of cost per
unit)?
69. 69
Traditional v. ABC System
Traditional:
Uses actual departments or
cost centers for
accumulating and
redistributing costs
Asks how much of an
allocation basis (usually
based on volume) is used by
the production department
Service department
expenses are allocated to a
production department
based on the ratio of the
allocation basis used by the
production department
ABC:
Uses activities, for
accumulating costs and
redistributing costs
Asks what activities are
being performed by the
resources of the service
department
Resource expenses are
assigned to activities based
on how much of the
resource is required or
used to perform the
activities
70. 70
Strategic Use of ABC
Managers use activity-based information in 2
ways:
To shift the mix of activities and products away from less
profitable to more profitable operations
To help them become a low-cost producer or seller
Activity Analysis involves 4 steps:
Chart activities used to complete the product or service
Classify activities as value-added or non-value-added
Eliminate non-value-added activities
Continuously improve & reevaluate efficiency of
activities or replace them with more efficient activities
71. 71
Tracing Marketing-Related
Costs to Customers
The costs of marketing, selling, and distribution expenses
have been increasing rapidly in recent years
Result of increased importance of customer satisfaction
and market-oriented strategies
Many of these expenses do not relate to individual products or
product lines but are associated with:
Individual customers
Market segments
Distribution channels
Companies need to understand the cost of selling to and
serving their diverse customer base
72. 72
Alpha – Beta Example (1)
Assume Alpha and Beta are customers generating about equal
revenue and seen as equally valuable customers
Using a conventional cost accounting system, marketing,
selling, distribution, and administrative (MSDA) expenses were
allocated to customers at a rate of 35% of Sales
ALPHA BETA
Sales $320,000 $315,000
CGS 154,000 156,000
Gross Margin $166,000 $159,000
MSDA expenses (@35% of Sales) 112,000 110,250
Operating profit $ 54,000 $ 48,750
Profit percentage 16.9% 15.5%
In many respects, however, the customers were not similar
73. 73
Alpha – Beta Example (2)
Beta’s account manager spent a huge amount of time on
that account
Beta required a great deal of hand-holding and was
continually inquiring whether the company could modify
products to meet its specific needs
Beta’s account required many technical resources, in
addition to marketing resources
Beta also:
Tended to place many small orders for special products
Required expedited delivery
Tended to pay slowly
All of which increased the demands on the order
processing, invoicing, and accounts receivable process
74. 74
Alpha – Beta Example (3)
Alpha, on the other hand:
Ordered only a few products and in large quantities
Placed its orders predictably and with long lead times
Required little sales and technical support
The Accounting Manager in Marketing knew that
Alpha was a much more profitable customer than
the financial statements were currently reporting
He launched an activity-based cost study of the
company’s marketing, selling, distribution, and
administrative costs
75. 75
Alpha – Beta Example (4)
The multifunctional project team:
Studied the resource spending of the various accounts
Identified the activities performed by the resources
Selected activity cost drivers that could link each activity
to individual customers
The Accounting Manager used:
Transactional activity cost drivers
Number of orders, number of mailings
Duration drivers
Estimated time and effort
Intensity drivers when he had readily-available data
Actual freight and travel expenses
76. 76
Alpha – Beta Example (5)
The manager also used a customer cost hierarchy
that was similar to the manufacturing cost
hierarchy
Some activities were order-related
Handle customer orders
Ship to customers
Others were customer-sustaining
Service customers
Travel to customers
Provide marketing and technical support
77. 77
Alpha – Beta Example (6)
The picture of relative profitability of Alpha and Beta shifted
dramatically
Alpha Beta
Gross Margin (as previously) $166,000 $159,000
Marketing & tech. support 7,000 54,000
Travel to customer 1,200 7,200
Distribute sales catalog 100 100
Service customers 4,000 42,000
Handle customer orders 500 18,000
Warehouse inventory 800 8,800
Ship to customers 12,600 42,000
Total activity expenses 26,200 172,100
Operating profit $ 139,800 $ (13,100)
Profit percentage 43.7% (4.2%)
78. 78
Alpha – Beta Example (7)
As the manager suspected, Alpha Company was a
highly profitable customer
Its ordering and support activities placed few demands
on the company’s marketing, selling, distribution, and
administrative resources
Almost all the gross margin earned by selling to Alpha
dropped to the operating margin bottom line
Beta Company was now seen to be the most
unprofitable customer that the company had
While the manager intuitively sensed that Alpha
was a more profitable customer than Beta, he
had no idea of the magnitude of the difference
79. 79
ABC Customer Analysis
The output from an ABC customer analysis is often portrayed
as a whale curve
A plot of cumulative profitability versus the number of
customers
Customers are ranked, on the horizontal axis from most
profitable to least profitable (or most unprofitable)
80. 80
Customer Profitability
Cumulative sales follow the usual 20-80 rule
20% of the customers provide 80% of the sales
A whale curve for cumulative profitability typically reveals:
The most profitable 20% of customers generate between
150% and 300% of total profits
The middle 70% of customers break even
The least profitable 10% of customers lose 50% - 200% of
total profits, leaving the company with its 100% of total
profits
It is not unusual for some of the largest customers to turn out
being the most unprofitable
The largest customers are either the company’s most
profitable or its most unprofitable
They are rarely in the middle
81. 81
Managing Customer Profitability (1)
High-profit customers, such as Alpha, appear in
the left section of the profitability whale curve
These customers should be cherished and
protected
They could be vulnerable to competitive
inroads
The managers of a company serving them
should be prepared to offer discounts,
incentives, and special services to retain the
loyalty of these valuable customers if a
competitor threatens
82. 82
Managing Customer Profitability (2)
The challenging customers, like Beta, appear on
the right tail of the whale curve, dragging the
company’s profitability down with their low
margins and high cost-to-serve
The high cost of serving such customers can be
caused by their:
Unpredictable order pattern
Small order quantities for customized products
Nonstandard logistics and delivery
requirements
Large demands on technical and sales
personnel
83. 83
Managing Customer Profitability (3)
The opportunities for a company to transform its
unprofitable customers into profitable ones is
perhaps the most powerful benefit the company’s
managers can receive from an activity-based
costing system
Managers have a full range of actions for
transforming unprofitable customers into
profitable ones
Process improvements
Activity-based pricing
Managing customer relationships
85. 85
Life-Cycle Costs
Life-cycle costing is a relatively new
perspective that argues that organizations
should consider a product’s costs over its
entire lifetime when deciding whether to
introduce a new product
There are five distinct stages in a typical
product’s life cycle
Not all products will follow this pattern
Some products will fail early and have a
truncated life cycle
86. 86
Product Life Cycle(1)
Product development and planning
The organization incurs significant research and
development costs and product testing costs
Because of the increasing costs of launching products,
organizations are devoting more effort to the product
development and planning phase
The nature and magnitude of these costs should be
identified so that when products are initially proposed,
planners have some idea of the cost that new product
development will inflict on the organization
Shorter life cycles provide less time to recover costs
87. 87
Product Life Cycle(2)
Introduction phase
The organization incurs significant promotional
costs as the new product is introduced to the
marketplace
At this stage the product’s revenue will often
not cover the flexible and capacity-related
costs that it has inflicted on the organization
88. 88
Product Life Cycle(3)
Growth phase
The product’s revenues finally begin to cover
the flexible and capacity-related costs incurred
to produce, market, and distribute the product
There is often little or no price competition
The focus of attention is on developing
systems to deliver the product to the
customer in the most effective way
89. 89
Product Life Cycle(4)
Product maturity phase
Price competition becomes intense and
product margins begin to decline
While the product is still profitable,
profitability is declining relative to the growth
phase
The organization undertakes intense efforts to
reduce costs to remain competitive and
profitable
90. 90
Product Life Cycle(5)
Product decline and abandonment phase
Phase in which the product begins to become
unprofitable
Competitors begin to drop out—the least
efficient first—and the remaining competitors
find themselves competing for a share of a
smaller and declining market
The organization incurs abandonment costs,
which can include selling off equipment no
longer required or restoring an asset (e.g.,
land) prior to abandoning it
91. 91
Product Life Cycle(6)
Product-related costs occur unevenly over the
product’s lifetime
The motivation for considering total life cycle
costs before the product is introduced is to
ensure that the difference between the product’s
revenues and its manufacturing and distribution
costs cover the other costs associated with
developing, supporting, and abandoning the
product
Life-cycle costing is a good example of a costing
system designed for decision making that has
little or no practical relevance in external
reporting
93. 93
Cost-Volume-Profit Analysis
Decision makers often like to combine
information about flexible and capacity-related
costs with revenue information to project profits
for different levels of volume
Conventional cost-volume-profit (CVP) analysis
rests on the following assumptions:
All organization costs are either purely variable or fixed
Units made equal units sold
Revenue per unit does not change as volume changes
94. 94
CVP Model
Cost-volume-profit (CVP) model
summarizes the effects of volume changes
on a firm’s costs, revenues, and profit
Analysis can be extended to determine the
impact on profit of changes in selling prices,
service fees, costs, income tax rates, and the
mix of products and services
Break-even point is the volume of activity
that produces equal revenues and costs
for the firm
No profit or loss at this point
95. 95
The CVP Profit Equation
Profit:
= Revenue - Flexible costs - Capacity-related
costs
= (Units sold x Revenue per unit) - (Units
sold x flexible cost per unit) - Capacity-
related costs
= [Units sold x (Revenue per unit-Flexible
cost per unit)] - Capacity-related costs
= (Units sold x Contribution margin per
unit) - Capacity-related costs
96. 96
Break-even Volume
Using the CVP profit equation, break-even
volume is determined by calculating the
volume where profit = 0
0 = (Units sold x Contribution margin per
unit) - Fixed costs
Units sold to break even =
Fixed costs
÷ Contribution margin per unit
97. 97
Target Profit
CVP analysis can be used to determine the
sales volume required to achieve a
specified target profit
Note that the previous break-even analysis
was used to determine the unit sales required
to achieve a target profit of $0
98. 98
Margin of Safety
Margin of safety - excess of projected
sales units over break-even sales level,
calculated as follows:
Sales Units - Break-Even Sales Units = Margin of Safety
Provides an estimate of the amount
that sales can drop before the firm
incurs a loss
99. 99
Multiple Product
Financial Modeling (1)
When a firm has multiple products, several
alternatives are available to facilitate financial
modeling
Assume all products have the same contribution margin
Assume a weighted-average contribution margin
Treat each product line as a separate entity
Use sales dollars as a measure of volume
100. 100
Multiple Product
Financial Modeling (2)
Assume all products have the same contribution
margin
Can group products so they have equal or near equal
contribution margins
Can be a problem when products have substantially
different contribution margins
Assume a weighted-average contribution margin
To determine break-even units, use the following
formula:
Fixed Costs________
Weighted Average Contribution Margin
101. 101
Multiple Product
Financial Modeling (3)
Treat each product line as a separate
entity
Requires allocating indirect costs to product
lines
To extent allocations are arbitrary, may
lead to inaccurate estimates
Use sales dollars as a measure of volume
Can use weighted average contribution
margin break-even dollar sales calculated
as follows:
Total Contribution Margin
Total Sales
102. 102
CVP Model Assumptions
Costs can be separated into fixed and variable
components
Cost and revenue behavior is linear throughout
the relevant range
Total fixed costs, variable costs per unit, and sales price
per unit remain constant throughout the relevant range
Product mix remains constant
103. 103
Relevant Costs and Revenues
Whether particular costs and revenues are
relevant for decision making depends on the
decision context and the alternatives available
When choosing among different alternatives,
managers should concentrate only on the costs
and revenues that differ across the decision
alternatives
These are the relevant cost/revenues
Opportunity costs by definition are relevant costs for any
decision
The costs that remain the same regardless of the
alternative chosen are not relevant for the decision
104. 104
Sunk Costs are Not Relevant
Sunk costs often cause confusion for
decision makers
Costs of resources that already have been
committed and no current action or decision
can change
Not relevant to the evaluation of alternatives
because they cannot be influenced by any
alternative the manager chooses
105. 105
Replacement Of A Machine(1)
A Company purchased a new drilling machine for
$180,000 on September 1, 2003
They paid $30,000 in cash and financed the remaining
$150,000 with a bank loan
The loan requires a monthly payment of $5,200 for the
next 36 months
On September 27, 2003, a sales representative from
another supplier of drilling machines approached the
company with a newly designed machine that had
only recently been introduced to the market and
offered special financing arrangements
The new supplier agreed to pay $50,000 for the old
machine, which would serve as the down payment
required for the new machine
In addition, the new supplier would require monthly
payments of $6,000 for the next 35 months
106. 106
Replacement Of A Machine(2)
The new design relied on innovative computer
chips, which would reduce the labor required to
operate the machine
The company estimated that direct labor costs would
decrease by $4,400 per month on the average if it
purchased the new machine
In addition it had fewer moving parts than the
current machine
The new machine would decrease maintenance costs by
$800 per month
The new machine has greater reliability
This would allow the company to reduce materials scrap
cost by $1,000 per month
Should the company dispose of the machine it just
purchased on September 1 and buy the new machine?
107. 107
Analysis Of Relevant Costs(1)
If the company buys the new machine, it will still
be responsible for the monthly payments of
$5,200 committed to on September 1
Therefore, the $30,000 that it paid in cash for
the old machine and the $5,200 it is
committed to pay each month for the next 36
months are sunk costs
The company already has committed these
resources, and regardless if it decides to buy
the new machine, it cannot avoid any of these
costs
None of these sunk costs are relevant to the
decision
108. 108
Analysis Of Relevant Costs(2)
What costs are relevant?
The 35 monthly payments of $6,000 and the down
payment of $50,000 are relevant costs, because they
depend on the decision
Labor, materials, and machine maintenance costs will
be affected if the company acquires the new machine
The relevant expected monthly savings are:
$4,400 in labor costs
$1,000 in materials costs
$ 800 in machine maintenance costs
The revenue of $50,000 expected on the trade-in of
the old machine is also relevant, because the old
machine will be disposed of only if the company
decides to acquire the new machine
109. 109
Analysis Of Relevant Costs(3)
In a comparison of the cost increases/cash
outflows to cost savings/cash inflows
The down payment required for the new
machine is matched by the expected trade-in
value of the old machine
The expected savings in labor, materials, and
machine maintenance costs each month
($6,200) are more than the monthly lease
payments for the new machine ($6,000)
Thus, it is apparent that the company will be
better off trading in the old machine and
replacing it with the new machine