Management accounting focus on providing information to internal users, management,
to assist planning, control and enhancement of the business.
Analysis for decision making
Accounting and management cycle:
1. What are the goals?
2. Performance evaluation, control
Management accounting reports:
No specified format as in financial.
Four w’s of successful report presentation:
Why: why is report headed? Purpose?
Who: who will use report?
What: what information is relevant? Detail?
When: when needed? Timely info? Deadlines?
Cost accounting is a key element of management reporting.
Flow of product Cost:
Cost of goods sold
Cost assignment methods:
Job order costing
Activity based costing
Alternatives for cost allocation
Cost traceability: direct, indirect
Cost behavior: fixed, variable costs
Cost and operations: value added and non value added
Cost and reporting: product and periodical costs
Strategic cost management
Cost behavior is a function of strategic choices. Cost is not primarily a function of output volume.
Three underlying themes:
Value chain analysis
Cost driver analysis
Strategic positioning analysis
Master budget is a set of interrelated budgets that constitutes a plan of action for a specific time period.
Direct material budget
Direct labor budget
Factory overhead budget
Budgeted income statement
Budgeted balance sheet
Capital expenditure budget
Purchase of long lived assets
Approaches to budgeting
Budgets help answer the following:
Where we are going?
Where are we now?
Where have we been?
Single period budget
Defines goals and objectives
Promotes analysis and focus on future
Provide a basis for evaluating performance against base or expected results
Facilitates coordination of business activities
Provides early warning system
New management philosophies in managerial accounting:
Just in time JIT
Total quality management TQM
Activity based management ABM using activity based costing ABC models
GOAL –continuous improvement