Management Accounting & Costing (Theory) - CH 25/26

Management Accounting

• Looks to the future

• Records past events

• Is governed by the Companies Act

• Is concerned with internal future planning, oranising, controlling and decision making of a company.

• The reports are prepared at regular short intervals

Financial Accounting

• Looks to the future

• Records past events

• Are prepared for the business as a whole

• Prepares financial statements annually

• The reports are prepared at regular short intervals

What are the 4 activities involved in management accounting?

• Planning, Controlling, Organising, Decision Making

• Planning, Organising, Decision Making, Controlling

• Planning, Organising, Controlling, Decision Making

• Organising, Planning, Controlling, Decision Making

What are the roles of the cost and management accountant?

• To establish the cost of running each department.

• To compare budgeted costs with actual costs.

• To prepare budgets – production, departmental, and master budgets.

• Deciding on what the future cost of running each department will be.

• To establish the cost of producing a product.

What are the advantages of management accounting information?

• Budgeted costs can be compared with actual costs so that costs can be controlled.

• Budgeting helps in the planning, and decision-making of a company.

• Budgeting helps assess past events within the company.

• The actual cost per unit can be used to fix the selling price.

Fixed Costs

• are not directly linked to a particular product or service

• are directly linked to a particular product or service.

• remain the same regardless of output levels

• are costs that vary with the level of production.

Direct Costs

• are not directly linked to a particular product or service

• are directly linked to a particular product or service.

• remain the same regardless of output levels

• are costs that vary with the level of production.

Indirect Costs

• are not directly linked to a particular product or service

• are directly linked to a particular product or service.

• remain the same regardless of output levels

• are costs that vary with the level of production.

Variable Costs

• are not directly linked to a particular product or service

• are directly linked to a particular product or service.

• remain the same regardless of output levels

• are costs that vary with the level of production.

Step Variable Costs

• ESB Bill, Telephone

• Rent

• Raw materials