Chapter 1: Rationales for costing Flashcards
What is the focus of cost accounting?
Cost
What is the focus of management accounting?
Anything required by management
What data is used in cost accounting?
Quantitative
What data is used in management accounting?
Quantitative and Qualitative
What is the time frame of cost accounting?
Short to medium term
What is the time frame of management accounting?
Includes longer term
What is the role of financial accounting?
Produce statutory accounts
What is the role of management accounting?
Provide information for management
What are some reasons for an organisation to know the cost of producing its product or providing its service?
Inventory Valuation - product produce internally needs to be valued at production cost
Profit Calculation
Pricing
Decision Making
What does the cost transformation model suggest?
focus on cost minimisation across an organisation through a change in culture and a focus on what drives costs will result in better cost competitiveness for an organisation. The cost competitiveness could help the organisation beat rivals in the market and gain a larger market share.
What are the three ways costs can be classified?
Behaviour
Element
Nature
What is the behaviour cost classification?
Fixed
Variable
Stepped
Semi-Variable
What is the element cost classification?
Materials
Labour
Overheads
What is the nature cost classification?
Direct
Indirect
What method do you use to break a semi-variable cost into two components?
High-low method
What are the three main purposes of management accounting?
Planning
Control
Decision Making
What are the three levels of decision making?
Strategic
Tactical
Operational
What decisions do the strategic level make?
Large impact on the whole organisation
Long term
Tend to be unstructured
What decisions do the tactical level make?
Medium impact on the whole organisation
Medium-term
Act as a bridge between strategic and operation levels
What decisions do the operational level make?
Normally only affect one business unit or department
Short-term
Tend to be highly structured
