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Management Accounting I > L1- Introduction To MA > Flashcards

L1- Introduction To MA Flashcards

1
Q

Define Financial Accounting

A

To give an account of the financial performance on a given date, which would allow investors to make decisions about resource allocation between different companies

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2
Q

Define Management Accounting

A

To give an account of the financial performance which would allow the managers in the company to make decisions about resource allocations between different products/projects/plans

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3
Q

Who is the targeted user of MA

A

Internal users—- Managers

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4
Q

Targeted users of Financial Accounting

A

External users— stockholders and creditors

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5
Q

What restrictions placed on MA

A

No mandatory rules for preparing reports

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6
Q

What restrictions placed on FA

A

Must follow GAAP when preparing financial statements

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7
Q

Types of info in MA

A

Financial and Non Financial info

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8
Q

Types of info in FA

A

Financial info

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9
Q

Time orientation in MA

A

Emphasises the future planning and decision making

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10
Q

Time orientation in FA

A

Historical orientation (reports what has already occurres)

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11
Q

Aggregation of MA

A

Detailed info about product line, departments, etc

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12
Q

Aggregation of FA

A

Info about overall firm performance

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13
Q

What are the 3 key functions of MA

A

–Planning
–Decision Making
–Controlling

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14
Q

Define Planning

A

Establishing goals (long, medium and short-term) and specifying how to achieve them

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15
Q

Example of Planning

A

iPhone 14 Pro launched in 2022 will generate what level of sales/profits in next 1 year, 3 years, 5 years?

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16
Q

Define Decision-Making

A

selecting a course of action from competing alternatives.

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17
Q

Example of Decision-Making

A

To maintain the sales of iPhone 13 after the launch of iPhone 14 Pro, should Apple reduce the price or spend
more on marketing to maintain sales?

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18
Q

Define Controlling

A

Gathering feedback to ensure that the plan is being properly executed or modified as circumstances change

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19
Q

Example of Controlling

A

Lower than planned sales… How to correct the situation? Should we focus on increasing sales of entire
portfolio or change product mix to focus towards high value-added models alone to achieve planned profit
targets?

20
Q

True or False. MA is closely linked to business strategy

A

True

21
Q

Which questions does business strategy answer?

A

–Which product market should we be catering to?
–How should we compete with other players in the same segment?
–How Technology, Scale/Size and Efficiency all have an impact on the strategic capability of an organization

22
Q

Which product market should we be catering to?

A

–Should Sony drop the movie business? What will be the financial implications
–Or invest in Men in Black: International, Spider-Man: Far From Home, Angry Birds 2, the Jumanji sequel and Bad Boys for Life? What are the potential costs and revenues?

23
Q

How should we compete with other players in the same segment?

A
  • By being more cost efficient : Dropping Opex of Mobile Phones Division by 50% through closure of Beijing Factory and Some
    Markets like Middle East and South America. How much will we save?
  • By being more innovative by coming up with new flagship products like the famous Xperia Z. What will be the research and
    development costs? Potential revenues?
24
Q

How Technology, Scale/Size and Efficiency all have an impact on the strategic capability of an organization.

A

–The financial implications of all the above.
–Home Entertainment & Sound segment sales has stagnated with slight increase in profitability so “a strategic decision
involves not to pursue scale in order to focus on profitability

25
Q

Define Cost

A

Consumption of economic resources

26
Q

What is calculating costs important for

A
  • Calculating profits
  • Pricing
  • Inventory valuation
  • Performance evaluation
  • Cost management
27
Q

Two types of costs

A

Manufacturing and Non-Manufacturing costs

28
Q

2 types of Manufacturing Costs

A

Indirect and Direct

29
Q

Examples of Direct Costs

A

–Direct materials
–Direct Labour

30
Q

Example of indirect costs

A

Manufacturing Support

31
Q

Examples of Non-manufacturing costs

A

–Distribution
–Selling
–Marketing
–R&D

32
Q

4 types of cost classification

A

–Functional Classification
–Traceability
–Behavioural Classification
–Period vs Product costs

33
Q

What is functional classification

A

Material, labour and overhead

34
Q

What is traceability

A

Direct vs Indirect Costs

35
Q

What is behavioural classification

A

fixed vs Variable costs

36
Q

Define Manufacturing Overhead

A

Manufacturing costs that cannot be traced directly to specific units produced.

37
Q

Example of manufacturing overhead

A

Indirect labour and indirect materials

38
Q

Define indirect labour

A

Wages paid to employees
who are not directly
involved in production
work.

39
Q

Examples of indirect labour

A

Maintenance
workers, cleaners and
security guards.

40
Q

Define indirect materials

A

Materials used to support
the production process.

41
Q

Examples of indirect materials

A

lubricants and
cleaning supplies used in the
car assembly plant.

42
Q

How can cost be fixed and direct

A

production managers salary (fixed)…(if cost object is the production function (direct)

43
Q

How can cost be fixed and indirect

A

rent of the factory building (fixed)…. multiple types of products are manufactured in the building and
cost object is the individual class of products (indirect)

44
Q

How can cost be variable and direct

A

Cost of steering wheels installed on
Honda Accords (variable)….the cost object is Honda Accord (direct)

45
Q

How can cost be variable and indirect

A

electricity bill of a car factory that
manufactures various models (variable)… cost object is individual models
produced and we cannot directly trace how much power is being used to
manufacture individual models (indirect)

Management Accounting I (8 decks)

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