Lesson 1 - flashcards

Question 1

Describe the focus of management accounting.

Answer 1

Management accounting focuses on providing important information to managers within an organization to help them plan, organize, control, and make effective decisions.

Question 2

How does management accounting differ from financial accounting?

Answer 2

Management accounting is aimed at providing information to internal managers, while financial accounting provides information to external parties such as shareholders, creditors, and regulators.

Question 3

List the key tasks performed by managers in an organization.

Answer 3

The key tasks performed by managers include planning, organizing resources, directing personnel, and controlling operations.

Question 4

Define the planning process in management.

Answer 4

The planning process involves identifying alternatives, evaluating those alternatives, and selecting the best option to achieve the organization’s goals.

Question 5

What role does historical data play in management planning?

Answer 5

Historical data, such as sales figures, profit margins, and costs, is used by managers to make informed plans and estimate potential revenues and costs.

Question 6

Explain the importance of budgets in management accounting.

Answer 6

Budgets are critical as they ensure that every aspect of the plan is supported with the necessary funding, allowing for effective resource allocation.

Question 7

How do managers use management accounting to direct and motivate employees?

Answer 7

Managers use management accounting to set clear performance goals, evaluate employee performance, identify efficiency improvements, and make informed decisions.

Question 8

What are the steps involved in the planning process?

Answer 8

The steps in the planning process include identifying alternatives, evaluating alternatives, and selecting the best option.

Question 9

Describe the role of directing in management.

Answer 9

Directing involves guiding and motivating employees to implement plans and carry out daily tasks effectively.

Question 10

How does management accounting assist in controlling operations?

Answer 10

Management accounting provides information that helps managers check if operations are going as planned and make necessary adjustments.

Question 11

Describe the role of controlling in management.

Answer 11

Controlling ensures that plans are being followed and allows for adaptations if needed, using feedback to maintain effective operations.

Question 12

How do detailed reports contribute to management control?

Answer 12

Detailed reports show whether operations are on track, providing essential information for managers to assess performance.

Question 13

Explain the purpose of performance reports in management.

Answer 13

Performance reports compare planned outcomes with actual results, helping managers identify issues and take corrective actions when necessary.

Question 14

Define the Planning and Control Cycle in management.

Answer 14

The Planning and Control Cycle is a continuous process that integrates planning, directing, motivating, and controlling to achieve organizational goals.

Question 15

What factors influence decision-making in management?

Answer 15

Decision-making is influenced by choices regarding what to sell, who to serve, and how to operate, ensuring effective strategy implementation.

Question 16

Describe the emphasis of management accounting compared to financial accounting.

Answer 16

Management accounting emphasizes future-oriented data for planning, whereas financial accounting summarizes past financial transactions.

Question 17

What is the significance of flexibility in management accounting?

Answer 17

Management accounting systems are flexible and tailored to internal needs, allowing for relevant and timely information.

Question 18

How does precision differ between management and financial accounting?

Answer 18

Management accounting prioritizes timeliness and can use approximate data, while financial accounting requires precise monetary data for accurate reporting.

Question 19

What focus areas are highlighted in management accounting?

Answer 19

Management accounting provides detailed reports on specific segments of the business, offering insights into particular areas of performance.

Question 20

Summarize the overall view provided by financial accounting.

Answer 20

Financial accounting gives an overall view of the company’s financial status, summarizing its past financial transactions.

Question 21

Describe the concept of decentralization in organizations.

Answer 21

Decentralization refers to the delegation of decision-making authority to managers at various levels within an organization, allowing them to make decisions related to their specific areas of responsibility.

Question 22

How does an organizational chart function in a company?

Answer 22

An organizational chart visually represents how responsibilities are divided among managers and illustrates the reporting structure within the organization.

Question 23

Define line positions and staff positions in an organizational context.

Answer 23

Line positions are directly involved in achieving the organization’s main objectives, while staff positions support line positions indirectly by providing advice or services.

Question 24

Explain the evolution of management accounting since the 19th century.

Answer 24

Management accounting has evolved from focusing on managing large-scale production to meeting financial accounting requirements, and now it emphasizes dynamic practices due to globalization and technological advancements.

Question 25

What impact has globalization had on companies’ operational strategies?

Answer 25

Globalization has pushed companies to lower prices, improve quality, and offer more choices, as well as adopt new methods like lean production and total quality management to enhance efficiency and reduce costs.

Question 26

How have Enterprise Resource Planning (ERP) systems changed management accounting?

Answer 26

ERP systems have revolutionized how businesses collect and share management information by integrating data across departments, making management accounting more effective.

Question 27

Describe the role of environmental management accounting.

Answer 27

Environmental management accounting involves tracking energy, water, and material usage, as well as analyzing costs to make environmentally responsible decisions.

Question 28

What are the key classifications of costs in management accounting?

Answer 28

Costs can be classified based on behavior (variable, fixed, semi-variable), traceability (direct vs. indirect), relevance (relevant vs. irrelevant), and timeframe.

Question 29

How do costs influence pricing and profitability in a business?

Answer 29

Understanding costs is crucial for pricing strategies, profitability analysis, and informed decision-making within a business.

Question 30

Describe the components of manufacturing costs.

Answer 30

Manufacturing costs include Direct Materials (raw materials that become part of the final product), Direct Labor (wages of workers who directly work on the product), and Manufacturing Overhead (indirect costs like factory maintenance, utilities, and equipment depreciation).

Question 31

Define non-manufacturing costs.

Answer 31

Non-manufacturing costs include Marketing or Selling Costs (expenses to promote and sell products) and Administrative Costs (general costs for managing the business).

Question 32

How do product costs differ from period costs?

Answer 32

Product costs are incurred during production and recorded as inventory until the product is sold, while period costs are non-production costs recorded as expenses during the period they occur.

Question 33

Explain the importance of understanding cost behavior.

Answer 33

Understanding how costs change with activity levels helps managers predict expenses and make informed decisions.

Question 34

What are the three types of costs based on behavior?

Answer 34

The three types of costs based on behavior are Variable Costs (change with production levels), Fixed Costs (remain constant regardless of activity levels), and Semi-Variable Costs (have both fixed and variable components).

Question 35

Define opportunity cost.

Answer 35

Opportunity cost is the benefit lost when choosing one option over another.

Question 36

What is a sunk cost?

Answer 36

A sunk cost refers to past expenses that cannot be recovered.

Question 37

Describe differential cost.

Answer 37

Differential cost is the difference in cost between two alternatives.

Question 38

What is marginal cost?

Answer 38

Marginal cost is the cost of producing one additional unit.

Question 39

How do variable costs behave with production levels?

Answer 39

Variable costs change with production levels, increasing or decreasing as production volume changes.

Question 40

Explain the concept of fixed costs.

Answer 40

Fixed costs remain constant regardless of activity levels, meaning they do not change with the volume of production.

Question 41

What is the role of manufacturing overhead in production costs?

Answer 41

Manufacturing overhead includes indirect costs such as factory maintenance, utilities, and equipment depreciation that are necessary for production but cannot be directly traced to a specific product.