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FOUNDATION EXAM - CPA Australia > Management Accounting > Flashcards

Management Accounting Flashcards

1
Q

LO2.0 - What are relevant costs?

A

Costs where future cash flows arise as a direct consequence of a decision made. Based on future costs, cash flows which reflect additional cash spend and incremental costs.

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2
Q

LO2.0 - What are avoidable costs?

A

Costs that would not be incurred if the activity to which they relate did not exist. Costs that would be saved (both variable and specific) ae considered avoidable.

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3
Q

LO2.0 - What are unavoidable costs?

A

Cost that would be incurred whether or not the product is discontinued.

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4
Q

LO2.0 - What is the differential cost?

A

The difference between cost alternatives when compared to the next best option.

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5
Q

LO2.0 - What are opportunity costs?

A

The value of the benefit lost when an alternative course of action is taken.

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6
Q

LO2.0 - What are sunk costs?

A

A past cost with no relevance to the decision making process as the expense is already incurred.

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7
Q

LO2.0 - What are variable costs?

A

Relevant costs constant per unit, but change as volume is increased / decreased.

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8
Q

LO2.5 - What are cash flows?

A

Costs that require additional cash spent. This does not include notional accounting costs such as depreciation and other apportioned costs.

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9
Q

LO1.1 - What are the 3 attributes of management accounting (as proposed by Simons)?

A

Score keeping, attention directing and

problem solving.

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10
Q

LO1.1 - What is management accounting used for?

A

Making decisions, future planning, monitoring performance, measuring profits / valuing inventory, implementation processes and practice for effectiveness and efficiency.

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11
Q

LO1.2 - What are the key aspects Financial Accounting?

A

Accounting for assets and liabilities, providing information on profits and financial performance. Information is used by shareholders and external stakeholders, preparation governed by law, the format determined by law and IFRS. Usually concerns the business as a whole, is monetary in nature. Historical reporting.

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12
Q

LO1.2 - What are the key aspects Management Accounting?

A

Specifically for internal use by Managers, used to aid, record, plan and control DECISION Making processes, no legal requirement and format is at the discretion of users. Can focus on specific parts of the business and incorporate non-Monetary measures. Can include historical, and future data.

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13
Q

LO1.2 - What are the key aspects Cost Accounting?

A

Provides source data used in Management accounting, used in preparing cost estimates, describes the process of data collection, used for measurement of inventory cost (inc. materials / WIP / finished product) and provides measurement and control.

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14
Q

LO1.2 - What is Cost Accounting used to measure?

A

Costs accounting is associated with individual departments or business units. Revenue earned, profitability, determining selling prices, future costs and budgetary control

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15
Q

LO1.2 - What are the key differences between Financial, Management and, Cost Accounting?

A

FINANCIAL - is historical reporting, monetary in nature, governed by law and IFRS, reporting on the business as a whole. MANAGEMENT - is historical and future reporting, can include historical and future reporting, reporting governed by used requirements, can be focused. COST - provides source data for decision making, incorporates data collection elements, includes estimates, measurement and control.

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16
Q

LO1.7 - What can the Management Accountant contribute in a cross functional team?

A

Provides / maximizes financial and technical aspects, coordinates and integrates systems, increased problem solving across multiple areas, and facilitates innovation and development.

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17
Q

LO1.7 - What can the Management Accountant maximize in a cross functional team?

A

FINANCIAL SKILL SET - Providing, collecting and assessing critical information. Helping to establish goals and priorities, assist problem solving and decision making. A financial contribution to the organizational perspective.

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18
Q

LO1.7 - What is a Cross Functional Team?

A

A small group of individuals with different expertise.

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19
Q

LO1.7 - What are the KPIs of a Management Accountant?

A

QUALITY OF INFORMATION - relevant, accurate, timely and clear. VALUE FOR MONEY - cost justified by level of service. AVAILABILITY - incorporating other functions and speed of response / delivery. MEASURE OF SERVICE - timeliness of response, contribution to overall goals of organization, involvement with the decision making process. FLEXIBILITY - the ability to provide ‘ad hoc’ reporting on demand in a timely fashion. USER SATISFACTION

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20
Q

LO4.1 - What are future costs?

A

Future costs include cash flow costs and committed costs.

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21
Q

LO4.1 - What is a committed cost?

A

A cost incurred, regardless of future decisions.

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22
Q

LO4.1 - What are incremental costs?

A

Costs incurred due to decision or alternative course of action.

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23
Q

LO1.5 - What is the hierarchy of Anthony’s management accounting theory?

A

Strategic planning -> management control -> operational control.

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24
Q

LO1.5 - What is strategic planning?

A

The process of deciding on objectives of an organisation, on changes of these objectives, resources required, policies, use and disposal of resources.

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25
Q

LO1.5 - What is management control?

A

The process of assurance that resources are obtained, and used effectively and efficiently to achieve strategic objectives. Also known as tactical planning.

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26
Q

LO1.5 - What is operational control?

A

The process of assuring specific tasks are carried out effectively and efficiently. The front line to achieving management objectives and results.

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27
Q

LO1.5 - How does a management accountant underpin management practice?

A

Provides information primarily for strategic plan and management control. Sometimes can be employed for operational control aspects.

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28
Q

LO1.5 - What does a management control system do?

A

Measures and corrects the performance and activities of subordinates.

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29
Q

LO1.5 - What are the basic elements (hierarchy) of a management control system?

A

PLANNING: what to do / desired result, RECORDING: standards of efficiencies and targets, IMPLEMENTATION: carrying out the plan / measuring results, COMPARING: actual results against plan, EVALUATION: comparison of results with objectives, CORRECTIVE ACTION. (Can include financial and non-financial information)

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30
Q

LO1.5 - What can be described as ‘strategic information’?

A

High level, summary information used by senior management, from internal and external sources, relevant to long term strategic planning. Often prepared ad hoc from both qualitative and quantitative data sources….cannot provide certainty.

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31
Q

LO1.5 - What can be described as ‘tactical information’?

A

Summarised, information used by middle management to decide how resources are being employed. Information can include productivity measures, budget control, variance analysis and cash flow forecasts. Usually internally created, information relates to short term objectives, analyses activities and departments, prepared routinely, based on qualitative measures to allow monitoring against goals. Aligned with management control.

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32
Q

LO1.5 - What can be described as ‘operational information’?

A

Highly detailed information to ensure specific tasks are planned and carried out (eg. payroll reports). Specifically short term in nature, they relate to the immediate term. Task specific and incorporate quantitative information.

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33
Q

LO2.1 - Define ‘decision making’ as it pertains to management accounting?

A

A choice between alternative courses of action.

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34
Q

LO2.1 - What are the steps involved with the decision making process?

A
  1. Define the problem; 2. Identify decision making criteria; 3. Develop alternative solutions / opportunities; 4. Collect and analyse relevant data about each; 5. Select alternatives, state expected outcomes, check that they align with goals and objectives; 6. implement and review.
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35
Q

LO1.9 - Why is planning for an organisation important?

A

Establishes overall objectives, assists with selecting appropriate strategies to achieve objectives, sets targets for each strategy, and formulates detailed plans for achieving targets.

36
Q

LO1.9 - What is organisational ‘vision’?

A

A succinct statement of an organisations future aspirations.

37
Q

LO1.9 - What is a mission statement?

A

A statement that sets out an organisations fundamental purpose.

38
Q

LO1.9 - What is organisational ‘objective’?

A

An aim or goal of an organisation based on strategy.

39
Q

LO1.9 - What is organisational strategy?

A

A possible course of action that might enable an organisation to achieve its objectives.

40
Q

LO1.9 - What is long-term strategic planning?

A

Corporate planning involving the selection and integration of appropriate strategies to attain organisational objectives.

41
Q

LO1.9 - What are the 4 basic elements of long-term strategic planning?

A

ASSESS, the organisation and its environment; DETERMINE, corporate objectives; devise STRATIGIES for achieving objectives; CREATE the corporate plan.

42
Q

LO1.9 - What is short term tactical planning?

A

Converting the long-term strategic plan into a number of short term plans. Usually covering one year, they can relate to internal business units, functions or departments.

43
Q

LO1.9 - How does the management accounting function support the short-term planning process?

A

By providing information for setting targets, standards and efficiencies; helping establish assumptions on which planning is based such as growth, costs and savings.

44
Q

LO1.9 - How can the management accounting function provide control within the short-term planning process?

A

By providing comparisons of planned performance with actual performance; that the strategic plan is reviewed in light of the comparisons made to asses whether objectives can be achieved; design of a management reporting structure for reporting information.

45
Q

LO1.0 - Non financial information can relate to matters such as….(examples)?

A

Quality, speed, flexibility, creativity, motivation, customer satisfaction, competitive advantage.

46
Q

LO1.1 - What is marginal costing?

A

The change in total cost that arises when the quantity produced has an increment by unit. Formula is change in costs / change in quantity. Eg. if the charge per unit is greater that the marginal cost of producing one more unit, then that unit should be produced.

47
Q

LO1.1 - What are some historical attributes of management accounting?

A

Recording costs, planning budgets, standard costing and variation reporting. Primarily in manufacturing industries.

48
Q

LO1.1 - What changes have occurred in the role performed by management accountants?

A

Included developments in application based costing such as separation of fixed and variable costing, marginal costing (activity based costing), discounted cash flow. Moves into service related industries, marketing and distribution.

49
Q

LO1.1 - What is included in the current role of a management accountant?

A

Expanded role of providing management control information and statistical planning. Now includes financial and non-financial data and measures. Implementing changes in manufacturing techniques such as Total Quality Management and Just in Time production. Incorporation of changes in technology to maintain increased demands.

50
Q

LO1.6 - What are the tangible components of a Management Control System (MAS)?

A

PEOPLE, particularly with accounting knowledge; TECHNOLOGY; RECORDS, of financial transactions; the COST ACCOUNTING SYSTEM on which it is based: MATHMATICAL TECHNIQUES, or management accounting techniques; REPORTS produced; and the USERS of the information.

51
Q

LO1.6 - What are the potential risks of a Management Control System (MAS)?

A

Excessive emphasis on financial measures, internal orientation (must include external data sources / influences), lack of goal congruence (across the whole organization), lack of future perspective, failure to adapt.

52
Q

LO2.2 - How is the basic relevant cost of labour determined from outside of the organisation?

A

Labour will be the total variable costs incurred.

53
Q

LO2.2 - How is the internal relevant cost of labour determined when their is expected spare capacity?

A

Variable cost incurred minus spare capacity - it is assumed that any spare capacity will be paid and can be utilized on another project.

54
Q

LO2.2 - How are the relevant cost of materials determined?

A

If additional materials are required, relevant cost is their current replacement cost - unless materials will not be replaced once used - then it is the higher of a) current resale value, or b)the value they would obtain put to an alternative use.

55
Q

LO2.2 - How is the internal relevant cost of labour determined if labour is in short supply?

A

Direct labour costs + contribution lost by non production. Eg. direct labour costs + (contribution per unit / labour to produce unit).

56
Q

LO2.2 - What is the relevant cost of an asset?

A

The relevant cost of an asset represents the amount of money that a company would have to receive if they were deprived of an asset - also called deprival value.

57
Q

LO2.2 - How is deprival value determined?

A

the LOWER of Replacement cost or; the HIGER of NRV or REVENUES EXPECTED.

58
Q

LO1.6 - What is management accounting ‘data’?

A

Raw material relating to facts, events and transactions.

59
Q

LO1.6 - What is management accounting ‘information’?

A

Processed data so as to be meaningful.

60
Q

LO1.6 - What are qualities of ‘good information’?

A

RELEVENT to its purpose; COMPLETE; RELIABLE and SUFFCIENTLY ACCURATE, CLEAR, CONFIDENT, that the information can be trusted with clearly defined assumptions; COMMUNICATED clear and precise; TIMELY, COST efficient, information must have value, and COMPARABLE.

61
Q

LO1.6 - Why is information important?

A

It provides awareness to make better financial and non-financial decisions.

62
Q

LO1.6 - What is the most important factor of MAS design?

A

That the output meets the needs of management fore executive decision making processes.

63
Q

LO1.6 - What factors should be considered in design of MAS’s (in hierarchical order)?

A

Information required and timing of delivery (most important); source of input data (capable of gathering the data needed); processes involved (including processing of data and report delivery); response required (how managers should respond - ultimately in decisions being made).

64
Q

LO1.6 - In line with Anthony’s hierarchy, what are the different information types of MAS’s?

A

Strategic, management (tactical), and operational information?

65
Q

LO1.4 - What is the definition of the Just In Time (JIT) management concept?

A

A commitment to continuous improvement and excellence. “Get things right first time.”

66
Q

LO1.4 - How does the JIT concept influence management accounting?

A

JIT responds to production / procurement as they are required. Driven by demand it identifies / eliminates excessive inventory, cost of machinery setup and long lead times.

67
Q

LO1.4 - What is the definition of Total Quality Management (TQM)?

A

A culture of continuous operational improvement with a philosophy of zero defects.

68
Q

LO1.4 - What are attributes of the TQM philosophy?

A

“The only thing that matters is the customer.” (internal/external). Substandard is unacceptable; no predefined or acceptable levels of quality. A system of constant review, quality assurance and feedback.

69
Q

LO1.4 - What are the associated costs with development of a TQM system?

A

Conformance cost - establishment, prevention and appraisal. Non-conformance costs - internal // external failures, faulty goods, customer claims.

70
Q

LO1.4 - What is definition of Kaizen?

A

The Japanese term for continuous self improvement.

71
Q

LO1.4 - What are the attributes of the Kaizen technique?

A

A feature of TQM, it focuses on small scale change during the production phase, focusing on the key elements of production, purchasing and distribution. To achieve cost reduction through continuous improvement often achieved through economic efficiencies (particularly through suppliers).

72
Q

LO1.4 - What is Lean Management Accounting?

A

Is the elimination of waste and continuous improvement; incorporating JIT (customer demand) and TQM (processes and value streams), this system provides information to drive improvement and eliminate waste.

73
Q

LO1.4 - What is life cycle costing?

A

A view that costs and profitability should be planed and monitored over the entire life cycle of a product. Particularly relevant to costs in early design stage or innovative organizations constantly redesigning / developing.

74
Q

LO1.4 - What are the advantages of life cycle costing?

A

Focuses on development and design costs, and end costs such as marketing, time to market, design and development problems. Also considers potential underspend in the design and development stage.

75
Q

LO1.4 - What are the disadvantages of life cycle costing?

A

Costing relies on estimations / assumptions of product life costs, and external data sources (eg. how much will a customer be prepared to pay).

76
Q

LO1.4 - What is Target costing?

A

A different approach to the relationship between cost, price and profit, where a concept is developed, the price that customers would be prepared to pay is determined, the desired profit margin is deducted; the balance is the target cost of production.

77
Q

LO1.4 - What are the advantages of Target Costing?

A

This approach incorporates external data and market information, and encourages continual product and production improvements.

78
Q

LO1.4 - What are the disadvantages of Target Costing?

A

It is difficult to set target cost as selling price is hard to determine. Relies heavily on assumptions of competitor behavior, technology and customer preferences.

79
Q

LO1.9- Define organizational behavior?

A

The impact that individuals, groups and the organizational structure have on the behavior and ability to create value?

80
Q

LO1.9 - What are the three key components of organizational behavior?

A

PEOPLE (exploit the potential of employees assuring their goals align with company goals), STRUCTURE and TECHNOLOGY and CONTROLS (systems of planning and control that effect motivation and achievement results).

81
Q

LO1.3 - Within the scope of the MA role, how can the MA create and improve organizational behavior value?

A

Recruit and retain the best talent; get the best results from employees; maintain a culture that supports, promotes and rewards the drivers of success; embrace and share knowledge; develop, implement and maintain this management system.

82
Q

LO1.10 - What is sustainability?

A

Ensuring that the needs of the present are meet without compromising the ability of the future.

83
Q

LO1.10 - What is sustainability with the organizational context?

A

Development of strategies so resources are only used at a rate that allows them to be replenished, and waste is confined to a level that does not exceed capacity. The objectives of which are to identify risks effecting sustainability and developing strategy to protect against risk.

84
Q

LO1.10 - What is sustainability accounting?

A

A new approach of accounting / reporting incorporating tools and organizational decisions consistent with economic, environmental and social sustainability.

85
Q

LO1.10 - What are the guidelines of the Global Reporting Initiative (GRI)?

A

Triple bottom line reporting that includes ECONOMIC (impacts on an organizations local, national, and global economic conditions); ENVIRONMENTAL (an organizations impact on living / non-living natural systems); SOCIAL (an organizations impact on the social systems within which it operates).

86
Q

What are possible limiting factors for an organization?

A

SALES (a limit to demand; LABOUR (in terms of skills shortage or available staff); MATERIALS (a shortage of materials to satisfy demand); CAPACITY (based in current infrastructure and ability to satisfy demand).

FOUNDATION EXAM - CPA Australia (1 decks)

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