Module 1: Management Accounting

Question 1

Why Do We Need Management Accounting?

Answer 1

 Acceptance / decline of nonrecurring special orders
 Calculation / pricing
 Setting minimum level of prices
 Insourcing / outsourcing
 Level of stockkeeping
 Product mix and product mix policy
 Expansion / reduction of client base
 Replacement investments

Question 2

Management Accounting : Purpose of information

Answer 2

Help managers make decisions to fulfill an organization’s goal

Question 3

Financial Accounting: Purpose of information

Answer 3

Communicate an organization’s financial position to investors, banks, regulators, and other outside parties

Question 4

Management Accounting: Primary users

Answer 4

Managers of the organization

Question 5

Financial Accounting: Primary users

Answer 5

External users such as investors, banks, regulators, and suppliers

Question 6

Management Accounting: Focus and emphasis

Answer 6

Future-oriented (budget for 2021 prepared in 2020)

Question 7

Financial Accounting: Focus and emphasis

Answer 7

Past-oriented (reports on 2020, performance prepared in 2021)

Question 8

Management Accounting: Rules of measurement and reporting

Answer 8

Internal measures and reports do not have to follow IFRS/GAAP but are based on cost-benefit analysis

Question 9

Financial Accounting: Rules of measurement and reporting

Answer 9

Financial statements must be prepared in accordance with IFRS/GAAP and be certified by external, independent auditors

Question 10

Management Accounting: time span and
type of reports

Answer 10

Varies from hourly information to 15 to 20 years, with financial and nonfinancial reports on products, departments, territories, and strategies

Question 11

Financial Accounting: time span and
type of reports

Answer 11

Annual and quarterly financial reports, primarily on the company as a whole

Question 12

Management Accounting: Behavioral implications

Answer 12

Designed to influence the behavior of
managers and other employees

Question 13

Financial Accounting: Behaviral implications

Answer 13

Primarily reports economic events but also influences behavior because manager‘s compensation is often based on reported financial results

Question 14

Strategic Decisions and Management Accounting – Key Success Factors (management accounting)

Answer 14

• Cost and Efficiency
  -Quality
  -Time
• Innovation
  -Sustainability
  –> page 7

Question 15

How Does the Management Accounting Process Work? (PDCA)

Answer 15

Plan, do, check, act

P: Define & Analyze Problem and identify Root Cause

D: Devise Solution, Develop Detailed Action Plan, Implement Plan

C: Confirm Outcomes against Plan, Identify Deviations / Issues

A: Standardize Solution, Review & Define Next Issues

Question 16

Decision Planning

Answer 16

 Choosing goals
 Predicting results under various ways of achieving those goals
 Deciding how to attain the desired goals

Question 17

Decision Control

Answer 17

 Action that implements the planning decision
 Performance evaluation of the personnel and operations

Question 18

Key Management Accounting Guidelines

Answer 18

1. Cost-benefit approach
2. Full recognition to behavioral as well as technical considerations
3. Use different costs for different purposes

Question 19

Cost-benefit approach

Answer 19

A cost-benefit approach should be used in order to spend resources if they promote decision making that better attains organization goals in relation to the costs of those resources

Question 20

Full recognition to behavioral as well as technical considerations

Answer 20

A management accounting system should have two simultaneous missions for providing information:

 To help managers make wise economic decisions

 To help managers and other employees to aim and strive for goals of the organization

Question 21

Use different costs for different purpose

Answer 21

A cost concept used for the external reporting purpose need not be the appropriate concept for the purpose of internal routine reporting to managers

Question 22

Incorporation of Management Accounting into the Organizational Structure

Answer 22

 Line management is directly responsible for attaining the objectives of the organization

 Staff management exists to provide advice and assistance to line management

 The Chief Financial Officer (CFO) is overseeing the financial operations of an organization

 The controller, also called the chief accounting officer (CAO), is the financial executive primarily responsible for both management accounting and financial accounting

Question 23

Organizational Structure and the Management Accountant

Answer 23

page 15

Question 24

Management Accounting and Ethical Principles

Answer 24

• Competence
  -Confidentiality
• Integrity
  -Credibility
• Resolution of Ethical Conflict

Question 25

Cost accounting: defintion

Answer 25

is a category of managerial accounting that aims to capture a company's total cost of value creation

Question 26

Costs: definition

Answer 26

resources sacrificed to achieve a specific objective --> measured as a monetary amount that is spent to acquire factors of production or resources that are used to produce a particular output.

Question 27

Total costs is composed of :

Answer 27

direct and indirect cost and variable and Fixe costs

Question 28

Direct cost

Answer 28

are all costs that are directly related to a cost object and can be traced in an economically feasible way

Question 29

Indirect cost

Answer 29

are all costs that are common to several cost objects but cannot be traced (in an economically feasible way) to a single one

Question 30

Variable Costs

Answer 30

change in total in proportion to changes in the related level of total activity or volume of output

Question 31

Fixed Cost

Answer 31

remain unchanged in total for a given time period, despite wide changes in the related level of total activity or volume of output

Question 32

Fixed cost are always ...costs

Answer 32

indirect costs

Question 33

Direct cost are.. in most of the case

Answer 33

variable costs

Question 34

Inventorial cost: defintion

Answer 34

all costs of a product recorded as an asset on the balance sheet, only expensed as cost of goods sold in the income statement when a product is sold

Question 35

Period cost: defintion

Answer 35

all costs in the income statement other than costs of goods sold  other costs such as design-, marketing- or distribution-costs  expect these costs to increase revenues in a specific period

Question 36

Gross margin calculation

Answer 36

Revenues - Cost of goods sold

Question 37

What does the flow of revenues and costs look like for a merchandising company?

Answer 37

 the flow of revenues and costs in the income statement are the same.  Inventoriable costs are only expensed as the cost of goods sold when a product is sold, and period cost exists as well.

Question 38

What are the difference for merchandising company in the balance sheet ?

Answer 38

- merchandising companies do not produce goods or services --> no positions such as direct material or work-in-progress inventory. = inventoriable costs are recorded in the balance sheet position “Merchandise Inventory”.

Question 39

The need for Uniform Terms

Answer 39

1. Uniform defintiomn (direct and indirect costs) 2. Different product cost for different purpose - R&D costs -Design costs -Production Costs -Marketing Costs -Distribution Costs

Question 40

Product cost : for financial Statements

Answer 40

Inventorial costs

Question 41

Acceptance/Decline of Nonrecurring Special Orders (why management accounting is use)

Answer 41

Helps in evaluating whether a special order will contribute to profitability

Question 42

Calculation/Pricing (why management accounting is use)

Answer 42

Assists in setting prices by analyzing costs such as direct materials, labor, and overhead. This ensures that prices are competitive while also covering costs and achieving profit margins.

Question 43

Setting Minimum Level of Prices (why management accounting is use)

Answer 43

Helps determine the minimum price at which a company can sell its products or services without incurring a loss.

Question 44

Insourcing/Outsourcing (why management accounting is use)

Answer 44

informs the decision to insource or outsource by comparing the costs and benefits of each option. --> pratique qui consiste à intégrer dans son entreprise les ressources d'un prestataire externe.

Question 45

Level of Stockkeeping (why management accounting is use)

Answer 45

Assists in managing inventory levels by analyzing costs of holding stock (e.g., storage, insurance) versus potential stockout costs

Question 46

Product Mix and Product Mix Policy (why management accounting is use)

Answer 46

Helps in deciding which products to focus on by analyzing profitability, contribution margin, and the demand for each product

Question 47

Expansion/Reduction of Client Base (why management accounting is use)

Answer 47

Evaluates the costs and benefits of expanding or reducing the client base

Question 48

Replacement Investments (why management accounting is use)

Answer 48

Provides analysis on the financial impact of replacing old equipment or assets

Question 49

Cost and Efficiency: definition

Answer 49

Management accounting information helps managers calculate a target cost for its products.

Question 50

Quality : definition

Answer 50

Management accounting information helps to evaluate the costs and revenue benefits of continuously improving the quality of products and processes

Question 51

Time: definition

Answer 51

Management accounting information helps to quantify the costs and benefits of reducing delivery times and meeting promised delivery dates.

Question 52

Innovation: definition

Answer 52

Managers rely on management accounting information to evaluate alternative R&D and investment decisions and the costs and benefits of implementing innovative business models, services, and marketing plans.

Question 53

Sustainability: definition

Answer 53

Companies are increasingly applying the key success factors of cost and efficiency, quality, time, and innovation to promote sustainability.

Question 54

competence (management accounting)

Answer 54

- Maintain professional competence -Follow applicable laws, regulations and standards -Prepare complete and clear reports after appropriate analysis

Question 55

Confidentiality (management accounting)

Answer 55

- Do not disclose confidential information unless legally obliged to do so - Ensure that subordinates do not disclose confidential information - Do not use confidential information for personal advantage

Question 56

Integrity (management accounting)

Answer 56

- Avoid conflicts of interest and advise others of potential conflicts - Recognize and communicate personal and professional limitations - Refuse gifts or favors that might influence behavior - Do not subvert organization’s legitimate objectives

Question 57

Credibility (management accounting)

Answer 57

- Communicate information fairly and objectively - Disclose all information that could influence user's understanding - Disclose delays or deficiencies

Question 58

Reduce version of management accounting process

Answer 58

- Planning - Control