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MGT102 - Management Accounting > Semester 1 > Flashcards

Semester 1 Flashcards

1
Q

What is management accounting?

A

Techniques and processes intended to provide both financial and non-financial information to people within an organisation

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2
Q

Who are the users of accounting information?

A

Financial Accounting - external parties outside of the organisation
Management Accounting - Internal parties within the organisation - Managers/primary managers

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3
Q

What are the purposes of accounting systems?

A

1) Formulating overall strategies and long-range plans
2) Resource allocation decisions
3) Cost planning and control of operations/activities (purchases, sales, hiring etc)
4) Performance measurement and evaluation of people
5) Meeting external regulatory and legal reporting requirements

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4
Q

What is cost accounting?

A
  • Provides information for both management and financial accounting
  • Measures and reports financial and non-financial data relating to cost of acquiring/consuming resources by an organisation
  • About analysing costs
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5
Q

What is cost management?

A
  • Activities of managers in short-run and long-run planning and control of costs
  • Includes continuous reduction of costs
  • Key part of general management strategies and implementation
  • Requires cost acc.
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6
Q

What are the roles of management accountants?

A
  • Planning
  • Controlling (produce performance reports and compare to planned)
  • Organising
  • Communicating
  • Motivating
  • Decision making (provide guidance)
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7
Q

What is the performance report?

A

Shows planned/expected revenues, CoGS, wages, fixed costs etc. and actual values

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8
Q

What are the features of the contemporary business environment?

A
  • Advances in manufacturing and information technologies
  • Focus on customer
  • New forms of management organisaton
  • Social, political and cultural changes
  • Increased global competition
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9
Q

What is life-cycle costing and what is used?

A

Identify and monitor costs throughout a product’s life cycle:

  • R&D costs
  • Product design and testing costs
  • Manufacturing, inspecting, packaging and warehousing costs
  • Marketing, promotion and distribution costs
  • Sales and service costs
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10
Q

What is benchmarking?

A
  • Identify an activity that needs to be improved
  • Find an organisation most efficient at this activity
  • Study the process and utilise the process
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11
Q

What is target costing?

A
  • Identify product opportunity
  • Determine the price that would make this competitive
  • Determine if product can be made at low costs to provide desired profit
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12
Q

What is the Balanced Scorecard?

A
  • Kaplan and Norton
  • Created to integrate financial and non-financial measures
  • seeks to link performance measures to an organisation’s strategy
  • Should be used to clarify, communicate and manage strategy
  • Management translates strategy into performance measures that employees understand
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13
Q

What is a cost?

A

A resource sacrificed or foregone to achieve a specific objective
- Expenditure incurred

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14
Q

What are the types of costs you may use?

A

Historical vs. replacement
Full vs. marginal
Actual vs. Budgeted

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15
Q

How can costs be classified?

A

By function
By element - e.g. material, labour or overhead
By nature - indirect or direct
By behaviour - fixed or variable/marginal

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16
Q

What is a direct cost?

A

Those related to a given cost object (product, department etc.) and that can be traced to it in an economically feasible way

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17
Q

What is an indirect cost?

A

Related to the particular cost object but cannot be traced to it in an economically feasible way

18
Q

What is a prime cost?

A

Sum of only direct costs: direct labour, materials etc.

19
Q

What is a conversion cost?

A

Indirect cost and direct labour - converting inputs into outputs

20
Q

What are product costs?

A

Those attached to products and therefore included in stock/inventory valuation - end in product
- e.g. raw material, labour, production overhead

21
Q

What is unsold product code/cost recorded as?

A 
Current asset (inventory) in balance sheet
- Becomes expense in profit and loss account when product sold
22
Q

What is sold product code recorded as?

A

Recorded as an expense in P&L account in current accounting period

23
Q

What are period costs?

A

Non-manufacturing costs
Not attached to products, not included in stock valuation
(E.g. marketing and administration expenses)

24
Q

What is period code recorded as?

A

All recorded as expense in IS in current accounting period - as expense as don’t incur cost in future

25
Q

What are variable costs?

A

Vary in proportion with activity

26
Q

What are fixed costs?

A

Remain constant over wide ranges of activity

27
Q

What are semi-fixed costs?

A

Fixed within specific activity levels, but they eventually increase/decrease by some constant amount at critical activity levels

28
Q

What are semi-variable costs?

A

Include both a fixed and variable component (e.g. telephone charges)

29
Q

What is cost-volume profit (CVP) analysis?

A

The study of interrelationships between costs and volume and how they impact profit

30
Q

What does CVP analysis examine?

A

The behaviour of total revenues, costs, and operating profit as changes occur in output level, selling price, variable costs per unit or fixed costs

31
Q

What does CVP aid management in?

A
  • Setting prices for products/services
  • Introducing a new product/service
  • Replacing a piece of equipment
  • Make or buy decisions
  • Performing strategic “what if?” analysis
32
Q

What is a semi-fixed cost also known as?

A

Step-fixed cost

33
Q

What is the graph of a semi-fixed cost like?

A

Steps up

34
Q

What is the graph of a semi-variable cost?

A

Slope up

35
Q

How do you calculate breakeven?

A

Fixed costs / contribution per unit

Costs same as revenue, profit = 0

36
Q

What is profit calculation?

A

Profit = Revenues - Total Costs

37
Q

What is the CVP model equation for revenue?

A 
(Q x P) = F + (Q x V) + N
Q = units sold
P = unit selling price
F = fixed costs
V = unit variable cost 
N = operating profit
38
Q

What is the equation for unit contribution margin?

A

P - V

Unit selling price - variable cost

39
Q

What is the contribution margin ratio?

A

P-V / P

40
Q

How is CVP analysis used to determine the BEP and target operating profit?

A
  1. The Equation Method: selling price per unit x Q = Total fixed costs + (variable unit cost x Q)
  2. Contribution Margin Method: you know quantity, so can apply Q = F/P-V

MGT102 - Management Accounting (1 decks)

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