Week 1 Everything

Question 1

Management accounting

Answer 1

Management accounting is the process of identifying, collecting and analysing accounting data for the management team to make decisions and to assess organisational efficiencies and effectiveness. The value chain specifies the domain for management accounting processes

Question 2

Financial accounting

Answer 2

prepares reports most frequently used by decision makers external to the organisation

Question 3

Management accounting

Answer 3

prepares reports most frequently used by decision makers internal to the organisation

Question 4

Cost accounting

Answer 4

Cost accounting is a “method for measuring the cost of a project, process, or thing” It includes both financial and nonfinancial information and is used for both financial and management accounting

Question 5

External reporting

Answer 5

Includes Shareholder reports such as financial statements.

Other stakeholder reports such as credit reports

Government reports such as tax returns

Question 6

Internal reporting

Answer 6

Support organisational strategies such as capital budgets

Support operating plans such as operating budgets

Monitor and motivate such as comparing actual performance to planned performance

Question 7

Organisational vision

Answer 7

Organisational vision is the core purpose and ideology which guides an entity’s overall direction and approach to its stakeholders

Question 8

Organisation core competencies

Answer 8

Organisation core competencies are the entity’s strengths relative to competitors

Question 9

Organisational vision and mission

Answer 9

Vision helps locate strengths and the core competencies help shape vision

Question 10

Organisational strategies

Answer 10

Future Focused (high value add)

Low-cost strategy

A differentiation strategy

Question 11

Future Focused (high value add)

Answer 11

Tactics that managers use to work toward the organisational vision while taking advantage of the core competencies. They are long term in nature. Include organisation structure, financial structure, and long-term resource allocation strategies
Management accounting practices include techniques to help with investment appraisal

Question 12

Low-cost strategy

Answer 12

Economies of scale in production. Experience curve effects. Tight cost control
Cost minimisation in R&D, service, sales force, advertising

Question 13

A differentiation strategy

Answer 13

Creating something customers perceive as being unique/. Brand loyalty, superior customer service, dealer network, product design and product features, technology

Question 14

Management Decisions: Operating Plans

Answer 14

Short-term focused (modest value-add)

Operating plans (budgets)

Actual operations

Question 15

Operating plans (budgets)

Answer 15

Generally involves planning for a short-term time frame (generally up to 12 months). Include specific performance objectives such as budgeted revenues and costs

Question 16

Actual operations

Answer 16

Measures actions taken and the results achieved over a period of time. Compares actuals with proposed plans (budgets). Feedback, corrective actions and learning

Question 17

Decisions confronting managers

Answer 17

Measuring, monitoring and motivating performance

Role of financial and non-financial information

Goal Kicking versus Goal Keeping

Proactive or Reactive

Question 18

Measuring, monitoring and motivating performance

Answer 18

Managers use results of operations to monitor performance and ensure it is in line with organisational vision. Results of operations make managers re-think organisational vision or their view of the organisation’s core competencies

Question 19

Role of financial and non-financial information

Answer 19

Management accounting is not just providing financial information for decisions but also relies on non-financial and qualitative data to inform decisions

Question 20

Relevant information

Answer 20

Helps decision maker to evaluate and choose among alternative courses of action. It concerns the future. Varies with the action taken

Question 21

Irrelevant information does not

Answer 21

vary with the action taken and therefore is not useful for decision making

Question 22

Decision-useful information

…. needs to be considered in light of:

Answer 22

Opportunity costs and cost benefit analysis

Question 23

Opportunity costs

Answer 23

Opportunity costs are the benefits foregone when we choose one alternative over the next best alternative

Question 24

cost benefit analysis

Answer 24

Cost-benefit analysis is an evaluation of the benefits derived from the information and the costs of collecting it

Question 25

Goal Kicking versus Goal Keeping

Answer 25

The role of the Chief Financial Officer (CFO) is to manage both “goal keeping” and “goal kicking” roles. Strategic management accounting tends to be “goal kicking” focused. Cost accounting contributes to the “goal keeping” role. At times, these two roles can conflict

Question 26

Proactive or Reactive

Answer 26

Should management be conservative or take risks?

Should they be strategic or react when uncertainty exists?

Question 27

A value chain

Answer 27

A value chain consists of the key activities engaged in by an organisation or industry. At the organisational level, the value chain is usually viewed as a combination of key activities and support activities. The value chain domain provides a suitable framework for considering a range of management accounting issues

Question 28

Value chain analysis key terminology

Answer 28

Supply chain
Value-added activity
Non-value-added activity

Question 29

Supply chain

Answer 29

The supply chain is the flow of resources from the initial suppliers through the delivery of goods and services to customers and clients

Question 30

Value-added activity

Answer 30

A value-added activity is one that is necessary and that the customer would normally be prepared to pay for

Question 31

Non-value-added activity

Answer 31

A non-value-added activity is one that is wasteful (unnecessary) and that the customer would not normally be prepared to pay for

Question 32

Value chain approaches

Answer 32

The external or industry value chain

Question 33

The external or industry value chain

Answer 33

The external or industry value chain incorporates the value-creating activities which span the industry from the initial raw material to the end consumer. Organizations ‘choose’ to operate in certain parts of the chain, from the fully vertically integrated organization to the core-activity focused organization (see companies A-G on following slide)

Question 34

External value chain

Answer 34

11/3/19

Question 35

Internal value chain

Answer 35

Every organisation has their own internal value chain. This provides the opportunity to understand the behaviour of costs and the sources of differentiation.

Question 36

The internal value chain is a collection of the key activities/functions performed to

Answer 36

Design; 
Produce; 
Market;  
Deliver; and 
Support its product(s)/service(s).

Question 37

The internal value chain

Answer 37

11/3/19

Question 38

Value chain analysis provides:

Answer 38

An understanding of supplier all the way through to distributor. VCA relationship is reflected in costs, costs are transferred in every value-added activity and end users (consumers) ultimately pay for the profit margins made throughout the value chain

Question 39

costs are calculated as:

Answer 39

cost of goods sold (GOGS) or costs of services and period costs (all other expenses incurred through the value chain)

Question 40

The three steps for conducting a value chain analysis

Answer 40

Separate the organisation’s operations into primary and support activities

Allocate cost to each activity

Identify the activities critical to customer satisfaction and market success

Question 41

Value chain advantage (relative to competitors)

Answer 41

Reduced costs, enhanced differentiation, or both

inventory cost reduction;

lower manufacturing costs;

lower product development costs;

fewer resources wasted on

non-value-added activities;

reduction in transaction costs (information systems sharing)

improved supplier relations;

fewer barriers and faster response to changing market demands

Question 42

Cost objects and cost drivers

Answer 42

Management of the value chain requires an understanding of the nature of costs and the drivers of costs

Question 43

Cost objects

Answer 43

A cost object is: a thing or activity for which we measure costs (from individual product/service to division or entire organisation)

Question 44

cost driver

Answer 44

A cost driver is: an input of activity that causes changes in total cost for a cost object

Question 45

If the cost object of interest is the value chain, cost drivers can be considered in terms of:

Answer 45

Structural cost drivers (relating to size and complexity)

Executional cost drivers (relating to the management of people and operations)

Question 46

Structural cost drivers

Answer 46

Relates to the company’s underlying structure and strategy:

Scale

Scope

Experience

Technology

Complexity

Question 47

Executional cost drivers

Answer 47

Scaled with performance (people and operations):

Workforce involvement

TQM

Capacity utilisation

Plant layout efficiency

Product configuration

Linkages with suppliers or customers

Question 48

Key value chain decisions

Answer 48

Who to engage strategic alliances with

Whether to outsource or keep in-house

Is the organisational structure suitable?

Question 49

The value chain, corporate structure & control

Answer 49

Structures can be centralised or decentralised.

Question 50

The larger the company and the more decentralised the company is:

Answer 50

The greater the organisational complexity (structural cost drivers) and the greater the need for accounting to help manage relationships within (and outside) the organization (executional costs drivers)

Question 51

Centralised v decentralised

Answer 51

11/3/19

Question 52

Strategic Business Unit: Large Diverse Company

Answer 52

11/3/19