Week 1- Introduction to Managerial Accounting

Question 1

who are the users of managerial accounting?

Answer 1

Users that are internal to the business

Question 2

What is managerial accounting used for?

Answer 2

Decision making

Question 3

what are the objectives of a cost management system?

Answer 3

1) Measure the cost of resources consumed
2) Identify and eliminate non- value-added costs
3) Determine the efficiency and effectiveness of major activities
4) Identify and evaluate new activities that can improve performance

Question 4

what are some of the changes to the business environment that have/can impact on managerial accounting?

Answer 4

1) E-business
2) Just in time inventory
3) Service vs manufacturing firms
4) Information and comms tech
5) Global competition
6) Total quality management

Question 5

what is the impact to managerial accounting of a growing service sector in teh global economy?

Answer 5

Necessitates an adaption to accounting techniques because:
Service firms are more labour intensive
Accounting systems have been fit for manufacturing firms

Question 6

How does managerial accounting add value to an organisation?

Answer 6

• Providing information for decision making
• Assisting managers in directing ad controlling activities
• Motivating managers and employees towards goals
• Measuring performance of subunits, activities and employees and allocation of resources
• Assessing the orgs competitive position

Question 7

what is the definition of a cost?

Answer 7

A sacrifice made to achieve a particular purpose

Question 8

what are product costs?

Answer 8

Costs associated with the manufacturing of the goods for sale

Question 9

What are period costs?

Answer 9

Costs that are not associated with the manufacturing of the product or service

Question 10

What are the three categories of manufacturing cost?

Answer 10

Direct materials
Direct labour
Manufacturing overhead

Question 11

what are direct materials?

Answer 11

materials that are easily traced to a finished product

Question 12

What is direct labour?

Answer 12

The wages of anyone who works directly on the product

Question 13

what is the manufacturing overhead?

Answer 13

all other costs incurred in the production process. Can be sub split into four sub units:

• Indirect materials
• Indirect labour
• Other manufacturing costs not easily traceable to a finished product eg. depriciation ( and things that are not materials)
• Overtime premiums and the cost of idle time

Question 14

Give an example of a direct material in the service industry?

Answer 14

Ingredients for food in a restaurant

Clippers at a barbers

Question 15

Give an example of a direct labour in the service industry

Answer 15

valet at a hotel

cooks and waiters in a restaurant

Question 16

What is a cost object?

Answer 16

A thing with a cost assigned to it

Question 17

what is a direct cost?

Answer 17

A cost that can be easily traced to the cost object

Question 18

What is an indirect cost?

Answer 18

A cost that cannot be easily traced to the cost object

Question 19

what is an opportunity set?

Answer 19

Set of alternative actions available to decision-makers

Question 20

What is an opportunity cost?

Answer 20

the benefits forgone by choosing one alternative over the best non selected alternative

Question 21

What are sunk costs useful for?

Answer 21

control puroposes- can hold managers accountable for incurring them

Question 22

what is a marginal cost?

Answer 22

the additional cost incurring when producing one more unit

Question 23

when activity increases what happened to fixed and variable costs/unit??

Answer 23

fixed costs/unit decrease

Variable costs /unit remain constant

Question 24

what is a differiential cost?

Answer 24

The difference in cost between two alternatives in an opportunity set