Week 1- Introduction to Managerial Accounting Flashcards
who are the users of managerial accounting?
Users that are internal to the business
What is managerial accounting used for?
Decision making
what are the objectives of a cost management system?
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
what are some of the changes to the business environment that have/can impact on managerial accounting?
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
what is the impact to managerial accounting of a growing service sector in teh global economy?
Necessitates an adaption to accounting techniques because:
Service firms are more labour intensive
Accounting systems have been fit for manufacturing firms
How does managerial accounting add value to an organisation?
- 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
what is the definition of a cost?
A sacrifice made to achieve a particular purpose
what are product costs?
Costs associated with the manufacturing of the goods for sale
What are period costs?
Costs that are not associated with the manufacturing of the product or service
What are the three categories of manufacturing cost?
Direct materials
Direct labour
Manufacturing overhead
what are direct materials?
materials that are easily traced to a finished product
What is direct labour?
The wages of anyone who works directly on the product
what is the manufacturing overhead?
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
Give an example of a direct material in the service industry?
Ingredients for food in a restaurant
Clippers at a barbers
Give an example of a direct labour in the service industry
valet at a hotel
cooks and waiters in a restaurant
What is a cost object?
A thing with a cost assigned to it
what is a direct cost?
A cost that can be easily traced to the cost object
What is an indirect cost?
A cost that cannot be easily traced to the cost object
what is an opportunity set?
Set of alternative actions available to decision-makers
What is an opportunity cost?
the benefits forgone by choosing one alternative over the best non selected alternative
What are sunk costs useful for?
control puroposes- can hold managers accountable for incurring them
what is a marginal cost?
the additional cost incurring when producing one more unit
when activity increases what happened to fixed and variable costs/unit??
fixed costs/unit decrease
Variable costs /unit remain constant
what is a differiential cost?
The difference in cost between two alternatives in an opportunity set
