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Management Accounting (Subject) / Accounting (Lesson)
This lesson was created by Janaw55.
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- Main purposes of Management Accounting CA (1) Cost Accounting: Product Costing & Inventory Valuation CM (2) Cost Management: Cost Estimation & Cost Control SDM (3) Strategic Decision Making OP (4) Operational Planning PE (5) Performance Evaluation
- Cost Classifications per M Management function: Manufacturing/ service costs & Non-manufacturing/non-service costs O Traceability to ‘cost objects’: Direct costs & Indirect Costs E Economic behaviour: Variable costs & Fixed costs & Semi-fixed costs. T Time of charge against revenues: Product/ service costs & period costs
- Cost Classification per Economic Behaviour How cost behave in accordance with changes in volume or some measure of cost driver Variable Costs: costs that vary in total in direct proportion to changes in activities Fixed Costs: costs that remain constant in total regardless of changes in activities Semi-Variable Costs: costs that vary with changes in activities, but not in direct proportion
- Cost Classification per Management Function Manufacturing Costs: costs associated with production activities DM: all the materials that become an integral part of the finished product that is significant in costs DL: all the labour force directly involved in making a product FOH + VOH Factory Overhead - all costs of manufacturing a product except DM and DL Non-Manufacturing Costs: expenses associated with obtaining sales and the delivery of product Selling: General & Administrative: all those expenses incurred in connection with performing general and administrative activities
- Cost Inclusion Method: Full Costing Gross Margin Format: The ‘Gross Margin’ is a measure of the product’s contribution to cover non-manufacturing costs and generate profit. GAAPs requirement Product Cost: = DM + DL + FOH + VOH Sales -COGS = Gross Margin - Non-Manufacturing Costs = Operating Income
- Cost Inclusion Method: Variable Costing Format produced internally Contribution Margin Format: The ‘Contribution Margin’ is a measure of the product’s contribution to cover ALL FC = manufacturing and non-manufacturing costs and generate profit. Product Cost: = DM + DL + VOH Sales -DM -DL -VOH = Contribution Margin - Fixed Manufacturing OH - Fixed Non-Manufacturing OH (SG&A) = Operating Income
- CM Ratio P - V / P
- BE point volume X vol = F / CM
- BE point in Revenue XRev = F / CM-Ratio
- How much volume to earn a profit of x? Target Profit = CM * X - TFC
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- How much Vol. to earn ROS of 20%? Target ROS = CM * X - TFC / P * X
- BE point of a multi-product firm? X BEP = FC/ WACM -> units first, then Revenue
- ROI ROI = Divisional Profits / Invested Capital ROI = Divisional Profits / Sales x Sales / Invested capital ROI = Sales Margin x Capital Turnover Sales Margin = % of sales than remain as profit Capital Turnover = Sales generated by every $ of Invested Capital
- Full Absorption Costing Only looks ar manufacturing OH