This document contains a summary of the textbook: Management Accounting as well as lecture notes. It encompasses Learning areas 1 - 8 which is the whole curriculum for the semester.
Test Bank For Management Accounting 6th Edition by Will Seal, Carsten Rohde, Ray Garrison, Eric Noreen Chapter 1-19
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University of Pretoria (UP)
Financial Management (FBS220)
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FBS220 – Financial Management
Contents
LA 1: Chapter 1: Management accounting & the business
environment ............................................................................................ 2
LA 2: Chapter 2: Cost terms/ concepts/ classifications ..................... 3
LA 3: Chapter 3: Cost Behaviour ........................................................... 6
LA 4: Chapter 4: Systems Design – Job order .................................... 11
LA 4: Chapter 4 (Appendix 4A): Service department costing ........14
LA 5: Chapter 5: Process Costing ........................................................ 16
LA 6: Chapter 6: Cost-volume-profit Relationships ........................... 19
LA 7: Chapter 7: Profit reporting under variable costing and
absorption costing ................................................................................ 23
LA 8: Chapter 11: Budgeting ............................................................... 26
,LA 1: Chapter 1: Management accounting & the business
environment
1. DIFFERENCES
Managerial accounting Financial accounting
Definition Provides info for managers Provides info to
of an organization who stockholders/
direct/ control its creditors/ others
operations outside organization
Work of management
- Planning
- Directing/
motivating
- Controlling
Users External Managers
Make financial decisions Plan for/ control
organization
Time focus Historical perspective Future emphasis
Verifiability vs Emphasis on verifiability Emphasis on
relevance relevance
For planning/ control
Precision vs Emphasis on precision Emphasis on
timeliness timeliness
Subject Primary focus on whole Focus on segments of
organization organization
Requirements Must follow prescribed Need not follow
formats prescribed formats
2. PLANNING/ CONTROL CYCLE
2
, LA 2: Chapter 2: Cost terms/ concepts/ classifications
1. COST TERMS
Manufacturing/ Direct materials
product costs Direct labour
Manufacturing overheads
Direct materials Direct cost
Become integral part of product
Traced directly to it
Direct labour Direct cost
Easily traced to individual units of product
Manufacturing Indirect cost
overheads Cannot be traced to specific units produced
Indirect labour/ materials
Prime cost = Direct materials + direct labour
Conversion cost = Direct labour + manufacturing overhead
Nonmanufacturing Marketing/ selling costs
costs Administrative costs
Variable costs Changes when activity level changes
Per unit: remains the same over wide ranges over
activity
Fixed costs Remain unchanged when activity changes
Per unit: goes up/ down as activity level goes up
Differential = Job offer with higher salary – current salary
revenue
Differential cost Commuting cost to new job
Opportunity cost Potential benefit that is given up when an alternative is
selected over another
Sunk costs Cannot be changed by any decision
Shouldn’t be ignored when making decisions
2. PRODUCT VS PERIOD COSTS
Product costs Direct materials
Direct labour
Manufacturing overhead
Inventory in Balance sheet
Cost of goods in Profit statement
Period costs Not included in product costs
Expensed on Profit statement
Income Statement
Sales X
Cost of goods sold (X)
Gross profit X
Period cost (X)
Net profit X
3
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