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Samenvatting MIDTERM Management Accounting $5.46   Add to cart

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Samenvatting MIDTERM Management Accounting

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This is a summary of all relevant chapters of the book: Management and Cost Accounting (8th edition), for the midterm. Chapters covered: H1 to 9, 11, 14, 20

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  • Hoofdstuk 1 t/m 9, 11, 14, 20
  • March 21, 2024
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  • 2023/2024
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Management and Cost Accounting : 8th edition
Chapter 1 : The manager and management accounting

Management accounting = measures, analyses, and reports financial
information and non-financial information that are intended primarily to assist
managers in fulfilling the goals of the organization

Broad differences between management accounting and financial accounting:
1. Regulations -> management accounting rapports are for internal use and are
therefore not restricted by any regulations
2. Range and detail of information -> management accounting rapports are
usually more detailed/descriptive since financial accounting rapports can be seen
by anyone (like competitors)
3. Reporting interval -> management accounting rapports are usually
produced more frequently than financial accounting rapports
4. Time period -> management accounting rapports include information from
the past, the present and the future whilst financial accounting rapports usually
only include past information

Cost accounting = measures and reports financial and non-financial information
related to the organization’s acquisition or use of resources

Cost management = the actions managers undertake in the short-run and long-
run planning and control of costs that increase value for customers and lower the
costs of products/services

Two broad strategies companies can follow:
1. Cost leadership = offering quality products/services for the lowest price
2. Product differentiation = offering differentiated/unique products/services

The major purposes of accounting systems:
1. Formulating overall strategies and plans
2. Resource allocation decisions such as product and customer emphasis and
pricing
3. Cost planning and cost control of operations and activities
4. Performance measurement and evaluation of people
5. Meeting external regulatory and legal reporting requirements where they exist

Planning = choosing goals, predicting results under various ways of achieving
those goals, and then deciding how to attain the desired goals

Control = the action that implements the planning decision and deciding on
performance, evaluation and the related feedback that will help future decision
making

Three traditional categories of management accountants functions:
1. Scorekeeping
= the accumulation of data and the reporting of reliable results to all levels of
management
-> increasingly undertaken by digital systems

, 2. Attention directing
= to make visible both opportunities and problems on which managers need to
focus
-> increasingly helped by digital systems
3. Problem solving
= the comparative analysis undertaken to identify the best alternatives in
relation to the organisation’s goals
-> lots of problems can already be solved by machines, but not all

Key themes of planning & control:
1. Customer focus
2. Value-chain and supply-chain analysis
3. Key success factors (Cost, Quality, Time, Innovation, Sustainability)
4. Continuous improvement and benchmarking
-> these factors help guide organisations with the design of a management
accounting system

Most significant challenge facing accountants today is the impact of digitalisation
-> it is changing the essence of accounting expertise in several ways:
1. Management accountants must play a role in unravelling what is happening
now, to a large degree by exploring big data, to determine the coming shape of
financial transactions
2. Executive action can increasingly be autopiloted such that financial objectives
are pursued back on machine-based decisions and action rather than through
human input
3. Accounting becomes part of the products being reported on

Two important points in relation to digital technologies:
1. Digital disruption and cognitive business
= digital technologies are impacting many industries and enabling new business
models
2. Data availability
= the huge volumes of data that has become available to firms has created both
opportunities and challenges in aiding data-backed decisions and insights

What emerging technologies are there today that management accounting
should be aware of?
- Artificial intelligence
- Blockchain -> accounting technology that can be described as a ‘distributed
ledger’, which records transaction continuously
- Big data and analytics
- the Cloud -> services where data are kept on servers connected to the internet

, Chapter 2 – An introduction to cost terms and purposes

Cost = a resource sacrificed or forgone to achieve a specific objective
Cost object = anything for which a separate measurement of costs is desired

Costing systems typically account for costs in two basic stages:
1. Accumulating costs by some natural classification (materials, labour, etc.)
2. Assigning these costs to the cost objects

Cost accumulation = the collection of cost data in some organised way through
an accounting system
Cost assignment = (1) tracing accumulated costs to a cost object, and (2)
allocating accumulated costs to a cost object

Direct costs = related to the particular cost object and that can be traced to it
in an economically feasible way
Indirect costs = related to the particular cost object but cannot be traced to it
in an economically feasible way

Factors affecting classification of a cost as direct or indirect:
1. The materiality of the cost in question
= when costs are high, it’s usually more feasible to classify it as a direct cost than
when the expenses are negligible
2. Available information-gathering technology
= more advanced technology is capable of enabling an increasing percentage of
costs to be classified as direct
3. Design of operations
= when an organization’s facility is used exclusively for one product, it’s easy to
assign the costs of that facility directly to that product

Cost-reduction efforts frequently identify two key areas:
1. Focussing on value-added activities
2. Efficiently managing the use of the cost drivers in those value-added activities

Variable costs = changes in total in proportion to changes in the related level of
activity/volume
Fixed costs = does not change in total despite changes in the related level of
activity/volume
-> there are some major underlying assumptions for these definitions:
1. Costs are defined as variable or fixed with respect to a specific cost object
2. The time span must be specified
3. Total costs are linear
4. There is only one cost driver

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