L
E
C
Revisions T
U
R
E 1
1
1 2
FINANCIAL AND MANAGERIAL
Management Accounting ACCOUNTING
Revision
Managerial Accounting Financial Accounting
Communicate financial
Learning Objectives: Purpose Decision making
position to outsiders
1. Cost concepts Primary Users Internal managers External users
2. Costing system: Job costing, process costing, ABC
Focus/Emphasis Future-oriented Past-oriented
costing
Do not have to follow GAAP compliant;
Rules
3. Inventory costing GAAP; cost vs. benefit CPA audited
4. Master budget Ultra current to very
Historical monthly,
Time Span long
quarterly reports
5. Flexible budgets and variances analysis time horizons
Designed to influence Indirect effects on
6. Decision making Behavioral Issues
employee behavior employee behavior
3 4
1
COST CONCEPTS Cost objects
5 6
5 6
Cost behavior Flows of costs – Manufacturing
7 8
7 8
2
Flows of costs - Merchandising COSTING SYSTEM – JOB COSTING
9 10
9 10
COSTING SYSTEM – PROCESS COSTING COSTING SYSTEM – ABC COSTING
12
11 12
3
INVENTORY COSTING MASTER BUDGETING
13
13 14
FLEXIBLE BUDGET VARIANCES
Actual results Flexible budget Static budget
Actual output Actual output Budgeted output
* * *
Budgeted price Budgeted price
Actual price output
output output
Flexible budget variance Sales volume variance
Static budget variance
16
15 16
4
VARIANCE ANALYSYS DIRECT COSTS VARIANCES
Actual cost
Flexible budget
incurred
Budgeted input
Actual input Actual input
quantity allowed for
quantity quantity
actual output
* * *
Budgeted price
Actual price input Budgeted price input
input
Price variance Efficiency variance
Flexible budget variance
17
17 18
CVP ANALYSIS CVP ANALYSIS
Changes in production/sales volume are the sole cause for cost and
revenue changes. BASIC FORMULATION
Total costs consist of fixed costs and variable costs. Unit
Revenue and costs behave and can be graphed as a linear function (a ( Selling Sales
Price * Quantity )-( Variable *
Costs
Sales
Quantity )- Fixed
Costs
= Operating
Income
straight line).
Selling price, variable cost per unit, and fixed costs are all known and
constant.
In many cases only a single product will be analyzed. If multiple products
are studied, their relative sales proportions are known and constant.
The time value of money (interest) is ignored.
19 20
5
DECISION MAKING –
PRICING DECISION
RELEVANT INFORMATION
Market-based: price charged is based on what
One-time-only special orders customers want and how competitors react.
Make or buy Cost-based: price charged is based on what it costs
to produce, coupled with the ability to recoup the
costs and still achieve a required rate of return.
21 22
Exercise
23
23
