Management accounting

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  • Management accounting
    • role of accounting in management
      • factors increasing need
        • global competition
        • changes in public sector
        • increased importance of service and non tangible industry
        • organisational restructuring
          • outsourcing
        • managing for value
        • managing for enviromental sustainability
    • cost, concepts and classification
      • uses of costs
        • costing for decisions
          • what price to sell
          • what product
          • how much product?
        • profit measurement
        • costing fo control
          • keeping costs down
    • cost volume profit relationship
      • cost/revenue behaviour
      • breakeven analysis
        • equation method
        • CM margin method
      • margin safety
      • operating leverage
      • cvp assumptions
        • units sold=units produced
        • constant feeling price throughout range
        • sales mix constant
        • costs linear
      • profit/volume chart
        • economists version
        • advantage
          • takes account economies of scale
    • costing overheads
      • activity based costing
        • problems
          • time consuming
          • expensive
          • cost greater than benefit
        • applies overheads by thinkingall costs driven by something
        • effect abc
          • identify non value adding products and departments
          • can lead to organisational change
      • absorption/full costing
        • quick
        • apportionmentto multiplecost centres
          • representative
          • fair
        • understandable
        • uses
          • profit measurement
          • control
          • assessing efficenticy
          • pricing and output decisions
        • multipleproductbusiness
          • job costing
            • by calculating direct cost
              • can assign indirect according to a base
            • labour hours most common
              • calc labour hours for job
                • x by POHR
          • more products need fair apportionmentof overhead
        • signle productbusiness
          • cost output=cost units produced
            • no need to split direct and indirect costs
        • problems
          • backward looking
          • includes irrelevant info
          • excldessome relevantinfo
          • out of date in moderntech culture
      • now more focus on managing overheads
        • re-engineering
        • outsourcing
    • pricing/ costing methods
      • demand analysis
        • advantages
          • take into consideration demand and elastisity
          • can offer insight on maximising profit in market context
        • problems
          • doesn'tallow for mark up
          • difficult accurate measurement of curves
          • doesn'ttake into account non monetary
          • slow, in tech culture
          • difficult when comes to multiple products
      • cost plus
        • cost of product+ mark up wanted
        • absorption costing
          • price that allows covering fixed cost and ROI
            • think safe
              • need to be careful as based on fixed sales
                • if sales are not reached ROI could be -ve
        • often used in monopoly situations
      • target cost
        • used in competitive situation
        • estimated market price
          • profit desired
            • provides target cost of making good
        • advantages
          • cost management
          • provides long term perspective
        • problems
          • may show not nice results
          • too slow tech market
      • pricing/yeaild management
        • used where
          • Untitled
          • high fixed cost
          • limited capacity
          • changing demand
          • e.g. hotel
        • principles
          • demand
          • changing need costumer
          • changing market
          • responsiveness
          • accurate hisorical info
          • good forecasting method
        • how to maximise yield
          • i.e. how to get as close as possible to actual capacity
          • set price to demand
      • generalproblems
        • costs aren't always easy to trace
        • more focus on market demand
    • capital investment decisions
      • accounting/simple rate return
        • only one to include profit and depreciation
        • advantage
          • simple
        • disadvantage
          • ignores time value
          • includes some irrelevant and excludes some relative
          • not direct link to share holder wealth
      • payback period
        • advantage
          • simple to calculate
          • insight to liquidity
        • disadvantage
          • ignores time value money
          • doesn't tell you about cash flow after payback period
          • ignores relevant info
          • doesn't take into account shareholders wealth
      • internal rate return
        • advantage
          • timely cash flow
          • similar result to NPV
          • all relevant info
        • disadvantage
          • doesn't consider shareholder wealth
          • difficult to calculate directly
          • if unconventional cash flow can be misleading
      • net present value
        • advantage
          • timely cash flow
          • considers share holder wealth
          • simple to calculate
          • all relevant info
    • budgeting and standard costs
      • advantages budgeting
        • communicating plans
        • identify bottlenecks
        • define objectives
        • identify problems
        • plan for future
        • way to allocate resources
      • disagvantage
        • constrained management style
        • inflexible
        • demoralising
        • competition between departments
        • cost control not value creation
      • standard costs
        • advantages
          • management by exception
          • possible cut costs
          • better info for planning
          • good for performance evaluating
        • disadvantages
          • impact moral
          • not timely
          • should focus on continuous improvement
          • may ignore other important company objectives
    • traditional accounting vs. strategic management accounting
      • traditional
        • historical, inward looking, internal performance
        • existing systems, programmed
        • ignores linkages
        • finacial performance only
        • manufacturing focus
        • single period
      • Untitled
      • strategic
        • outward looking, forward looking, competitive performance
        • non monetary included
        • unprogramedlearning process
        • looks for linkages
        • multiple periods
        • 3 main strands
          • external info on competitors
          • strategic positioning
          • competitive advantage using value chain analysis
        • advantages
          • management accountants using traditional counting are providing useless info
          • keep up with changes
          • focus on competitors
            • keep up with changes
        • disadvantages
          • can strategy be planned
          • subjectivity ignored
          • unsure of quality of info
      • balance score card
        • link short and long term, fix some perspectives and others will follow
        • learning and growth
          • internal business perspective
            • costumer perspective
              • finacial perspective
        • advantages
          • communicating and linking goals
          • learning and feedback
          • translating vision of goal to all
          • business planning targets
        • disagvantages
          • non financial not in monetary terms
          • cause and effect hasn't been proven
          • shareholder interest is dominant still will not take risk to move away from finance target

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