MANAGEMENT
ACCOUNTING
Docent:
Hugo
van
Hengel
E-‐mail:
h.g.van.hengel@vu.nl
Kamer:
7A-‐71
(aanwezig:
ma
&
wo
–
vr)
Book:
Cost
Accounting,
A
Managerial
Emphasis
(Horngren,
Datar
&
Rajan)
Education
limited;
15th
edition
Chapters
1,
3-‐8,
11,
12,
14,
15,
17
&
21-‐23
-‐
Het
is
verstandig
om
voor
elk
college
de
hoofdstukken
te
lezen
die
we
dat
college
gaan
bespreken.
Zo
kan
je
gericht
vragen
stellen
en
blijf
je
goed
bij.
-‐
Je
moet
vooral
de
tekst
lezen
rondom
de
onderwerpen
die
in
de
college(sheets)
worden
behandeld.
-‐
Van
elk
hoofdstuk
enkele
vragen
/
rekenopgaven
maken
+/-‐
5
–
10.
Session
1
Introduction
• CH1
The
Manager
and
Management
Accounting
(niet
alles
letterlijk
gelezen)
• CH3
Cost-‐Volume-‐Profit
Analysis
(niet
alles
letterlijk
gelezen)
• CH6
Master
Budget
and
Responsibility
Accounting
(niet
alles
letterlijk
gelezen)
• Merchant,
K.
A.,
and
J.-‐F.
Manzoni.
1989.
The
achievability
of
budget
targets
in
profit
centers:
A
field
study.
The
Accounting
Review
64
(3):539-‐558.
College:
H1
The
Manager
and
Management
Accounting
Er
is
onderscheid
tussen:
-‐
Managerial
accounting:
measures,
analyzes,
and
reports
financial
and
nonfinancial
information
to
help
managers
make
decisions
to
fulfill
organizational
goals.
Managerial
accounting
need
not
be
GAAP
compliant.
Focus:
intern
Key
questions:
1)
How
will
this
information
help
managers
do
their
jobs
better?
2)
Do
the
benefits
of
producing
this
information
exceed
the
costs?
-‐
Financial
accounting:
focus
on
reporting
to
external
users
including
investors,
creditors,
and
governmental
agencies.
Financial
statements
must
be
based
on
generally
accepted
accounting
principles
(GAAP).
Focus:
extern
Major
differences
between
Financial
and
Managerial
Accounting:
Managerial
Accounting
Financial
Accounting
Purpose:
decision
making
communicate
financial
position
to
outsiders
Primary
Users:
internal
managers
external
users
Focus/Emphasis:
future-‐oriented
past-‐oriented
Rules:
do
not
have
to
follow
GAAP
GAAP
compliant,
CPA
audited
cost
vs.
benefit
Time
Span:
ultra
current
to
very
long
time
historical
monthly,
quarterly
reports
horizons
Behavioral
Issues:
designed
to
influence
empolyee
indirect
effects
on
employee
behavior
behavior
Strategy
and
Management
Accounting:
-‐
Strategy:
specifies
how
an
organization
matches
its
own
capabilities
with
the
opportunities
in
the
marketplace
to
accomplish
its
objectives
-‐
Cost
leadership
vs.
Product
differentiation
(2
main
strategies)
-‐
Strategic
cost
management:
focuses
specifically
on
the
cost
dimension
within
a
firm’s
overall
strategy
Management
accounting
helps
answer
important
questions
such
as:
-‐
Who
are
our
most
important
customers,
and
how
do
we
deliver
value
to
them?
-‐
What
substitute
products
exist
in
the
marketplace,
and
how
do
they
differ
from
our
own?
1
,
-‐
What
is
our
critical
capability?
-‐
Will
we
have
enough
cash
to
support
our
strategy
or
will
we
need
to
seek
additional
sources?
Management
accounting
and
value
-‐
Value
chain
is
the
sequence
of
business
functions
in
which
customer
usefulness
is
added
to
products
or
services.
-‐
The
Value
chain
consists
of
6
steps:
1. Research
&
development
2. Design
3. Production
4. Marketing
(including
sales)
5. Distribution
6. Customer
service
-‐
In
addition
to
the
six
primary
business
functions
there
is
an
administrative
function
during
al
the
six
steps.
-‐
At
different
times
and
in
different
industries,
one
or
more
of
these
functions
are
more
critical
than
the
others.
-‐
Management
accounting
has
in
every
step
an
important
role!
Supply
chain:
describes
the
flow
of
goods,
services
and
information
from
the
initial
sources
of
materials
and
services
to
the
delivery
of
products
to
consumers,
regardless
of
whether
those
activities
occur
in
the
same
organization
or
in
other
organizations.
Important
issues
for
customers
regarding
the
value
chain
and
supply
chain.
-‐
cost
and
efficiency
-‐
quality
-‐
time
-‐
innovation
Planning
and
control
systems
-‐
Planning
selects
goals,
predicts
results,
decides
how
to
attain
goals,
and
communicates
this
to
the
organization.
Budget
à
the
most
important
planning
tool
-‐
Control
takes
actions
that
implement
the
planning
decision,
decides
how
to
evaluate
performance,
and
provides
feedback
to
the
organization.
The
five
step
decision
making
process:
(komt
in
meerdere
hoofdstukken
weer
terug)
1. Identify
the
problem
and
uncertainties
2. Obtain
information
3. Make
predictions
about
the
future
4. Make
decisions
by
choosing
among
alternatives
5. Implement
the
decision,
evaluate
performance
and
learn
-‐
The
first
four
are
planning
decisions
and
the
last
step
is
a
control
decision.
-‐
Deze
stappen
komen
in
heel
veel
aspecten
van
management
accounting
terug.
2
,Key
management
accounting
guidelines:
• Employ
a
cost-‐benefit
approach:
wegen
de
kosten
op
tegen
de
baten?
• Give
full
recognition
to
behavioral
and
technical
considerations:
er
spelen
altijd
technische
en
menselijke
aspecten
mee
die
erkent
moeten
worden.
• Use
different
costs
for
different
purposes:
These
three
guidelines
help
management
accountants
provede
the
most
value
to
their
companies
in
strategic
and
operational
decision
making.
Organization
structure
ad
the
management
accountant
-‐
Line
management:
(production,
marketing,
etc.)
is
directly
responsible
for
attaining
the
goals
of
the
organization.
-‐
Staff
management:
(HRM,
management
accountants,
etc.)
provides
support
and
advice
to
line
management
so
that
they
can
do
their
job
better.
-‐
CEO:
Chief
Executive
Officer
-‐
CFO:
Chief
Financial
Officer
is
responsible
for:
controllership,
treasury
(financing
&
investments),
risk
management,
taxation,
investor
relations
&
internal
audit.
-‐
Management
accounting
is
an
integral
part
of
the
controller’s
function
in
an
organization.
In
most
organiszations,
the
controller
reports
to
the
CFO,
who
is
a
key
member
of
the
top
management
team
H3
Cost-‐Volume-‐Profit
Analysis
Cost-‐volume-‐profit
analysis:
studies
the
behavior
and
relationship
among
total
revenues,
costs
and
income
as
changes
occur
in
the
units
sold,
the
selling
price,
the
variable
cost
per
unit,
or
the
fixed
cost
of
a
product.
-‐
Foundational
Assumptions
in
Cost-‐Volume-‐Profit
(CVP)
-‐
Changes
in
production/sales
volume
are
the
sole
cause
for
cost
and
revenue
changes.
-‐
Total
costs
consist
of
fixed
costs
and
variable
costs.
-‐
Revenue
and
costs
behave
and
can
be
graphed
as
a
linear
function
(a
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.
-‐
aannames
maken
het
eenvoudiger
om
te
rekenen
Contribution
margin
=
difference
in
revenue
&
variable
costs
à
revenue
minus
variable
costs.
-‐
The
contribution
margin
per
unit
is
a
useful
tool
for
calculating
contribution
margin
and
operating
income.
à
formula:
unit
selling
price
minus
variable
costs
per
unit
-‐
It
can
also
be
presented
in
percentage:
contribution
margin
/
unit
selling
price
-‐
If
a
company
has
more
than
one
product
you
should
calculate
one
product
as
a
mix
of
the
products.
(denk
aan
taco
voorbeeld
in
college)
Breakeven
point
=
a
company
has
no
profit
or
loss
at
the
given
sales
level.
-‐
Formula
for
breakeven
units:
fixed
costs
/
contribution
margin
per
unit
-‐
Formula
for
breakeven
revenues:
fixed
costs
/
contribution
margin
percentage
-‐
The
breakeven
point
formula
can
be
modified
to
become
a
profit
planning
tool:
Quantity
of
units
required
to
be
sold
=
(fixed
costs
+
operating
income)
/
Contr.
margin
p/u
Taco
voorbeeldopgave
uit
college
sheets
behandeld.
a)
Totale
verwachte
winst:
1,5
*
200.000
+
2,25
*
300.000
=
975.000
–
117.00
=
858.000,-‐
b)
Breakeven
point
bij
40%
kip
&
60%
vis:
1,5*0,4
+
2,25
*
0,6
=
1,95
à
117.000
=
1,95X
à
117.000
/
1,95
=
60.000
à
24.000
kip
&
36.000
vis
Truc:
je
moet
als
het
ware
1
taco
maken
met
40%
kip
en
60%
vis.
CVP
and
income
taxes
-‐
After-‐tax
profit
can
be
calculated
by:
3
,
-‐
Net
Income
=
Operating
Income
*
(1-‐Tax
Rate)
-‐
Operating
Income
=
Net
Income
/
(1-‐Tax
Rate)
Stel:
de
ijscoman
moet
nog
25%
belasting
betalen,
maar
hij
wil
nog
steeds
135
euro
netto
overhouden.
Hoeveel
ijsjes
moet
hij
nu
verkopen?
Operating
income
=
135
/
0,75
=
180
euro
Vereiste
afzet
=
(90
+
180)
/
(1,50
–
0,60)
=
300
-‐
With
CVP
analysis
managers
can
make
decisions
to,
for
example,
reduce
the
selling
price.
Sensitivity
analysis
=
a
‘what
if’
technique
that
managers
use
to
examine
how
an
outcome
will
change
if
the
original
predicted
data
are
not
achieved
of
if
an
underlying
assumption
changes.
Use
Excell
for
these
analysis.
(gevoeligheidsanalyse)
-‐
useful
to
recognize
uncertainty
-‐
an
aspect
of
sensitivity
analysis
is
the
margin
of
safety:
budgeted
revenues
–
breakeven
revenues
Operating
leverage
=
describes
the
effects
that
fixed
costs
have
on
changes
in
operating
income
as
changes
occur
in
units
sold
and
contribution
margin.
-‐
high
fixed
costs
=
high
operating
leverage
-‐
Degree
of
operating
leverage
=
contribution
margin
/
operating
income
Effects
of
sales-‐mix
on
CVP
-‐
Sales
mix
=
the
quantities
of
various
products
that
constitute
total
unit
sales
of
a
company.
Je
maakt
als
het
ware
1
pakketje
van
de
mix
van
producten
in
de
gegeven
verhouding.
-‐
The
formulae
presented
to
this
point
have
assumed
a
single
product
is
produced
and
sold.
-‐
A
more
realistic
scenario
involves
multiple
products
sold,
in
different
volumes,
with
different
costs.
-‐
The
same
formulae
are
used,
but
instead
use
average
contribution
margins
for
bundles
of
products.
-‐
Breakeven
point
in
bundles:
fixed
costst
/
contribution
margin
per
bundle
Gross
margin
&
Contribution
margin:
-‐
Contribution
margin
=
revenues
–
variable
manufacturing
costs
-‐
nonmanucacturing
costs
Is
dus
revenues
minus
de
variable
kosten.
-‐
Gross
margin
=
revenues
–
variable
manufacturing
costs
–
fixed
manufacturing
costs
Is
dus
revenues
minus
de
variable
&
non
variable
manufacturing
cotst.
A
decision
table
=
a
summary
of
the
alternative
actions,
events,
outcomes
and
propabilities
of
these
events.
Expected
outcome
=
the
weighted
average
of
the
outcomes,
with
the
probability
of
each
outcome
serving
as
the
weight.
Zie
vb
boek
blz.
107
H6
Master
Budget
and
Responsibility
Accounting
Budget
defined:
The
quantitative
expression
of
a
proposed
plan
of
action
by
management
for
a
specified
period
and
an
aid
to
coordinating
what
needs
to
be
done
to
implement
that
plan.
-‐
May
include
both
financial
and
nonfinancial
data
-‐
Het
taakstellende
karakter
van
het
budget
(actieplan)
is
het
essentiële
verschil
met
de
begroting
-‐
Een
budget
komt
voort
uit
en
hangt
samen
met
de
globalere
strategie.
Functies
van
het
budget:
1.
Planning
5.
Taakstelling
2.
Coördinatie
6.
Autorisatie
3.
Communicatie
7.
Control
(meer
beheersing
ipv
controleren)
4.
Motivatie
8.
Evaluatie
en
beoordeling
Budgeting
cycle:
4
