Finance and
Accounting/Managerial
Accounting
Part 1
Topic outline
Cost-volume-profit analysis
Budgets
Investing analysis
Variance analysis
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:
1. Research & Development
2. Design
3. Production
4. Marketing
5. Distribution
6. Customer Service
The value chain illustrated
A five-step decision making process in planning and control
1. Identify the problem and uncertainties.
2. Obtain information.
3. Make predictions about the future
4. Make decisions by choosing between alternatives.
5. Implement the decision, evaluate performance, and learn.
, Cost behavior
Variable costs-changes in total in proportion to changes in the related level of
activity or volume.
Fixed costs – remain unchanged in total regardless of changes in the related level of
activity or volume.
Costs are fixed or variable only with respect to a specific activity or a given time
period.
Variable cost Example
GoSound produces portable music players.
Each unit produced requires a digital chip that costs $11.
For example, $1,650,000 is spent when 150,000 units are produced (150,000 x $11)
Fixed Costs Example
Assume that GoSound leases the manufacturing facility where the portable music
players are assembled.
Rent is $1,200,000 no matter the level of production.
The rent is said to be a “fixed” cost, because total rent will not change as output rises
and falls.