Management Accounting 1
week 1
management accounting measures, analyses and reports financial and non-financial info that
helps managers to achieve the organizations’ goals.
analyzing and reporting on business performance by means of monthly performance, AOP
profitability, quarterly forecasting, strategic planning, cost control, target setting,
pricing/margin analysis
management accounting = supporting management in doing their job. een tool voor
management.
by providing info to help them manage the daily operations
(costing info, budgets, variances)
by helping them decide on new activities
(setting prices, accepting orders)
helping management to account for its actions
(performance reports, budget outcomes)
2 uses of MA
1. to make decisions
- product and service introductions
- adjusting and improving processes
- pricing decisions
- outsourcing decisions and cooperation decisions
2. to evaluate performance
- how well have we done? have we met our profit targets? who gets a bonus or
promotion?
but: what you measure is what you get
- firm objective: satisfied customers
- performance measure: sales
- possible employee behaviour: sell customers everything they will buy even if they don’t
need it
week 1 lecture deel 1
cost object = something we want to know the cost of (product, sevice, activities,
organizational units)
direct costs can be linked directly to a cost object (dit zijn vaak variable costs)
variable costs = change when the volume of product/service changes
de wielen om een fiets te maken
indirect costs / overhead costs are related to the cost object but cannot be linked directly
(vaak fixed costs)
de plant van de fietsfabriek die wordt gebruikt om fiets te maken
fixed costs = don’t change with a variation in the number of products/services
→ overhead kosten: alle kosten die je maakt om onderneming draaiende te houden
(personeel, administratie, verzekeringen, ict,huisvesting, algemene kosten)
1
,when there is only one cost object, there are no indirect costs. Want je weet dat alles wordt
gebruikt voor dat object. Als er 2 verschillende objecten zijn weet je niet hoeveel van de fixed
costs eigenlijk wordt gebruikt voor de verschillende objects
cost allocation base = finding a way to share the overhead costs among the cost objects
- cause-and-effect relationship with cost pools
week 1 lecture deel 2
job costing = when an org generates individual units with varying characteristics (custom
made)
verschillende soorten jobs/treatments/services
a different cost for each job
process costing = when an org generates masses of similar units
process industry: chemicals, foods
large scale manufacturing
we calculate average costs per period and all output units get the same unit cost
for all costing purposes we require: (geldt voor indirect costs. directe kan je direct tracen)
a set of cost pools: costs which are grouped together (building, wages, equipment)
a cost allocation base for each cost pool. Vaak de cost driver (labor hours)
an estimate of the expected volume of the cost allocation base
you want to calculate a cost per unit of the allocation base to get an allocation rate for each
cost driver (20euro aan wages per labor hour)
à allocation rate = standaard amount of indirect/overhead costs applied to a unit of
production/service
à then you can calculate the cost of each job
plus variabele kosten = unit cost
normal costing = when you calculate allocation rates based on expected costs and volumes
à dit gebruik je omdat je anders alleen job costs kan berekenen aan het einde van de
periode als je de actual costs hebt
costs = budgeted cost rate * actual labor hours
actual costing = when you use actual costs and actual volumes
inventories van verschillende firms
manufacturing firm:
- raw materials (input for production process)
- work-in-process (units on which work is done but not fully completed)
- finished goods (ready to be sold)
merchandising firm: (trade, wholesale, retail: buy and sell products without doing work on
them)
- finished goods
service firm (consultancy, health care):
- no inventories. Maybe some office supplies
→ inventoriable costs / capitalized costs = Provide future benefits. Can be recorded on the
balance sheet (only the manufacturing costs)
2
,revenue costs = costs unrelated to production (marketing, distribution, general costs)
Recorded as expenses of the accounting period when they are incurred
Differences between normal and actual costs. What are the under/ overallocated costs?
Allocating under/ overallocated indirect costs/overhead.
Adjusted rate allocation approach and write-off end of year
Allocating under/ overallocated indirect costs/overhead: Proration
= spread the under- or overallocated overhead among inventory and COGS
(raw materials have not yet been worked on, so only WIP and finished goods inventory)
Proration based on overheads already included in inventory
à percentage van de totale included overhead is de allocation base
3
, Proration based on year end values
Het percentage dat elke inventory is van de totale inventory, dat percentage van de total over
of underallocated overhead voeg je toe aan de inventory
à
percentage van de totale inventory is de allocation base
→ which method is prefered?
de adjusted allocation rate approach. deze gebruikt de actual rate en die is meest precies.
deze correct ook de unit costs of all jobs throughout the year
week 1 deel 3
process costing = when there are more similar units/services which you can’t identify
dan neem je gewoon aan dat dezelfde hoeveelheid overhead costs gelden voor elk proces
Allocation based on machine hours
process industry = chemicals, food processing, oil
high volume identical products = smartphones, computer chips
high volume services = parcel, post delivery
→ conversion costs are the indirect costs (to turn materials into products)
we calculate average costs per period and all output gets the same unit cost
niet alle producten zijn tegelijk allemaal af. er is altijd nog work-in-process
equivalent units used to account for the partially completed units
→ we make an estimate of the degree of completion of the work-in-process
→ number of equivalent units = number of units in process * completion rate
- use different equivalent units for different cost pools. Ook andere completion rates
process costing with closing WIP
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