management accounting W2L1

Question 1

why is management accounts important

Answer 1

• communicate, engage and Collab with other specialist
• understand wider business environment

Question 2

what is management accounting and what does it focus on?

Answer 2

is a collection, analysis and reporting of data for planning and control
focuses on:
- cost
-sales
- profit

Question 3

draw a table showing the difference between management and financial accounting.

Question 4

draw a table showing who does what in Management accounting

Question 5

What problem does inflexibility pose in Management Accounting systems?

Answer 5

• inaccurate reporting
• delayed decision making

Question 6

How does bureaucracy impact decision-making in Management Accounting?

Answer 6

needs lots of data gathering and analysis which slows down the decision making process

Question 7

What risks does arbitrariness pose in Management Accounting?

Answer 7

small differences in methods can make a impact on the profit

Question 8

How does the emphasis on hierarchies affect business units in Management Accounting?

Answer 8

• rivalries within company
• competition

Question 9

What is the impact of insular thinking in Cost Accounting?

Answer 9

• focus on cost can impact sales promotion
• undermine awareness of customer needs

Question 10

How does Cost Accounting relate to overproduction?

Answer 10

• Prioritizes cost per unit, which decreases with higher volumes
• encourages companies to overproduce

Question 11

difference between Traditional approach and ABC approach

Answer 11

Traditional Approach: (simple rules)
- production measures labour, machine time and materials used then straight away allocates the cost where it takes into accounts simply the products and services
- (not proportional as it just sets price with what’s has been used (good or bad))

ABC approach: (activity layer)
- more effective as identifies wasteful products
- business process ALWAYS align with the products and services (proportional)

Question 12

difference between lean and traditional accounting:

Answer 12

lean accounting:
- reports daily of sales and costs
- graphical
- workers are main users

Traditional accounting:
- reports monthly /weekly costs
- numerical
-management is the main user

Question 13

What principles does Lean Accounting align with and how is it implemented?

Answer 13

Lean Accounting:
- Aligned with lean manufacturing principles.
- Implemented to eliminate waste, emphasize quality, and achieve rapid response times.

Question 14

define revenue

Answer 14

total income from sale of goods or services

Question 15

define cost

Answer 15

how much something costs to make

Question 16

define income

Answer 16

amount achieved when items sold. Amount charged to
customer

Question 17

define opportunity cost

Answer 17

is what you give up to buy what you want

Question 18

define profit and its formula

Answer 18

-total sales income less total costs
- P = S – C [profit = total revenue – total cost]
P = S – CV – CF [profit = total revenue – total variable cost – total
fixed cost]

Question 19

What are Variable Costs in Management Accounting?

Answer 19

• Costs that fluctuate with quantity:
  
  • Materials and components
  • Labour for manufacturing
• power consumption

Question 20

What are Fixed Costs in Management Accounting?

Answer 20

• Costs that remain constant regardless of quantity:
  
  • Property rent
  • Machinery rental
  • HR department
  • Managing director salary
  • Security

Question 21

what does break even mean?

Answer 21

means you make neither a profit nor a loss =0

Question 22

define contribution and its formula

Answer 22

• the per unit revenue less the per
  unit direct costs
• Contribution = Sv - Cv (Variable sales income – variable costs)