Intro to Management Accounting and Cost Concepts/Behaviour

Question 1

Differences between Management and Financial accounting

Answer 1

Management accounting is more internal, looks at owners, managers, employees. Focuses on both future and past info where financial accounting looks at just past

Question 2

Changing role of MA and the management accountant

Answer 2

• Technological advancements and breakthroughs such as Big Data and analytics (so accountant needs to play a role in ‘validating information’

Now, focus on value for customers and sustainability, accountants need to be prepared for this

Question 3

Importance of ethics in MA

Answer 3

Builds trust, promotes loyal, productive relationships with users

CIMA has written codes of ethics which serve as a guide for employees e.g.: integrity, confidentiality

Question 4

What is a cost objective

Answer 4

Any activity for which a separate measurement of costs is required e.g.: inventory valuation

Question 5

What is a cost object

Answer 5

Anything for which cost data is desired e.g.: products, customers

Question 6

What is a cost classification

Answer 6

Grouping together costs which share the same attributes

Question 7

Direct vs Indirect costs

Answer 7

Direct costs are costs of things that directly link to the product e.g. for a car: radio, lights

Indirect costs are indirectly linked to the product, common to all products e.g.: for the car: cleaners, maintenance workers

Question 8

What is the manufacturing overhead

Answer 8

Manufacturing costs that cannot be traced directly to units produced e.g.: tiny screws in cars

Question 9

Prime cost =

Answer 9

Direct materials + direct labour

Question 10

Conversion cost =

Answer 10

Direct labour + MAN OH

Question 11

What is indirect materials and indirect labour

Answer 11

Indirect materials are materials necessary for production but not part of finished product

Indirect labour is all labour other than those who turn raw materials into finished products

Question 12

What is a period cost

Answer 12

A non-stock related cost e.g.: marketing, administrative

Question 13

What is a product cost

Answer 13

A cost that is incurred in purchasing or making the product

Question 14

How do product costs go into the balance sheet

Answer 14

As assets and only go through the profit and loss when they get sold

Question 15

How do period costs go through the profit and loss

Answer 15

In the period in which they are incurred, never in inventory

Question 16

What are differential costs and revenues

Answer 16

Costs and revenues that differ among alternatives

Question 17

What are sunk costs

Answer 17

Costs that cannot be changed by any decision