Chapter 1 Management Accounting

Question 1

Purpose of Management Accounting

Answer 1

Planning
Co-ordinating
Controlling
Communicating
Motivating
Decision Making

Question 2

Decision Making

Answer 2

Management accountants use management information to make informed decisions about the future

Question 3

Planning

Answer 3

Management accountants provide information that is needed to make plans for the business

Question 4

Co-ordinating

Answer 4

By producing plans the different departments within an organisation can be co-ordinated to work together

Question 5

Controlling

Answer 5

Comparing actual figures with budget figures. Then using this information to look into to areas which need to be improved.

Question 6

Communicating

Answer 6

Making sure all departments are on the same page in terms of what the plan is.

Question 7

Motivating

Answer 7

Targets should be included within the plans to motivate the employees.

Question 8

What are the attributes of good information?

Answer 8

Accurate
Complete
Cost Beneficial (Cheap)
Understandable
Relevant
Authoritative
Timely
Easy to use

Question 9

What is Cost Accounting?

Answer 9

Cost accounting is used to determine the cost of a good or service, cost of a accounting period, value inventory, prepare budgets/ forecasts, determine selling price, determine profits on individual products/services.

Question 10

What is a Cost Unit?

Answer 10

A individual unit of a product or service for which cost can be separated to. E.g a car manufacturer would use a car, a hairdresser would use a haircut.

Question 11

What is a Composite Unit?

Answer 11

A composite unit is when a company has two variable they have to divide costs to such as tonnes-miles for a delivery company or patients-day for a hotpital

Question 12

What is a Cost Centre?

Answer 12

Is a place where money leaves the business (costs) but no money comes into the business (incomes). This could be a factory or a classroom for example.

Question 13

What are Segmented Reports?

Answer 13

Reports that are produced for different segments, products or services of the business

Question 14

What are Budgeted Financial Reports?

Answer 14

Budgeted statement of profit or loss and budgets statement of financial position. (Basically budget version of reports made in financial accounting)

Question 15

What are Variance Reports?

Answer 15

Reports comparing actual figures and budgeted figures

Question 16

What are Cost Cards?

Answer 16

The detailed breakdown of the cost of a product/service.

Question 17

What is a Cost Object?

Answer 17

Any objects that can ascertain a cost

Question 18

What is a Responsibility Centre?

Answer 18

An individual part of a business whose manager has a personal responsibility on performance.

Question 19

What is a Revenue Centre?

Answer 19

A part of a business which only occurs income not cost. Eg. A sales team

Question 20

What is a Profit Centre?

Answer 20

A profit centre is a part of a business where both cost and incomes happen.

Question 21

What is a Investment Centre?

Answer 21

A part of a business where investment decisions are made. Therefore they are often judged on Capital Employed as well as profits.