Lecture 4: Management Accounting

Question 1

What is the purpose of external financial management?

Answer 1

Communication of financial situation to investors, banks, and other stakeholders.

Question 2

What is the purpose of internal financial management?

Answer 2

Support of the management team in achieving targets.

Question 3

Who are the main users of external financial management information?

Answer 3

Mainly external stakeholders, especially investors.

Question 4

Who are the main users of internal financial management information?

Answer 4

Different management hierarchies within the organization.

Question 5

How is external financial management regulated?

Answer 5

Strictly regulated, adherence to rules confirmed by external auditors.

Question 6

How flexible is internal financial management in terms of application?

Answer 6

Any application is possible depending on needs.

Question 7

What is the temporal focus of external financial management?

Answer 7

Historical: presenting past expenses and performance.

Question 8

What is the temporal focus of internal financial management?

Answer 8

Future-oriented: projections, budgeting, product calculations.

Question 9

What are the reporting periods for external financial management?

Answer 9

Defined: usually annually or quarterly.

Question 10

What are the reporting periods for internal financial management?

Answer 10

Flexible: based on decision needs

Question 11

What types of reports are used in external financial management?

Answer 11

Aggregated reports (e.g., one statement for the whole group).

Question 12

What types of reports are used in internal financial management?

Answer 12

Detailed reports for specific decisions.

Question 13

What dimensions can costs be differentiated by?

Answer 13

Attributability, employment dependency, type of recording, source, function, liquidity effect, and origin.

Question 14

What are fixed costs?

Answer 14

Costs that are independent of output during a relevant period.

Question 15

Examples of fixed costs?

Answer 15

Rent, lease, most salaries, insurance.

Question 16

Are fixed costs always fixed?

Answer 16

No, in the long run all costs can change.

Question 17

What are variable costs?

Answer 17

Costs that depend on the cost object’s output.

Question 18

Examples of variable costs?

Answer 18

Material costs, piecework salaries.

Question 19

How are total costs calculated?

Answer 19

Fixed costs + Variable costs.

Question 20

What are mixed costs?

Answer 20

Costs that include both fixed and variable components.

Question 21

What happens to fixed costs per item as quantity increases?

Answer 21

Fixed cost per item decreases.

Question 22

For per-item analysis, how are fixed/variable costs viewed?

Answer 22

Fixed costs are variable; variable costs are fixed.

Question 23

What are direct costs?

Answer 23

Directly allocated to a cost object (e.g., material, production salaries).

Question 24

What are overhead (indirect) costs?

Answer 24

Need an allocation method (e.g., rent, admin, electricity).

Question 25

What is a cost rate allocation?

Answer 25

Output-based cost allocation (e.g., CHF 100/h for machine usage).

Question 26

What is a surcharge rate allocation?

Answer 26

Cost center costs related to a cost type (e.g., 10% storage cost on material).

Question 27

What is a disperse rate allocation?

Answer 27

Allocating costs (like rent) to cost centers by area or similar basis.

Question 28

What is the contribution margin?

Answer 28

Revenue minus variable costs; helps assess profitability.

Question 29

What is the break-even point?

Answer 29

When total revenue equals total costs (fixed + variable).

Question 30

What is break-even volume?

Answer 30

Minimum number of units to be sold to become profitable.

Question 31

What is break-even revenue?

Answer 31

Revenue required to break even.

Question 32

What is the coefficient of safety?

Answer 32

Indicates margin of safety before losses start.

Question 33

How is break-even used in marketing decisions?

Answer 33

To see if fixed marketing costs are covered by contribution margins of added sales.

Question 34

How does break-even help in pricing decisions?

Answer 34

Assesses if higher prices (fewer sales) or lower prices (more sales) lead to higher profits.

Question 35

How does cost structure affect profitability?

Answer 35

High operating leverage means sales changes greatly affect profit.

Question 36

What is operating leverage?

Answer 36

A measure of how sales volume changes affect profit due to cost structure.

Question 37

Why is budgeting controversial yet useful?

Answer 37

It allows planning and comparison of expected vs actual outcomes.

Question 38

How does digitalization impact management accounting?

Answer 38

Offers opportunities for redesign and innovation in accounting practices.