Management Flashcards
(50 cards)
What is management accounting?
helps managers understand the financial health of their organization, make informed decisions, plan, and monitor performance to achieve their goals
Who is the user of management accounting?
Only produced if the benefits it offers management exceed the cost of collecting it
What are the legal requirements of management accounting?
MA is both past and future
FA is generally passed info
What is the report frequency of MA compared to FA?
MA is daily, weekly or monthly (depends on management needs)
FA is annually (Sometimes semi-annually)
What are the key elements of decision making?
- Identify objectives
- Search for alternative courses of action
- Select appropriate courses of action
- Implement the decisions
- Compare actual and planned outcomes
- Respond to divergences from plan
What are the ethics of management accounting?
- integrity
- objectivity
- Professional competence and due care
- confidentiality
- Professional behavior
explain Integrity
Always be honest and straightforward in your professional and business dealings. Avoid any information that you believe is false or misleading, whether by statement or omission.
explain Objectivity
Don’t let personal interests or other people’s influence affect your professional decisions.
explain Professional competence and due care
Keep improving your professional skills and knowledge. Stay updated on new practices, laws, and techniques. Make sure your team receives proper training and supervision.
explain Confidentiality
Don’t share professional information unless you have permission or a legal obligation to do so.
explain Professional behavior
Follow the law and rules. Don’t do anything that could harm the professional’s reputation.
What can costs be broadly characterized into?
Fixed costs
Variable costs
What are the fixed costs?
Stay the same unless there unless when changes occur to the volume
Fixed costs remain constant over wide ranges of activity for a specified time (total fixed cost is a constant)
What are variable costs?
Vary according to the volume of activity
Costs that vary in direct proportion to the volume of activity
Unit variable cost is a constant i.e cost per unit is constant
Anything you can trace into each unit will increase in cost with every item you make.
What is a semi-fixed cost?
some costs that appear fixed in the short term will vary over the longer term when a wider range of activity is considered
give an example of semi-fixed cost
Example: rents over a period, wedding venue hire under 100 guests is £10,000, between 100 and 150 £13,000 etc.
What is a semi-variable cost?
These costs have both a fixed and a variable element
give an example of semi-variable cost
Example: mobile or energy bills
What is meant by a break-even analysis?
Break-even analysis helps a business figure out:
- How many units does it need to sell to cover all its costs.
- At what level of sales revenue it will start making a profit
What is the breakeven point?
The Breakeven point - BEP (in units sold) is the point at which a business makes neither a profit nor a loss
What is target profits?
If business wants to achieve a target level of profit, it must sell enough units to make enough contribution
So, it can cover fixed costs AND target profit
What is the margin of safety (Mos)?
It is the fall in expected sales volume that would reduce expected profit to zero
What are the qualitative factors of breakeven point?
Break-even analysis can aid managers to make decisions but does not give “the answer”
give one assumption and limitation of the accountants’ model?
Sales prices are constant
ignored discounts and price elasticity of demand
