Accounting 2030 Exam I

Management Accounting

The provision and use of financial and non-financial information to assist with decision making, planning, analysis, reporting and control.

Strategy

Plan for using resources to achieve sustainable goals with a competitive environment.

Success

Comes from developing and implementing an effective strategy to fulfil the organization’s mission.

Cost Leadership

-Outperform competition by producing @ lowest cost

-Large Market Share

-Avoids Niche Markets

Price Advantage

Product Leadership (Differentiation)

-Develop &Maintain Unique Value

-Niche/Segmented Markets

Critical Success Factors

Measures of firm performance essential to success.

SWOT Analysis

-Systematic Procedure for Identifying CSF

-Internal Factors (Strengths, Weaknesses, Core Competencies)

External Factors (Opportunities, Threats, Industry Analysis)

Execution

-Consise statement of strategy

-CSF’s are clearly identified communicated and acted upon

-Focus on process of ……… is critical.

Value Chain Analysis

An analytic tool firms use to identify the specific steps required to provide a product or service to the customer.

Cost Management

The development and use of cost management information.

Balanced Scorecard

An accounting report that includes the firm’s critical success factors in four areas:

(1) Financial Performance,(2) Customer Satisfaction, (3) Intermal Processes, and (4) Learning and Growth.

Strategy Map

A graphical representation of the organization’s value proposition; used to depict the series of causes and efects embodied in the various perspectives of an organization’s balanced scorecard.

-Roadmap to execute strategy

-Causes and Effect Diagram of Perspectives in BSC

-Develop & Communicated Strategy throughout Organization

Sustainability

The balancing of the company’s short and long-term goals in all three dimensions of performance— Social, Environmental, and Financial (Triple Bottom Line).

Cost

Usage of resource for some purpose.

Cost Pool

Meaningful group into which costs are collected.

Cost Driver

Any factor that causes or relates to a change in the total cost of any activity.

Assignemt of Costs to Cost Objects/Pools

Explaining Cost Behavior

Cost Object

Any unit to which costs are assigned.

Direct Cost

Traced directly to cost pool or object

Direct Tracing

Indirect Cost

Cannot be traced directly to cost pool or object

Cost Allocation (Assignment using cost drivers (allocation bases).

Direct Materials (D/M)

Cost of materials in production of cost object.

Direct Labor (D/L)

Labor use to manufacture the cost object.

Overhead (OVH)

Indirect Materials (Cost of materials used not part of cost object).

Prime Cost= D/M + D/L

Conversion Costs= D/L + OVH

Indirect Labor

Cost of labor associated with production.

Product Costs

Costs necessary for Production

D/M, D/L, OVH, COGS

Period Cost

All non-product cost for managing the firm

Other income statement items

Variable Costs

Portion of Total Cost that changes in response to changes in a cost driver.

Fixed Costs

Portion of Total Cost that does not change with a change in cost drivers.

Mixed Costs

Include VC and FC components.

Step Cost

Varies with cost drivers in discreet steps.

Unit Cost (Average)

TC/Number of unis of output.

Activity-Based Cost Drivers

-Factors that cause a change in activity

-Starts with Activity Analysis

-Assign Cost Driver for each Activity

Volume-Based Cost Drivers

-Based on amount produced or quanity of service provided.

Structual

-Strategic Plans and Decisions with long term impact.

Executional

-Short-Term Operational Decisions.