Course: AC211 Management Accounting for Non-Accountants
Instructor: Dr. Gail Sheppard
Purpose: Information resources for managers to control, plan, and make business decisions.
Overlap: Management accounting and cost accounting are often used interchangeably; both can exist separately or combined in organizations.
Structure: Organizations may have distinct departments for Financial Accounting and Management Accounting or might have personnel performing both roles (Financial Accountant and Management Accountant).
CIMA Official Terminology: Management accounting involves applying accounting principles for value creation and protection for stakeholders in various types of enterprises (for-profit and not-for-profit).
Definition: Process of identifying and accumulating costs associated with business operations.
Applications:
Planning: Forecasting future transactions.
Decision-Making: Assessing whether to produce and sell particular products.
Monitoring Outcomes: Comparing expected costs versus actual costs; encapsulated in the saying "What gets measured, gets managed."
Key Functions:
Planning
Decision-Making
Reporting
Performance Measurement
Controlling operations for efficiency.
Steps Involved:
Set Business Decision
Assess alternatives and make decisions
Make plans
Control activities
Monitor outcomes
Refine objectives as necessary.
Involvement in Strategic Decisions:
Market positioning
Sourcing goods
Expansion into international markets.
Business Type: Family-owned greeting card business.
Operations: Buys design from freelancers, prints, assembles, and packages cards.
Recent Changes: After selling shares to investors, a principal active director named Paco appointed two new directors: a Sales Director (Tracey) and a Production Director (Karim).
Sales Director (Tracey):
Implement a commission scheme.
Focus on more profitable product lines.
Production Director (Karim):
Invest in modern equipment.
Establish an in-house design team for a consistent stream of designs.
Build a corporate branding approach.
Absences:
No sales budget inhibiting target setting for the sales team.
Lack of profitability data on different products.
No cost monitoring system in place.
Sales strategy consideration:
Commission scheme needs to balance costs and generated profits.
Achievable target setting is crucial.
Focus on more profitable product ranges requires knowledge of profitability.
Decision Factors:
Assess costs of existing production facilities versus waste levels.
Require information on possible actions before decision-making.
Cost Comparison:
Evaluate in-house versus freelance design costs.
Assess non-financial impacts (e.g., design uniqueness).
Considerations for Actions:
Align actions with the long-term business objectives and priorities.
Board-level decisions regarding strategy are vital.
Profitability: Fundamental objective but should not be the only priority.
Examples of Objectives:
GlaxoSmithKline plc's mission: Improve human life quality.
Pearson plc's vision: Focus on bravery, imagination, and decency.