Lecture Management accounting: An Australian perspective: Chapter 2 - Kim Langfield-Smith

This chapter introduce the management accounting: basic terms and concepts. The contents of this chapter includes: Management accounting information, conventional vs. contemporary management accounting systems, emphasis on cost, cost classifications, cost behaviour,... Inviting you refer.
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Lecture Management accounting: An Australian perspective: Chapter 2 - Kim Langfield-Smith Chapter 2 Management accounting: basic terms and conceptsCopyright 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & Hilton Slides prepared by Kim Langfield-SmithManagement accountinginformation Components Costingsystem Budgetingsystem Performancemeasurementsystem Costmanagementsystem Conventionalversuscontemporary approachesCopyrightª2003McGrawHillAustraliaPtyLtd, 2Conventional vs. contemporarymanagement accounting systemsCopyrightª2003McGrawHillAustraliaPtyLtd, 3Emphasis on cost Whydomanagementaccountantspayso muchattentiontocosts? Historicfocusonproductioncosts,tovalue inventoryandCOGSforexternalreporting Readyavailabilityofcostdatawithinthe transactionbasedaccountingsystem Importanceofcostinformationinmanagers’ decisions Nonfinancialinformationhasassumed increasedimportanceincontemporary managementaccountingsystemsCopyrightª2003McGrawHillAustraliaPtyLtd, 4Cost classifications Beforeclassifyingcosts,needtoconsider howmanagersintendtousethecost informationindecisionmaking Differentcostandclassificationsareused fordifferentpurposes Thesamecostcanbeclassifiedina numberofwaysdependingontheintended useofthecostinformation continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 5Cost classifications Whatarecosts? Resourcesgivenuptoachieveaparticular objective Ifthebenefitextendsbeyondthecurrent accountingperiodthesecostsareclassifiedas assets Ifthebenefitisused,thecostsareclassifiedas expense MeasuredinmonetarytermsCopyrightª2003McGrawHillAustraliaPtyLtd, 6Cost behaviour Managersmustunderstandhowcosts changeastheasthelevelofactivityinthe businesschanges Thelevelofactivityisthelevelofwork performedintheorganisation Variablecosts Changeintotalindirectproportiontoachange inthelevelofactivity Sometimesreferredtoasunitlevelcostsin productcostingastheyincurredforeachunitof product/serviceproduced continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 7Cost behaviour Fixedcosts Remainunchangedintotaldespitechangesin thelevelofactivity Canbedescribedascommittedcosts Resultfromanorganisation’sownershiporuseof premisesanditsbasicorganisationstructure,andis difficulttochangeintheshortterm orasdiscretionarycosts Resultfrommanagement’sdecisiontospenda particularamountofmoneyforsomepurpose,and canbeeasilychanged continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 8Cost behaviour Costdrivers Anyactivitiesorfactorsthatdrive(cause)costs Conventionalapproachesfocuson productionvolumeasthelevelofactivity(or costdriver) Costsareclassifiedasvariableorfixedwith respecttoproductionvolume Contemporaryapproachesrecognisethat other(nonvolume)costdriversexistCopyrightª2003McGrawHillAustraliaPtyLtd, 9Direct and indirect costs Animportantfunctionofmanagement accountingistomeasurethecostofcost objects Costobjectsaretheitemsforwhich managementwantsaseparatemeasureof costs Products,projects,contractsanddepartments arecommoncostobjectsinconventional costingsystems Contemporarycostingsystemsmayalsoinclude activitiesandcustomersascostobjectsCopyrightª2003McGrawHillAustraliaPtyLtd, 10Direct and indirect costs Inresponsibilitycentres Thecostingsystemmaymeasurethecostsof managers’individualareasofresponsibility Coststhatcanbetracedtoaparticular responsibilitycentrearedirectcostsofthat centre Coststhatrelatetoresponsibilitycentres,but cannotbetracedpreciselytospecific responsibilitycentresareindirectcostsofthose centres continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 11Direct and indirect costs Productcosts Manufacturingcoststhatcanbetracedto productinaneconom ...