Professional Documents
Culture Documents
WHAT IS MANAGERIAL
ACCOUNTING?
COMMON CONCEPTIONS
Tax returns
Financial statements
Investors and
potential
investors
Suppliers,
customers,
other partners
Tax
authorities
Organization
Competitors
Regulatory
agencies
Managerial accounting
Internal users
WHY IS MANAGERIAL
ACCOUNTING IMPORTANT?
Facilitates decisions
Creates, organizes, and shares the
right information to allow for the best
decision
Guides/Influences decisions
Helps align managers and
employees decisions with what is
best for the firm
BY THE WAY . . .
What types of organizations?
Information?
Focus on measurement
Quantitative
Currency-based
Alternatives?
CONTEMPORARY ISSUES
Global organizations
Value chain and strategic alliances
Social considerations
Ethics
Costing Concepts
TERMINOLOGY
Cost
Just money?
Usage of resources
Cost Object
Product
Can be anything
COST FRAMEWORK 1
OBJECTS
Organization of costs by
relation to cost object
Direct costs
Materials
Labor
Indirect costs
Necessary, but difficult/infeasible
to trace to the cost object
Catch-all category
INDIRECT COSTS
Example scenario
Overhead
In multiple-product scenarios,
how overhead is allocated to
products influences the perceived
cost of the product
If arbitrary or inaccurate, may lead
to poor decisions
COST FRAMEWORK 2
BEHAVIOR
BASIC IDEA
EXAMPLE SCENARIO
COST
COST BEHAVIOR
TOTAL VARIABLE COSTS
UNIT COST
COST BEHAVIOR
UNIT VARIABLE COSTS
PRODUCTION VOLUME
TOTAL COST
COST BEHAVIOR
TOTAL FIXED COSTS
PRODUCTION VOLUME
COST
COST BEHAVIOR
UNIT FIXED COSTS
EVERYTHINGS LINEAR?
UNIT COST
COST BEHAVIOR
UNIT VARIABLE COSTS
PRODUCTION VOLUME
TOTAL COST
COST BEHAVIOR
TOTAL FIXED COSTS
PRODUCTION VOLUME
TOTAL COSTS
EVERYTHINGS LINEAR?
Normal
activity
range
UNITS PRODUCED