Management Accounting Class 1 18 February, 2011
Introduction What are the differences (and similarities) of financial and managerial accounting? • Audience • Preparation • Flexibility • Time period • Regulation • Purpose
Group work
Cost behaviour exercise • Direct material costs
Cost behaviour exercise • Supervisor’s salary
Cost behaviour exercise • Electricity costs for a bread packing machine in a bakery
Cost behaviour exercise • Lighting costs in a supermarket
Cost behaviour exercise • Direct hourly labour with a surcharge of 100%for overtime
Cost behaviour exercise • A breakeven chart
Cost behaviour exercise • Cost of raw materials charged at 1$0/ unit for the first 50 units, $5/ unit for the next 50 units, and $1/ unit for any further units
Cost behaviour exercise • Depreciation of plant, calculated on a straight-line basis
Cost behaviour exercise • Mixed costs, for example, costs of water supply based on a mixed annual change plus a charge for every cubic meter used
Cost behaviour exercise • Advertising revenues of a radio station
Cost behaviour exercise • Incentive plan that pays workers $2.10 for every unit produced above some level of production
Cost behaviour exercise • Daily rental costs of three lorries that are hired depending on the daily output of a factory
Cost behaviour exercise • Interest charges on bank overdraft
Cost behaviour exercise • Cost of data transmission service that charges for the first 15,000 minutes of use at a constant rate per minute and is free for any additional units
Cost behaviour • Why does cost behaviour matter? Why should we seek to understand it? – Forecasting – Breakeven analysis – Operating leverage – Cost control – Variance analysis