Week 1: managerial accounting
Managerial accounting: information for 1. Creating value and 2. Managing resources
Cost terms and concepts: cost classifications
- Predicting cost behaviour
- Assigning costs to cost objects
- Financial reporting
- Making business decisions
Competitive advantage: advantages of one business over another that are difficult to imitate,
achieved by
Cost leadership
- Economies of production Neptune orient lines
- Superior process technologies tesla
- Tight cost control xiaomi
Production differentiation
- Superior quality SIA
- Customer service seamless, connectivity
- Delivery performance google/amazon
- Product features
Managerial accounting is a process of
- Identifying
- Measuring
- Analysing
- Interpreting
- Communicating information
MA deals with the future
Cost: measure of resources given up to achieve a particular purpose
Common cost classification
- Behaviour variable: unit level/engineered, fixed: committed/discretionary
- Traceability direct, indirect
- Controllability controllable, uncontrollable
- Value chain upstream, manufacturing, downstream
- Manufacturing/product costs direct material, direct labour, manufacturing overhead
- Timing of the expense product, period
Predicting cost behaviour
Cost behaviour: how a cost will react to changes in the level of business activity
- Total variable costs change when activity changes
- Total fixed costs remain unchanged when activity changes
,Total variable cost: battery used in tesla model 3 electric car number of battery increases as the
number of cars produced increases
Variable cost per unit: the cost per battery is constant $10k per battery
Total fixed cost: depreciation of gigafactory’s equipment cost not change whether tesla produces
5000 cars or 50,000 cars
Fixed cost per unit: the average cost per car decreases as tesla produces more electric car
decreasing at a decreasing rate
,Summary:
Assigning costs to cost objects
Activities undertaken resources used costs
Direct cost: cost that can be easily and conveniently traced to a unit of product or other cost object
direct material, direct labour
Indirect cost: costs that cannot be easily and conveniently traced to a unit of product or other cost
object manufacturing overhead
, 3 basic manufacturing cost categories
- Direct material
- Direct labour
- Manufacturing overhead
Direct material: raw material that become an integral part of the product and that can be
conveniently traced directly to it battery for the electric car
Direct labour: labour costs that can be easily traced to individual units of product wages paid to
automobile assembly workers
Indirect labour: when you put in robot to do the job, we would have an engineer to make sure the
robot is programmed right wages paid to engineer to maintain robots
Manufacturing overhead does not include prime cost
- Indirect material
- Indirect labour
- Other costs
Indirect material: used to support the production process: lubricant, cleaning supplies
Indirect labour: cost of personnel who do not work directly with the product maintenance
workers, janitors, security guards
Other costs: property taxes, insurance, utilities, overtime premium, unavoidable idle time
Manufacturing costs
- Modern costings systems analyse costs in greater detail than traditional costing systems
- In many industries, direct material is the largest proportion of the manufacturing costs and
direct labour costs are the smallest
Product costs:
- Managers need estimates of product costs for different purposes
- Product costs determine COGS
- Product costs help value inventory on hand
- Period cost
Controllable and uncontrollable cost: a cost that can be significantly influenced a manager is a
controllable cost
Financial reporting
Managerial accounting: information for 1. Creating value and 2. Managing resources
Cost terms and concepts: cost classifications
- Predicting cost behaviour
- Assigning costs to cost objects
- Financial reporting
- Making business decisions
Competitive advantage: advantages of one business over another that are difficult to imitate,
achieved by
Cost leadership
- Economies of production Neptune orient lines
- Superior process technologies tesla
- Tight cost control xiaomi
Production differentiation
- Superior quality SIA
- Customer service seamless, connectivity
- Delivery performance google/amazon
- Product features
Managerial accounting is a process of
- Identifying
- Measuring
- Analysing
- Interpreting
- Communicating information
MA deals with the future
Cost: measure of resources given up to achieve a particular purpose
Common cost classification
- Behaviour variable: unit level/engineered, fixed: committed/discretionary
- Traceability direct, indirect
- Controllability controllable, uncontrollable
- Value chain upstream, manufacturing, downstream
- Manufacturing/product costs direct material, direct labour, manufacturing overhead
- Timing of the expense product, period
Predicting cost behaviour
Cost behaviour: how a cost will react to changes in the level of business activity
- Total variable costs change when activity changes
- Total fixed costs remain unchanged when activity changes
,Total variable cost: battery used in tesla model 3 electric car number of battery increases as the
number of cars produced increases
Variable cost per unit: the cost per battery is constant $10k per battery
Total fixed cost: depreciation of gigafactory’s equipment cost not change whether tesla produces
5000 cars or 50,000 cars
Fixed cost per unit: the average cost per car decreases as tesla produces more electric car
decreasing at a decreasing rate
,Summary:
Assigning costs to cost objects
Activities undertaken resources used costs
Direct cost: cost that can be easily and conveniently traced to a unit of product or other cost object
direct material, direct labour
Indirect cost: costs that cannot be easily and conveniently traced to a unit of product or other cost
object manufacturing overhead
, 3 basic manufacturing cost categories
- Direct material
- Direct labour
- Manufacturing overhead
Direct material: raw material that become an integral part of the product and that can be
conveniently traced directly to it battery for the electric car
Direct labour: labour costs that can be easily traced to individual units of product wages paid to
automobile assembly workers
Indirect labour: when you put in robot to do the job, we would have an engineer to make sure the
robot is programmed right wages paid to engineer to maintain robots
Manufacturing overhead does not include prime cost
- Indirect material
- Indirect labour
- Other costs
Indirect material: used to support the production process: lubricant, cleaning supplies
Indirect labour: cost of personnel who do not work directly with the product maintenance
workers, janitors, security guards
Other costs: property taxes, insurance, utilities, overtime premium, unavoidable idle time
Manufacturing costs
- Modern costings systems analyse costs in greater detail than traditional costing systems
- In many industries, direct material is the largest proportion of the manufacturing costs and
direct labour costs are the smallest
Product costs:
- Managers need estimates of product costs for different purposes
- Product costs determine COGS
- Product costs help value inventory on hand
- Period cost
Controllable and uncontrollable cost: a cost that can be significantly influenced a manager is a
controllable cost
Financial reporting
