mgmt accounting week 1

• Management Accounting MSc International Accounting & Finance Department of Accounting & Finance Strathclyde Business School 2023-24
• Title


  Management Accounting
• Lecturer


  Julia Smith
• Weeks


  1 – 6
• The department is committed to provide Assessment for Learning' as per the University policy of assessment and feedback.
• This approach recognises that assessment is central to learning and teaching, and is not designed solely to measure student learning.
• Each class has a mixture of coursework assessment and final examination where appropriate.
• The class lecturer will provide specific details on the assessment of the learning outcomes in each class.
• The class lecturer will also explain the nature of the assessments used in the class and provide an overview of the criteria by which the assessments will be marked
• Formal feedback on coursework should normally be given within three weeks of the submission date during the semester, excluding the holiday periods.
• Feedback on assessment


  The nature of the feedback will be appropriate to the assessment, and will usually be received through MyPlace. You are always welcome to see the class lecturer with regards your performance. In terms of the Honours dissertation, students get one to one feedback on work submitted, and any issues they may face in the completion of their dissertations.
• Feedback Beyond Assessment


  You will receive informal feedback through tutorials and workshops in response to set questions. Staff will provide feedback when you ask questions about anything related to the class or seeking further clarification of material covered. Likewise any discussion with the class lecturers and tutors via email, phone, and face to face meetings are relevant feedback.
• Class Aims


  The course aims to give students a foundation in the theory and practice of management accounting. It emphasises the role of the management accountant in helping the owners and managers of a business to make decisions. Different accounting information is required for different purposes: conventional cost accounting emphasises product costs for the allocation of costs between the cost of good sold and inventories; decision-relevant costs provide information to help managers make resource allocation decisions; and responsibility accounting, cost control and performance measurement focus on both financial and non-financial information. It covers management accounting principles and their relevance to the business environment. It further involves a detailed exploration of the uses of management accounting information in the financial decision making process.
• Knowledge Based Outcomes


  On completion of the class students will be able to: understand the role of management accounting; define and use cost terms and concepts; identify the required Information to make better decisions; understand the information required for cost accumulation and assignment; appreciate the role of planning and control purposes; and understand information required for performance measurement.
• Skills Outcomes


  On completion of this class students should be able to demonstrate that they can: analyse information for decision making; employ cost concepts in decision taking; and understand the role of information in a business context.
• Teaching and Learning


  One lecture per week (in person) A one hour workshop a week (in person) Students are expected to undertake both independent and directed learning, by reading in advance of class and attempting the workshop questions. Additional questions will be worked through in workshops. Online resources include multiple choice tests and case studies.
• Assessment


  Class test - 30 per cent Multiple choice test – 45 minutes long, 30 questions (online) Final examination - 70 percent of the assessment Includes calculations and narrative discussion Final examination in April/May - two hours Any reassessment will be via a re-sit exam of the same format as the main exam.
• Reading


  Drury, Colin & Mike Tayles (2022) Management Accounting for Business (8th edn), Thomson Learning. ISBN: 978-1-4737-7880-1. Further Reading Zimmerman, Jerold (2016) Accounting for Decision Making and Control
• Web Resources https://www.cengage.uk/c/management-accounting-for-business-8e-drury-tayles/9781473778801/
• Lecture Programme


  • 1 Management accounting, cost terms and concepts
  • 2 Information for better decisions
  • 3 Cost accumulation and assignment
  • 4 Information for planning and control
  • 5 Information for performance measurement
• Definition of accounting


  Users of accounting information can be divided into two categories: (i) External parties outside the organization (ii) Internal parties within the organization
• Major differences between financial and management accounting


  Statutory requirement, Scope, GAAP, Time period, Frequency
• The changing business environment Organizations have faced dramatic changes in their business environment
• Competing successfully


  Significant impact on MAS
• Key success factors


  • Cost efficiency
  • Quality
  • Time
  • Innovation
• New management approaches


  • Continuous improvement
  • Employee empowerment
  • Value chain analysis
  • Social responsibility and corporate ethics
• International convergence of management accounting Management accounting practices can be observed at the macro or micro levels
• Tendency towards globalization at the macro level

  Drivers of convergence include
• At the micro level accounting information may be used in different ways
• Primary functions of cost/management accounting systems


  • Inventory valuation for internal and external profit measurement
  • Provide relevant information to help managers make better decisions
  • Profitability analysis
  • Product pricing
  • Make or buy
  • Product mix and discontinuation
  • Provide information for planning, control and performance measurement
  • Long-term and short-term planning
  • Feedback control
  • Evaluating performance
• Inventory Valuation and Profit Measurement

  1. Consider a situation where a company has produced three products (A,B and C) during the period. The total costs for the period are £40,000. Product A has been sold for £20,000, product B has been completed but is in finished goods stock, and product C is partly completed. Costs must be traced to products to value stocks and cost of goods sold.

  2. Sales £20,000

  3. Production cost £40,000

  4. Less Closing stocks (B =£18,000, C =£8,000) £26,000

  5. Cost of goods sold (A =£14,000) £14,000

  6. Profit £6,000
• Approximate but inaccurate individual product costs may be appropriate for profit measurement for financial accounting.
• Cost information for providing guidance for decision-making


  Example:Short-term decision A company is negotiating with a customer for the sale of XYZ. The cost recorded for stock valuation purposes is: Direct materials £200, Direct labour £150, Fixed overheads £300 (Total £650). The maximum selling price that can be negotiated is £500 per unit for an order of 100 units over the next three months. Should the company accept the order? Spare capacity Additional relevant costs (100 × £200) £20,000 Additional sales revenue £50,000 Contribution to profits £30,000
• Operational control and performance measurement


  1. Example Budgeted costs per unit: Product 1 £60, Product 2 £150, Product 3 £240 (Total £450). Budgeted and actual production (units) 1000, 1000, 1000.

  2. Comparison of actual with budgeted costs by products: Budgeted cost £450,000, Actual cost £510,000, Variance £60,000 Adverse.

  3. Comparison of actual with budgeted costs by cost centres: Budgeted cost £450,000, Actual costs £510,000, Variance £60,000 Adverse.
• DRURY – Chapter 1: Introduction to management accounting MYPLACE – Multiple Choice Test TUTORIAL – Question 1
• Cost Objects


  Any activity for which a separate measurement of cost is required. A cost collection system normally accounts for costs in two broad stages: 1. Accumulates costs by classifying them into certain categories 2. Assigns costs to cost objects
• Direct and indirect costs


  Direct costs can be specifically and exclusively identified with a given cost object. Indirect costs cannot be specifically and exclusively identified with a given cost object. Indirect costs are assigned to cost objects on the basis of cost allocations. Cost allocations = process of assigning costs to cost objects that involve the use of surrogate, rather than direct measures. The distinction between direct and indirect costs depends on what is identified as the cost object.
• Categories of Manufacturing Costs


  Traditional cost systems accumulate product costs as: Direct materials xxx, Direct labour xxx, Prime cost xxx, Manufacturing overhead xxx, Total manufacturing cost xxx, Non-manufacturing overheads xxx, Total cost xxx
• Period and product costs


  Product costs are those that are attached to the products and included in the stock. Period costs are not attached to the product and included in the inventory valuation.
• Example


  Product costs £100,000, Period costs £80,000, 50% of the output for the period is sold and there are no opening inventories. Production cost (product costs) £100,000, Less closing stock (50%) £50,000, Cost of goods sold (50%) £50,000, Period costs (100%) £80,000, Total costs recorded as an expense for the period £130,000