ACCG101 Lecture Notes - Lecture 9: Management Accounting
30 May 2018
School
Department
Course
Professor
Week 9 Management and Budgeting
Management accounting refers to the process and techniques that focus on the
effective and efficient use of organisational resources to support managers in their
task of enhancing both customer value and shareholder value.
Management Functions
1. Planning
- Looking ahead and establishing short or long term objectives
2. Direction and motivation
- Implementation of plans by coordinating diverse activities and resources
3. Controlling
- The process of keeping the entity’s activities on track
Costs
- Resources given up to achieve a particular objective
Manufacturing Costs
Associated with converting raw materials into finished goods
1. Direct materials (cost of materials e.g. steel, timber)
2. Direct labour (wages and salaries)
3. Manufacturing overheads (indirect materials and labour)
All costs = product costs + period costs
Product costs:
- Costs that are necessary and integral part of producing the product
- E.g. direct materials, direct labour, manufacturing overhead
Period costs:
- Costs that are identified with a specific time period rather than with a saleable
product -> not manufacturing costs
- E.g. selling expenses, admin expenses, financial expenses
Conversion costs:
- Direct labour and manufacturing overhead are incurred in converting direct
materials into finished goods
- The total of direct labour and manufacturing overhead
Prime costs:
- The major costs associated with producing a product
- The total of direct materials and direct labour
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Document Summary
Management accounting refers to the process and techniques that focus on the effective and efficient use of organisational resources to support managers in their task of enhancing both customer value and shareholder value. Looking ahead and establishing short or long term objectives: direction and motivation, controlling. The process of keeping the entity"s activities on track. Implementation of plans by coordinating diverse activities and resources. Resources given up to achieve a particular objective. Associated with converting raw materials into finished goods: direct materials (cost of materials e. g. steel, timber, direct labour (wages and salaries, manufacturing overheads (indirect materials and labour) All costs = product costs + period costs. Costs that are necessary and integral part of producing the product. E. g. direct materials, direct labour, manufacturing overhead. Costs that are identified with a specific time period rather than with a saleable product -> not manufacturing costs. E. g. selling expenses, admin expenses, financial expenses.
