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A snapshot of the summary - Management Accounting and Control
Lecture 1: Introduction & Recap
What are examples of decision making related to product management?
* Add new product
* Terminate and existing product line
* Accept or reject special order
- Operations management
- Budgeting - capital and operating
- Just-in-time (JIT)
What are examples of decision making related to pricing?
* Set selling price to achieve desired profits
* Set selling price to achieve positive cash flow
- Microeconomics - price theory
- Corporate Finance
What are examples of decision making related to cost control?
* Add new equipment
* Change production process
* Make internally versus buy externally (outsource)
- Process engineering
- Management information systems
- Activity-based costing (ABC)
Lecture 1: Cost Analysis & Cost Allocation
When might sunk costs be useful?Sunk costs might be useful for control purposes and ex-post evaluations (learning, accountability, responsibility)
What are weaknesses of break-even analysis?
There are three general problems:
- non-linear relationships
- stepped fixed costs
- multi-product businesses
Firms with high operating leverage have:
- Rapid increases in profits when sales expand
- Rapid increases in losses when sales fall
- Greater variability in cash flow
- Greater risk
Format of Income Statement - Financial Accounting
- Costs of goods sold
= Gross profit
- General, selling, administrative and taxes (period costs)
= Net income
How can the cost/management accounting system be designed?
The design of the accounting system should be guided by the challenges facing the manager.
Additionally, there are 4 key themes that are important to managers seeking to make effective planning and control decisions (see next flashcard)
What are the four key themes in management decision making?
1. Customer Focus
2. Value-chain and supply-chain
3. Key succes factors: cost and efficiency, quality, time and innovation
4. Continuous improvement and benchmarking
How does the value chain of business functions look like?
1. Research and development
2. Product/service/process design
6. Customer service