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MindMap Gallery management accounting

management accounting

A mind map about management accounting.

Edited at 2020-09-08 01:10:56

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management accounting

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Management Accounting

Competencies

PK:MA:01 Designs, evaluates, and advises on the organization’s performance measures to ensure alignment with corporate strategy, and recommends changes as required (KPIs and balanced scorecards)

PK:MA:02 Develops, analyzes, and monitors operational plans and budgets, and recommends corrective action as needed (annual budgets, special project budgets, budget variance analysis)

PK:MA:03 Identifies, assesses, and advises on information required for management decision making (cost-volume-profit relationships, cost classifications and flows, market or industry data, non-financial factors)

PK:MA:04 Designs, evaluates, and advises on the organization’s management accounting systems to ensure that information is relevant, accurate, and timely (costing models, non-financial reporting,planning and forecasting, activity-based cost models, KPIs and balanced scorecards, responsibilityaccounting)

PK:MA:05 Implements, monitors, and updates management accounting systems (costing models, non-financial reporting, planning and forecasting, activitybased cost models, KPIs and balanced scorecards, responsibility accounting)

PK:MA:06 Analyzes and evaluates information from management accounting systems, and makes decisions (pricing and costing decisions, transfer pricing decisions, make or buy decisions, performance-based compensation plans)

PK:MA:07 Recommends organizational improvements based on results from management accounting systems (cost reduction strategies, revenue growth, business process re-engineering, compensation criteria)

Concepts

Costing methods

Strategic Analysis

Porter's 5 Forces

Current competitors

potential for new entrants

equivalent products or services

bargaining power

customers

suppliers

SWOT

Strengths

R&D

weak

customer

supplier

good reputation

Weaknesses

R&D

cash flows

strong

customer

supplier

high cost structure

Opportunities

competition

collapse of competitor

market

change in product demand

fashion/trend

economy

change in interest rates

economic improvement

economic hardship (eg McDonalds)

increase sales

increase market share

Threats

competition

political changes

economic changes

legislative/regulatory changes

international pressures

Internal

External

Budget Variance & Analysis

Transfer Pricing

effects

profitabliity of subunits

management compensation

performance evaluation/measurement

methods

market-based

general market must be available

usually leads to optimal pricing

where interdependence of subunits is minimal

no additional costs or benefits to compaines

long-run average can be used with high variances

cost-based

methods

straight

absorbtion

full cost

minimum should be variable costs of production for selling unit

maximum should be market price

proration is acceptable

dual can be used when selling uses cost-based and buying uses market

negotiated

ensure that price optimises organizations returns/goal congruence

managers given autonomy

aids in management training

Corporate Governance

definition

system of law and sound approaches by which corporations are directed and controlled, focussing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks which may stem from the misdeeds of corporate officers

specifies distribution of rights/responsibilities

specified rules & procedures for corporate decision making

provides structure through which corporations set and pursue objectives

reflects the context of social, regulatory & market environment

mechanism for monitoring

actions

policies

decisions

alignment of interests among stakeholders

principles

rights & equitable treatment of shareholders

respect rights

help exercise rights

openly and effectively communicate

encourage shareholders to participate in general meetings

interests of other stakeholders

legal

contractual

social

market-driven

include

employees

investors

creditors

suppliers

local communities

customers

policy makers

roles & responsibilities of the Board

sufficient relevant skills & understanding

review & challenge management performance

adequate size

appropriate levels of independence & commitment

integrity & ethical behaviour

fundamental requirement

code of conduct for directors and executive

promote ethical and responsible decision making

disclosure and transparency

clarify and make publicly known roles & responsibilities of board & directors

implement procedures to verify & safeguard integrity of financial reporting

disclose material matters

timely

balanced

all investors have access to clear, factual information

mechanisms

ownership concentration

degree to which large-block shareholders influence activities of management

usu. financial institutions, municipal funds, pension plans

pressure to maximize returns

sometimes remove managers who are perceived as inefficient in meeting goals

board of directors

internal governance mechanism

monitor's managers

elected by shareholders to oversee the management team

protects rights & interests of the shareholders

executive compensation

used to ensure long-term actions align with owners' interests

difficult to design & implement

Inventory management and valuation

break-even analysis

sales-variable costs = contribution margin

CM - fixed costs = profit or loss

at B/E contribution = fixed (p/l = $0)

managing constraints

produce only what can be sold

bottleneck

add overtime or another shift

hire new workers

acquire new machinery

subcontract productoin

streamline production process

pricing differences

long-run

cannot be changed in short-term

usu. fixed costs

set to earn reasonable ROI

all costs are variable in long run

time horizon of one year or longer

competitive forces often set prices

accurate full cost data is a decision requirement

short-run

immediate impact

Costing system

Absorption costing

all costs of production are product costs

cost of a unit of product

direct materials

direct labour

variable o/h

fixed o/h

allocates portion of fixed costs to each unit of product with variable costs

all costs of production = "full cost"

do not include selling & admin

Variable costing

only costs that vary with output are product costs

fixed costs are treated as period costs

no fixed o/h costs

aka direct costing or marginal costing

do not include selling & admin

Activity-based costing

two stage

allocates activities into pools

overhead costs assigned to products/services on basis of iterations of each activity in each pool

activity-based management

thorough understanding of tasks, activities processes carried out in pursuit of goals

Financial and non-financial performance measures

Examples

Gross profit margin

net profit margin

ROI

ROE

good indicators for periodic comparison

based on past data

can be manipulated

performance measures

should include financial and non-financial

financial

lag indicator

can be manipulated

management accountants provide information on effectiveness of strategy implementation

non-financial

other factors contributing to success

Balanced Scorecard

a balance of indicators

financial

customer

internal business processes

learning & growth

management system

aligns business activities to vision of strategy

improves internal & external communication

clarify vision & translate into action

feedback for internal processes & external outcomes

transforms strategic planning from academic exercise to nerve center of an enterprise

Management compensation and bonuses

agency costs (audits)

avoid negative ramifications of earnings management

information assymetry

management & and owner goals

congruent

eliminate rationale for managers to engage in earnings management

indicators

net income

short-term management

subject to manipulation

share price

subject to external influences

long-term growth

industry benchmarks

controllability principle

accountable only for areas over which managers have authority/can influence

Cost of quality

factors

fitness for use

meet customer needs

conform to design specs

conform to engineering requirements

aspects

quality of design

how closely meets needs and wants of customers

conformance

performance according to design and production specs

does product meet design and production specs?