Mind Map Gallery management accounting
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management accounting
A mind map about management accounting.
Edited at 2020-09-08 01:10:56
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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?
Categories
Prevention
support activities
reduce # defects
Appraisal
identify defects before shipping
also called inspection costs
Internal Failure
scrap
rejected products
reworking of defective units
downtime caused by quality problem
External failure
warranty
repairs
replacement
recalls
liability/litigation
reputational effects
lost sales
migration of customer base
Analysis
Control charts
random & non-random variation in processes
Pareto diagrams
frequency of defect by type
Cause/Effect diagrams
"fishbone"
root of problems
Main Topic