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CHAPTER 11 : MANAGEMENT ACCOUNTING TECHNIQUE (Types of Techniques…
CHAPTER 11 : MANAGEMENT ACCOUNTING TECHNIQUE
Types of Techniques
Activity Based Costing
Cost Benefit Analysis
Data Dredging
Data Mining
Forecasting
Absorption costing
Marginal costing
Variance costing
Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy
Management accounting techniques give business leaders the tools to measure and increase profit margins while lowering operating expenses.
Breakeven Analysis
Expense Budgeting
Inventory Management
Capital Budgeting
Absorption Costing Definition
Treat all manufacturing cost including both the fixed and variable cost as
product cost
.
Absorption involves in identifying the absorption base, establishing an absorption rate, and absorption of overheads in to cost unit
Basis of absorption involves in unit, labour hour, machine hour and also % of direct labour
Absorption costing formula
(Absorption Cost per-unit) =
(Per-Unit Variable Costs) + (Per-Unit Fixed Overhead)
High value of closing stock will be obtained as some factory overheads are included as product cost and carried forward as closing stock
Marginal Costing Definition
Treat only the variable manufacturing costs as product cost. The fixed manufacturing overheads are regarded as
period cost
.
Lower value of closing stock that included the variable cost only
More relevance decision-making
Marginal costing formula
Sales - VC = FC + Profit
Variance Analysis
Purchase price variance
Labor rate variance
Variable overhead spending variance
Fixed overhead spending variance
Selling price variance
Material yield variance
Labor efficiency variance
Variable overhead efficiency variance
Variance analysis is the quantitative investigation of the difference between actual and planned behavior. This analysis is used to maintain control over a business.