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Chapter 11 Management Accounting Techniques (Types of techniques (Activity…
Chapter 11 Management Accounting Techniques
Definition of Management Accounting
the process of analyzing business costs and operations to prepare internal financial report, records and account to aid managers’ decision making process in achieving business goals.
Types of techniques
Activity based costing
Cost benefit analysis
Data dredging
Data mining
Demand forecasting
Variance analysis
Regression analysis
Absorption costing
used when preparing financial statements for external purposes.
inventory and units produced must include a share of all production costs, both fixed and variable, incurred in getting them to their present condition
Formula : (Absorption Cost per-unit) = (Per-Unit Variable Costs) + (Per-Unit Fixed Overhead)
Marginal costing
used for internal decision making purpose (short-term)
as fixed costs are incurred regardless of the level of activity the purpose of marginal costing is to determine what contribution is been generated (sales less variable costs)
Formula : Sales - VC = FC + Profit
Variance Analysis
Is an analysis of the difference between planned and actual numbers for the same time period
should be performed on an annual basis by all centers
Formula = Actual Income/ Expense – Budgeted income/ Expense
Management accounting techniques provide a tool to measure and increase profit margins while lowering operating expenses
Breakeven Analysis
Expense Budgeting
Inventory Managament
Capital Budgeting