Part I
Part I
Part I
Scope
The scope of management accounting is very wide and broad-based. It includes all information
which is provided to the management for financial analysis and interpretation of business operations.
This includes financial and cost accounting budgeting and forecasting, cost control procedures and
reporting.
Objective
Responsibilities
Managerial accounting and Financial accounting are similar in that they are financially focused,
produce financial reports, have a specific set of users and require a deep understanding of accounting
theory.
The following are the major differences of Financial Accounting and Managerial Accounting:
Financial Accounting
Use of accounting information for reporting to external parties, including investors and
Managerial Accounting
Management uses cost accounting data to minimize the cost and evaluate the performance as a
basis for decision making. It is for this reason that most of the cost accounting concepts are also used in
management. Although there is some overlapping in the areas of cost accounting ang management
accounting the two are not synonymous.
4. Discuss the controllership: explain briefly the qualifications and functions of the
controller.
5. Compare the controller’s function with that of the treasurer. (10 points)
Treasurers and controllers are both financial managers, but they have different roles. Controllers
prepare financial statements and other reports based on past activity. On the other hand, treasurers
focus outward and interact with the bankers, shareholders and potential investors who provide capital.
6. Differentiate line authority from staff authority. Give at least 3 examples. (10
points)
The key difference between line authority and staff authority is that line authority reflects
superior-subordinate relationships characterized by the power of decision making whereas staff
authority refers to the right to advice on improving the effectiveness for line employees in performing
their duties.
Examples are managers within a business who have line authority are the controller,
production manager and sales manager.
Examples of staff positions are accounting finance, purchasing, and management
information systems.
A manufacturing concept which is about customers with what they want when they want it and
aims to inventories by supplying by producing only what it necessary when it is necessary.
c) Process Reengineering
d) Mass Customization
Mass Customization is the process of delivering market goods and services that are modified to
satisfy a specific customer’s needs. Mass customization is a marketing and manufacturing technique that
combines the flexibility and personalization of custom-made products with the low unit costs associated
with mass production. Also known as made-to-order or built-to-order.
e) Balance Scorecard
The balance scoreboard links performance measures. It provides answers to four basic
questions;
f) Activity Analysis
Activity analysis is the examination of the process steps within a selected area of an
organization. This analysis determines the following items:
Activity-based costing (ABC) also known as transaction costing. Those activities (transactions)
that consume overhead resources are identified and related to the costs incurred. The basic premise in
activity-based costing is that overhead costs that are caused by activities are traced to individual product
units on the basis of frequency of consumption of overhead resources by each product.
Activity-based management (ABM) is a system for determining the profitability of every aspect
of a business so that its strengths can be enhanced and its weaknesses can either be improved or
eliminated altogether. ABM can be used to look at the cost of operating the department, the costs of
testing out new products and whether the products developed turned out to be profitable.
i) Theory of Constraints
Theory of Constraints (TOC) is a management paradigm that views any manageable system as
being limited in achieving ore of its goals by a very small number of constraints. There is always at least
one constraint, and TOC uses a focusing process to identify the constraint and restructure the rest of the
organization around it.
Life cycle costing, or whole-life costing, is the process of estimating how much money you will
spend on an asset over the course of its useful life. Whole-life costing covers an asset’s cost from time
you purchase it and time you get rid of it.
k) Target Costing
l) Automation
Automation, or automatic control, is the use of various control systems for operating equipment
such as machinery processes in factories, boilers, and heat-treating ovens, telecommunication network,
etc., by application of machines to tasks once performed by human beings, a simple replacement of
human labor by machines, which by generally implies integration.
Computer-aided design (CAD) is the use of computers to aid in the creation, modification,
analysis or optimization of design. CAD software is used to increase the productivity of the designer,
improve quality of design, improve quality of documentation, and to create database for manufacturing.