As a company's management accountant you would:
prepare plans & forecasts for the total activities of the business.
Statements that relate to business objectives:
-corporate objectives relate to an organisation as a whole
-it is possible for a division of an organisation to have it's own specific objectives
What is part of the management accountants role?
To provide a service to departmental managers
What does management accounting aim to primarily maximize?
The efficiency of the organization.
Qualities of good information:
-it should be communicated to the right person
-it should be understandable by the recipient
Organisation's management information systems:
-it generates both financial & non-financial information
-it often uses a database system
Spreadsheets:
-have a facility to allow data within them to be displayed graphically
-could be used to prepare a budgeted profit & loss account
Strategic planning:
-it is concerned with quantifiable & qualitative matters
-it is concerned predominantly with the long term
What is an initial requirement of a management control system?
Setting organisational objectives
To reduce the chances of fraud, the finance department should not pay an invoice for raw materials until:
a goods received note has been received, signed by an authorised person
When prices are rising the last in first out (LIFO) method of stock valuation:
understates the gross profit
Under recovery of overheads occurs when:
the actual overhead incurred is more than that charged to production
Activity based costing (ABC) is considered by some to be better than traditional absorption costing because it is:
More accurate
-Harder to understand and carry out and more expensive as more time consuming
Proponents of ABC claim that traditional absorption costing:
Overstates the cost of high volume products
In a management accounting context, AMT stands for:
Advanced manufacturing technology
Another name for a cost pool is:
A cost centre
The first stage in the design of an ABC system is to:
Identify the major activities which take place within the organisation
State a characteristics of contract costing:
Customer-driven production
A company operates a job costing system. Job 812 requires £60 of direct materials, £40 of direct labour and £20 of direct expenses. Direct labour is paid £8 per hour. Production overheads are absorbed at a rate of £16 per direct labour hour and non-production overheads are absorbed at a rate of 60% of prime cost.
What is the total cost of Job 812?
£272
Direct materials £60
Direct labour £40
Direct expenses £20
Prime cost £120
Prod overheads
(5 hrs [£40 dir labour/£8 per hr] x £16 per hr
or 2 x £40 - £16 is 2xhrly lab rate) £80
Non production overheads
(60% x £120) £72
£272
A company operates a job costing system. Job number 506 requires £64 of direct materials and 7 hours of direct labour. Direct labour is paid £8 per hour. Production overheads are absorbed at the rate of £20 per direct labour hour and non-production overheads at a rate of 60% of prime cost.
What is the total cost of job number 506?
£332
Direct materials £64
Direct labour(7hrs x £8) £5 6
Prime cost £120
Production overheads
(7hrs x £20) £140
Non production overheads
(60% x £120) £72
£332
Which of the following industries would most likely use a job costing system?
A Frozen food
B Motor
C Chemical
D Building
D Building
Job costing system is for one off products not likely to be repeated
Job costing is only applicable to service organizations. True of false?
False
Job costing not just apply to service organizations
Batch costing can be used when a number of identical products are manufactured together to go into finished stock. True or false?
True
Batch costing exists where quantities of identical products are made in a batch and the whole batch is treated as a job
