a) Describe the purpose and role of cost and management accounting within
an organization.[k]
b) Compare and contrast financial accounting with cost and management
accounting.[k]
c) Outline the managerial processes of planning, decision making and
control.[k]
d) Explain the difference between strategic, tactical and operational
planning.[k]
e) Distinguish between data and information.[k]
f) Identify and explain the attributes of good information.[k]
g) Explain the limitations of management information in providing guidance
for managerial decision-making.[k]
Cost Accounting and Management Accounting
Cost accounting and management accounting are terms which are often used
interchangeably. It is not correct to do so. Cost accounting is part of
management accounting. Cost accounting provides a bank of data for the
management accountant to use.
Cost accounting is a process of collecting, analyzing, summarizing and
evaluating various alternative courses of action .
Management accounting measures and reports financial and non-financial
information that helps managers make decisions to fulfill the goals of an
organization.
Role of Cost and Management Accounting
Users of
information
Management
Accounting
Management Only
Format
Content
Includes future
prediction
Level of detail
More detailed
Frequency of
preparation
Purpose of
information
Bases of
valuation
Nature of
information
Legal
requirement
Annually, Quarterly,
monthly or weekly
Useful to plan, control
and make decision
Relevant costs
Financial and Non
financial
None
Financial
Accounting
Shareholders,
banks, creditors,
potential investors,
Customs & Excise,
Government, etc..
Presentation
regulated by law
and profession
through accounting
standards
A summary of
mainly historic
information
As prescribed by
legislation
Usually annually
Stewardship and
investment decision
Historical costs
Mostly financial
Limited company
most produce
Planning
Planning is the setting of goals and selecting the means of achieving
them.
As business become large, these will need to be formalized.
Planning can be either short term or long term
Decision making
Decision making usually involves using the information provided by the
costing system to make decision.
For decision to be optimal, management must be provided with
information appropriate to their needs.
Decisions are made at every step of managerial process.
Control
Strategic control compares the strength, weakness and limitations of
the organization with other business in the same industry.
Control mechanisms are to ensure that organizational objectives are
achieved.
Long
Tactical planning
Planning the utilization of resources to achieve specific objectives in
the most effective and efficient way.
Time frame for planning is typically one year
Tactical plans aim to contribute to the long term strategy
Plans may be very formalized and detailed
Information used in planning will be mix of internal and external
Operational planning
Fully detailed specification by which individuals are expected to carry
out the predetermined cycles of operations to meet sector objectives.
Time frame for planning is very short-possibly one week or even one
day ahead
Targets set will be numeric targets
The information used for planning will be mainly internal
Data and Information
Data are facts or pieces of information, which are recorded but not yet
processed to make it suitable for use.
Accurate
Complete
Cost Effective
Understandable
Relevant
Available
Timely
Easy to use
2. Sources of data
a) Describe sources of information from within and outside the organization
(including government statistics, financial press, professional or trade associations,
quotations and price list.[k]
b) Explain the uses and limitations of published information/data (including
information from the internet) .[k]
c) Describe the impact of general economic environment on costs/revenue.[k]
d) Explain sampling techniques (random, systematic, stratified, multistage, cluster
and quota) .[k]
e) Choose an appropriate sampling method in a specific situation.[s]
Sources of Information
Internal Sources
External Sources
census figures
telephone directories
trade journals
Survey maps
Payroll system
professional publications
the Internet
Quotations
Secondary data can be general and vague and may not really help companies
with decision making.
The information and data may not be accurate. The source of the data must
always be checked.
Strong Economy
Weak Economy
Revenue and cost both increase. Revenue will decline but cost will be
same.
Sampling Methods
Type of Sampling
Multi-Stage Sampling: Use of Stratified Sampling for more than one time.
This is applied where population is particularly large.
1.1 Information is
a. Data
b. Processed Data
c. Manipulated input
d. Computer output
a Middle managers
b Line managers
c Top managers
d All workers
b Line managers
c Top managers
d All workers
b Scheduling production
c Assessing competitor car
d Computing sales tax collected
b Detailed
c Summarized
d Irrelevant
c Unstructured
d Partly structured
1.26 Match and find best pairing for a Human Resource Management
System
(i)Policies on giving bonus (iv)Strategic information
(ii)Absentee reduction (v)Tactical information
(iii)Skills inventory (vi)Operational Information
a (i) and (v)
b (i) and (iv)
c (ii) and (iv)
d (iii) and (v)
1.27 Match and find best pairing for a Production Management System
(i) Performance appraisal of machines (iv)Strategic information to decide on
replacement
(ii)Introducing new production (v)Tactical information technology
1.28 Match and find best pairing for a Production Management System
(i) Performance appraisal of machines (iv)Strategic information to decide on
replacement
(ii)Introducing new production (v)Tactical information technology
(iii)Preventive maintenance schedules (vi)Operational information for machines
a (iii) and (vi)
b (i) and (iv)
c (ii) and (v)
d None of the above
1.29 Match and find best pairing for a Materials Management System
(i) Developing vendor performance (iv) Strategic information measures
(ii) Developing vendors for critical (v) Tactical information items
(iii)List of items rejected from a vendor (vi)Operational information
a (i) and (v)
b (ii) and (v)
c (iii) and (iv)
d (ii) and (vi)
1.30 Match and find best pairing for a Materials Management System
(i)Developing vendor performance (iv)Strategic information measures
(ii)Developing vendors for critical (v)Tactical information items
1.31 Match and find best pairing for a Materials Management System
(i)Developing vendor performance (iv)Strategic information measures
(ii)Developing vendors for critical (v)Tactical information items
(iii)List of items rejected from a vendor (vi)Operational information
a (i) and (vi)
b (iii) and (vi)
c (ii) and (vi)
d (iii) and (iv)
1.32 Match and find best pairing for a Finance Management System
(i)Tax deduction at source report (iv)Strategic information
(ii)Impact of taxation on pricing (v)Tactical information
(iii)Tax planning (vi)Operational information
a (i) and (v)
1.33 Match and find best pairing for a Finance Management System
(i)Budget status to all managers (iv)Strategic information
(ii)Method of financing (v)Tactical information
(iii)Variance between budget and (vi)Operational information expenses
a (i) and (v)
b (iii) and (vi)
c (ii) and (v)
d (ii) and (iv)
1.34 Match and find best pairing for a Marketing Management System
(i)Customer preferences surveys (iv)Strategic information
(ii)Search for new markets (v)Tactical information
(iii)Performance of sales outlets (vi)Operational information
a (i) and (iv)
b (ii) and (v)
c (iii) and (vi)
d (ii) and (v)
1.35 Match and find best pairing for a Marketing Management System
(i)Customer preferences surveys (iv)Strategic information
(ii)Search for new markets (v)Tactical information
(iii)Performance of sales outlets (vi)Operational information
a (iii) and (iv)