CHAPTER 1.pptx..........................

management accounting

1. CHAPTER 1: INTRODUCTION TO MANAGEMENT ACCOUNTING LECTURER: Siti Nur Aida Mohd Nashruddin MANAGEMENT ACCOUNTING (BACC3044)

2. LEARNING OUTCOME To understand the function of management accounting To differentiate the different between financial accounting and management accounting To define and identify manufacturing cost

3. 1.1MANAGEMENT FUNCTION

4. 1.2 FINANCIAL ACCOUNTING VS MANAGEMENT ACCOUNTING

5. COST is the monetary measure of resources given up to attain a product or service. Costs react to changes in activity; or purpose in decision making; therefore there are categorized as either DIRECT or INDIRECT: DIRECT COSTS (or VARIABLE Cost) are those which change (in total) in direct proportion to the change in activity. INDIRECT COSTS (or FIXED Cost ) are those remain constant within the relevant (normal) range of the activity

6. 1.3 MANUFACTURING COST & NON-MANUFACTURING COST

7. Manufacturing Cost PRODUCT COSTS (also known as manufacturing costs OR inventoriable costs) These costs include: o DIRECT MATERIALS - Material costs that can be traced to the product o DIRECT LABOUR - Labour costs that can be traced to the product o FACTORY OVERHEAD - All manufacturing costs other that those that are direct PRIME COST - Sum of direct materials, (direct expenses), and direct labour

8. Non Manufacturing Cost PERIOD COSTS (also known as non-manufacturing costs OR non-inventoriable costs) These costs include: o MARKETING (SELLING) COSTS All costs necessary to secure orders; and to get the finished product/service into the customer’s hands o ADMINISTRATIVE COSTS All costs of general administration (management) of the company as a whole

9. 1.4 COST OF GOODS MANUFACTURED MANUACTURED (FINISHED) GOODS : The manufacturing account is used to disclose the cost of producing a finished product. The cost are separated into PRIME COST and OVERHEAD COST. PRIME COST The sum of all those costs that can be traced directly to the creation of the product; whose contribution was so great that the product would not exist without them. DIRECT MATERIALS The cost of acquiring actual materials from which the product is made DIRECT LABOUR The cost (wages) of the workers who actually make the product DIRECT EXPENSES The cost (expense) of acquiring the rights to make the product

10. MANUFACTURING (FACTORY) OVERHEAD COST The sum of all those costs (other than prime cost) that were used in the factory; but their contribution was too marginal to be traced directly to the product. INDIRECT EXPENSES The cost exclusively incurred in operating the factory on a whole INDIRECT MATERIALS The cost purchased for the factory but not to make the product INDIRECT LABOUR The cost (wages) of the workers in the factory who do not actually make the product

11. INCOMPLETE WORK/WORK IN PROGRESS (WIP) Due to timing differences the END of the FINANCIAL YEAR and the END of a PRODUCTION CYCLE do not always coincide. As a result work which is in the process of being made at the CUT-OFF DATE can only be measured to the stage (percentage) of its completion.

12. Let’s Do MIND MAPPING 