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SUMMARY NOTES IN MANAGEMENT SERVICES INTRODUCTION TO MANAGEMENT ACCOUNTING Management Services 1. Management Accounting - field of accounting that provides economic and financial information for internal user such as managers for decision making 2. Financial Management Management Financial Accounting Accounting User | Managers, Officer | Investors, Crectos, (intemal user) Govemment (extemal user) Slencaré | No PFRS, GAAP ‘AccaurtirgSterdard | (requites to prepare 5 (Prepares specie | Financial Statement needs only when | monthiyiquarterlyiann needed) wally Basis of [Related to futwe, | Relates to past Report | Historical transactions only Reportin | Segment Product- | Business as a whole gEntty | line, supplier Others | Timeliness Precision The information provided by management accounting covers all areas of stratogy and operations, and Includes information to assist wit planning, directing/motivating & cantrol, and other decision- making by management. ‘+ Planning ~ setting goal, strategies. + Directing/Motivating - overseeing day-to-day activites Controlling ~evaluation of performance against the plan. SUMMARY NOTES IN MANAGEMENT SERVICES COST & COST CONCEPTS Cost- measurement, in monetary terms, of the amount of fesources used for some purpose. Cost Object-is often a product or department for which costs are accumulated or measured % Cost Driver ~ is the unit of an activity that causes the chenge in activity’s cost (variable) ® Cost Pool — is 2 grouping of individual costs, typically by department or service center. > Activity - eters to any event, action transection © Value Adding - necessary to produce product co Nen-Value Adding - do not make the product more valuable CLASSIFICATION OF COST 1, As totype a. Product Cast ~ manufacturing cost — seling & admin cost 2. As to traceability a. Direct Cost - DM, DL b. indirect Cast ~ FOH 3. Fordecision making a. Relevant Gost - wil differ from options b. Differential cost - difference of 2 costs i, Ineremental Cost - increase in cost altemative to another ii. Decremental Cost - decrease in cost from altemative to another ©. Opportunity Gost - income given up fram choosing an alternative d. SunkiHistorical Costs ~ pest cost, irrelevent am, Overall Objective of Management Accounting: Provision of a quality service. Sub-Objective: 1. Provision_of Good Information ~ relevent, reliable, fimely, clear, comprehensive, appropriately communicated 2. Provision of A Value-For-Money Service — benefits must exceed the cost 3. The Availabilty of Informed Personnel ~ WA siatf available o enswer queries and resolve problems 4. Flexibitty GOST ACCOUNTING - A technique or method ‘or determining the cost of a project, process, of thing This cost Is determined by direct measurement, arbitrary assignment, or systematic and rational allocation. ROLE AND ACTIVITIES OF CONTROLLER AND TREASURER CONTROLLER - deals with records, systems, and processes to attain the objectives of internal controls and geod managing TREASURER - He serves as the protector of a company's value and finances from ‘nancial risks Deals with money, cash, or wealth of an organization. Controller Treasurer "Cash flow management: a. Operating — credt anc ". Plenning ard cortzoling 2. Reporting & Interpreting 2. Evelaling and consulting | collection 4, Government relations, b. investing compliance, and reporting «. Financin 5. Eoonomic appraisal provision, investor relations, 6. Tax planning anc shorkterm financing, barking administration and custody 7. Protection of Asset 2. Riskmanagement— insurance 4. Asto Behavior a. Variable Cost — total amount varies directly with change in activity, per units constant Fixed Gost - total amount is constant, per Unit varies inversely with change in activity. i. Committed Fixed Cost ii. Discretionary Fixed Cost c. Mixed Cost -variable + fixed cost d. Step Cost i z i 5 3 : ; coat Talal Amount FerUni T Fed Constant Decreases a7 wodvtion (vere ceationshi) 2 vanabie | prosuetoninereases | constant (rec reatonsg) Toneder | Increases ess | Decrees Sem sroperionatey os. | proportionately varaole | toravarable cor) | “os untae ‘ production costs) a2, ireases sroducon STANDARD OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS 1. Competence 2 Confidentiality 3. Integrity 4. Credibility 2 LEVELS OF POSITIONS 1. Line Positions — directly involved in the revenue generating activities. 2. Siatt Positions — supporting the line position. ‘THE COST FUNCTION Y=a+bx ‘Y= total cost 2 sired cost b= variable cost xe #ofunits COST SEGREGATION TECHNIQUES FOR NIXED COST 1. High-Low Methoc — the oostcriveris the basis 2. Scattergraph Method plots the data point, visval method 3, Least Scuere/Regression Method ~most accurate GOODNESS IN FIT Correlation ~ measure of co-varation between cependent and neepercertvatiables a. Coefficient of Correlation { r) ~ measure the degree of relationsrip between twa variables, Range of values:-1 to 4 Positive (1) direct relaionstip Zera— na felationship Negative (-1)— incirect relationship b. Coefflclent of Determination (r*2) ~ amcurt of variation in the ceperdent variable explained by independent variables. Strength of liner equatan fr cost function. The closer to 1 the better, the more accurate 
