Management Accounting Techniques
Cost the work, absorb the overheads, decide with contribution, and build budgets you can flex. Includes variance analysis and reporting to managers.
Subsections
Read the lessons, then take the check. The check pulls in anything you struggled with earlier in the unit.
Costing fundamentals
What management accounting is for, how costs behave, and how materials and labour are costed before overheads enter the picture.
- Purpose, cost centres and classification9 min
- Material costs, FIFO and AVCO9 min
- Labour costs and payment methods8 min
Overheads and absorption
Getting indirect costs into the cost of a product: allocation, apportionment, reapportionment, absorption rates and the under or over absorption that follows.
- Allocation, apportionment and reapportionment9 min
- Absorption rates and cost cards8 min
- Under and over absorption8 min
Short term decision making
Contribution as the decision tool: break even, margin of safety, target profit, limiting factors, and make or buy.
- Contribution, break even and margin of safety9 min
- Limiting factors and product ranking9 min
- Make or buy, and relevant costs8 min
Budgeting and variance reporting
Build functional and cash budgets, flex them properly, calculate variances and write the report a manager can act on.
- Preparing functional and cash budgets9 min
- Flexed budgets and variance calculation9 min
- Interpreting variances and reporting to managers9 min
Mixed unit review
Fifteen questions drawn from the whole unit, weighted towards the topics you have got wrong before. Nothing is flagged for revision right now.
Month end pack for Aldbury Precision
You work in the management accounts team at Aldbury Precision. The budget was built for 8,000 units but the factory made and sold 9,000. The plant manager wants the pack before Thursday's meeting, along with a view on which variances matter and a decision on a component quote from an outside supplier.
How this unit is assessed
Computer based assessment, eight tasks, 120 marks, computer & human marked.
| Task | Focus | Marks |
|---|---|---|
| 1. Purpose of management accounting | Users, cost centres, cost units, cost behaviour | 12 |
| 2. Inventory valuation and labour | FIFO, AVCO, piecework, overtime and idle time | 16 |
| 3. Overhead absorption | Apportionment, absorption rates, under or over absorption | 18 |
| 4. Short term decisions | Contribution, break even, limiting factors | 18 |
| 5. Budget preparation | Functional and cash budgets | 18 |
| 6. Flexed budgets and variances | Flexing, favourable and adverse variances | 18 |
| 7. Performance indicators | Gross and operating margin, return on net assets | 10 |
| 8. Written report | Explaining variances and recommending action | 10 |