Chapter 2 "Management accounting: cost terms and concepts". The contents of this chapter includes: Management accounting information, conventional vs. contemporary management accounting systems, emphasis on cost, cost classifications, cost behaviour,. Inviting you refer. | Chapter 2 Management accounting: cost terms and concepts 2- Management accounting information Management accounting systems need to be tailored to an organisation’s needs Components Costing system Budgeting system Performance measurement system Cost management system Conventional versus contemporary approaches Contemporary approaches developed in the 1990s in response to changes in the business environment 2- 2- Emphasis on costs Why do management accountants pay so much attention to costs? Historic focus on production costs—to value inventory and COGS for external reporting Ready availability of cost data within the transaction-based accounting system Importance of cost information in managers’ decisions Non-financial information has assumed increased importance in contemporary management accounting systems Used to make decisions and manage various sources of customer value and shareholder wealth 2- Cost classifications: different classifications for different purposes Before we classify costs, we need to consider how managers intend to use the cost information in decision making Different costs and classifications are used for different purposes The same cost can be classified in a number of ways depending on the intended use of the cost information continued 2- Cost classifications: different classifications for different purposes What are costs? Resources given up to achieve a particular objective In financial accounting, if the benefit extends beyond the current accounting period these costs are classified as assets If the benefit is used up in the generation of revenue, the costs are classified as expense Measured in monetary terms 2- 2- Classifying costs according to their behaviour Managers must understand how costs change as the level of activity in the business changes The level of activity is the level of work performed in the organisation Units produced, kilometres driven, hours worked Variable costs Change in total in . | Chapter 2 Management accounting: cost terms and concepts 2- Management accounting information Management accounting systems need to be tailored to an organisation’s needs Components Costing system Budgeting system Performance measurement system Cost management system Conventional versus contemporary approaches Contemporary approaches developed in the 1990s in response to changes in the business environment 2- 2- Emphasis on costs Why do management accountants pay so much attention to costs? Historic focus on production costs—to value inventory and COGS for external reporting Ready availability of cost data within the transaction-based accounting system Importance of cost information in managers’ decisions Non-financial information has assumed increased importance in contemporary management accounting systems Used to make decisions and manage various sources of customer value and shareholder wealth 2- Cost classifications: different classifications for different .
