MONASH

BUSINESS
SCHOOL

Chapter 1

Management accounting:
information for creating value and
managing resources

No reproduction or posting of this material, except as

provided in the Copyright Act 1968, is permitted
without the written permission of Monash University,
Faculty of Business and Economics.
Welcome to ACC/ACF2200!

Dr Maleen Z. Gong
Chief Examiner and Lecturer
[email protected]
(03) 99052338
 What we’re going to do today……

• Introduce the unit

• Discuss briefly the
assessment tasks
• Learn what management
accounting is
• Highlight how management
accounting is very different to
financial accounting
 ACC/ACF2200: Introduction to
Management Accounting
An introductory management accounting unit that focuses
on the types of cost information that can be produced to
assist managers and other employees within organisations
with planning, control, and decision making.
What do management accountants (MA’s) do in the
workplace?
• Support managers in the process of making
decisions

• Identify problems and help solve them

• Apply accounting concepts and techniques to

real world problems

• Explain accounting concepts and techniques to

managers who are not trained in accounting

7
 Video

What role does the management accountant have?

http://www.youtube.com/watch?v=o_ShGlIvy7U&feature=related
 What does this mean to you as a management
accounting student?
• You must develop a strong ability to apply
accounting techniques to real life problems.
• You must let go of any rote learning mentality
• You must gain and improve excellent analytical
skills through constant practice
• You must be patient! You may not be good at
this straight away but with enough practice and
effort every week, you will improve.

9
 How is this unit assessed?

ASSESSMENT TASK DUE DATE VALUE

Tutorial preparation and Ongoing across all tutorials (including

participation Week 1) 10%

Individual assignment by 5pm 18th of May (Week 10) 20%

Online quizzes Online during Weeks 7 & 12 20%
Final examination To be advised
50%

TOTAL 100%
 Tutorials: Preparation and Participation
Tutorials will run in three stages:
1. Discussion of solution to homework questions
2. Practice of in-class tutorial question/s
3. Discussion of in-class tutorial question/s

Student responsibilities:
– Study relevant textbook chapter
10% of in-semester marks – Complete homework questions
Please read the following on – Read in-class tutorial question/s prior to
Moodle carefully: attending class
• Tutorial schedule – Be proactive in seeking feedback and help with
your work
• Unit schedule and planned
tutorial activities
11
 ACC/ACF2200_S1_2020_Unit Schedule and Planned Tutorial Activities

WEEK STARTING DATE LECTURE TOPIC READINGS HOMEWORK QUESTIONS (TUTORIAL) IN_CLASS QUESTION/S (TUTORIAL)

1 09 MARCH Introduction to Management Accounting Chapter 1 Case Study

( No face-to-face tutorial in week 1)
Prepare answers for case study questions
(no more than 2 pages)

2 16 MARCH Cost terms, concepts and Chapter 2 1.5, 1.6, 1.7, 1.27 Discussion of case study
classifications questions from week 1 & 1.32

3 23 MARCH Cost behaviour, cost drivers and cost Chapter 3 2.5, 2.6, 2.7, 2.22, 2.33 2.39 and 2.40
estimation

4 30 MARCH Product costing systems Chapter 4 3.3, 3.9, 3.11, 3.26, 3.27 3.42

5 06 APRIL Process costing systems Chapter 5 4.4, 4.11, 4.22, 4.26, 4.40 4.43

IN-SEMESTER BREAK 10th APRIL – 17th APRIL

6 20 APRIL A closer look at Chapter 7 5.8, 5.9, 5.10, 5.27, 5.38 5.45
overhead costs

7 27 APRIL Activity-based costing (ABC) Chapter 8 7.1, 7.9, 7.21, 7.32, 7.40 7.41

8 04 MAY Pricing and product mix Chapter 20 8.2, 8.9, 8.11, 8.35, 8.45 8.37
decisions

9 11 MAY Relevant costs for decision making Chapter 19 20.1, 20.12, 20.18, 20.26, 20.27 20.44

10 18 MAY Cost volume profit analysis Chapter 18 19.9, 19.14, 19.29, 19.36 19.34

11 25 MAY Capital expenditure decisions Chapter 21 18.2, 18.5, 18.8, 18.26, 18.43 18.33

12 1 JUNE Course overview 21.23, 21.24, 21.27, 21.28, 21.30 21.29

 Whole
semester

Night
before
exam

During
exam
 www.buseco.monash.edu

Tutorial One
Reflection on ‘Cost Savings in Gulf-Air’

1. Why did Gulf-Air implement aggressive cost-control?

2. How did Gulf-Air cut costs?
(Please note: This question doesn’t ask you to list what costs were cut (you will do this in
the next question – Q3). Instead it asks how costs were cut – i.e. what techniques were
used?)
3. What costs were cut?
4. Besides cost, what other factors were taken into consideration?
5. What skills does a management/cost accountant need to embark on a
cost-cutting project similar to Gulf-Air’s?
(Hint: It may be useful to watch the video uploaded on Moodle (Week 1)).
 Some housekeeping….
• Please only attend the tutorial to which you are
allocated

• Questions about the unit or any topics within it

should be posted on Moodle and not e-mailed to
lecturers or tutors (unless it is of a personal nature)

• Your lecture will be recorded

• Please be aware of the policy regarding the use of

Monash University coursework material
– Further details are found on Moodle

16
 Available now at the Campus bookstore

Management Accounting
Information for Creating and Managing Value
Langfield-Smith | Smith | Andon | Hilton| Thorne
What is Management
Accounting?
……and why is it important?
Some history….

• During the industrial revolution large manufacturers and producers needed

information to measure their companies' performance.
• These companies were privately-owned so accounting did not follow
(financial) accounting standards.
• Owners developed management accounting as a way to track the costs
relating to the production of goods and services.
• These methods became quite complex and laid the foundation for today’s
cost accounting techniques
• As competitors began entering economic markets and owners needed
external financing for their companies, financial accounting was more
important than management accounting.
In recent times….
So….
Managers need information that is much more
detailed than that found in financial reports to
make decisions, solve problems, and plan for
the future.
 Contemporary management accounting
techniques have developed to support new
organisational structures, systems and
practices, as a response to a rapidly
changing business environment
 What is management
accounting?
“… the processes and techniques
that focus on the effective and
efficient use of organisational
resources to support managers in
their tasks of enhancing both
customer value and shareholder
value”
• Customer value
– The value that a
customer places on
particular features of
a product or service

• Shareholder
value
– The value that
shareholders or
owners place on a
business
 Therefore…..
• Management accounting systems produce the information
required by managers to create value for customers and
shareholders
• Examples of management accounting information:
– Estimates of the costs of producing goods and services
– Information for planning and controlling operations
– Information for measuring performance
– Information for determining future plans and strategic
direction

Difficult to extract this information from financial reports

 How MA differs from Financial Accounting….
• Financial accounting:
– The practice of preparing and reporting accounting
information for parties outside the organisation

• Management Accounting:
– Focuses on the information needs of managers inside the
organisation.
Financial Acc Information Management Acc Information
Shareholder reports Support organisational
• Financial statements strategies
• News releases • Capital budgets
Other stakeholder reports • Product development
• Credit reports • Analysis of potential
• Inventory reports for acquisitions
suppliers Support operating plans
Government reports • Operating budgets
• Tax returns • Analysis of product mix
• Cost reports • Cash flow plan
Monitor and motivate
• Actual vs planned
performance
• Bonus computations
• Supplier quality
 MA processes and techniques help to….
• Formulate and implement strategy

• Improve competitive advantage

through process improvement and
cost management

• Manage resources through systems of planning and control

• Estimate the costs of an organisation’s inputs and outputs

• Support the strategic and operational decision needs of managers

 Management accounting and strategy
Vision:
• The desired future state or aspiration of an organisation
• Used by senior managers

Mission statement:
• Defines the purpose and boundaries of the organisation

Objectives (or goals):

• The specific aims of the organisation
• Often quantified
• Relates to a specific period of time
 Strategy

•The direction that the

organisation intends to take over
the long term to meet its mission
and achieve its objectives

•Focus on ways to manage the

organisation’s resources to create
value for customers and
shareholders
 Competitive advantage
• Advantages of one business over another that are difficult to
imitate, achieved by
• Cost leadership
Economies of production
Superior process technologies
Tight cost control
• Product differentiation
Superior quality
Customer service
Delivery performance
Product features
Major decisions in formulating
strategies
• In what type of business will we operate in?
– What products and services should we
launch or discontinue?
– What strategic alliances and business
networks should we enter into?
– What should we invest or divest in?
• How should we compete in that business?
• What systems and structures should we have in
place to support our strategies?
 Two aspects to this….
• Strategic planning
– Long-term planning
– Deciding how a business competes within its chosen market

• Strategy implementation
– Planning and managing the implementation of strategy
– Performance measurement systems compare actual outcomes
to budgets and other targets
– New structures, new systems, new production processes, new
marketing approaches, new human resource management
policies
Planning and controlling
 Overlap with Financial Accounting?
• Not much!!

• Product costs are prepared to meet external reporting purposes

• However….. different product costs may also be produced outside

of the financial accounting system, to better meet managers’
decision-making needs
– These costs may not comply with GAAP or accounting standards
– FLEXIBILITY NEEDED
Design Implement Manage Report Audit

Management Financial
Accounting Accounting

Different information for different purposes

 High level of flexibility in MA….
• Focus is on the needs of managers within the organisation

• Influenced by:
– Managers’ information needs and the nature of the resources
they manage
– Differences in production and service technologies,
organisational structure, organisational size, the external
environment, level of sophistication of computer systems

1-38
 Therefore, quite often….
• ….while accounting staff and processes may be found at the
corporate level to help determine the organisation’s overall
strategy, they are also found in operating divisions

• Managers from other functional areas may also undertake

management accounting activities, for example – customer
service and warehouse managers
 Cost accounting systems
• We need ways of categorising, accumulating and
analysing costs.

• Examples:
• job costing systems
• process costing systems
• hybrid costing systems
• activity-based costing systems

• No two cost accounting systems are alike,

as organisations differ, so too do costing systems
 Acknowledgement
Some slides contained in this presentation were
adapted from:

Management Accounting: Information for managing and creating value 8e, Langfield-
Smith, Smith, Andon, Hilton and Thorne
Copyright © 2018 McGraw-Hill Education (Australia) Pty Ltd