CS代写 ACCT2522 Management Accounting 1

UNSW Business School
ACCT2522 Management Accounting 1
Topic 1: Introduction to Management Accounting, Understanding Processes and Costing Basics

Managing Costs
2. Activity-based Costing 3. Standard Costs &
Variance Analysis
Managing Quality 4. Cost & Quality
Managing Time
5. Theory of Constraints 6. Project Management
7. Responsibility Accounting & Transfer Pricing
8. Management Control & Performance Evaluation
9. MA Information for Decision-making
ACCT2522 Course Map
Introduced in COMM1180; advanced understanding in ACCT3583
Value Creation
Customers: Products & Services
Role of Management Accounting (MA)
Planning Control
1. MA & Understanding Processes
Activities
Organisational Resources
Introduced in COMM1170
Strategy Implementation

Topic 1: Learning Objectives
1. Understand how management accounting differs from financial accounting
2. Understand processes and demonstrate the ability to conduct process analysis
3. Demonstrate an understanding of costing basics:
a) Discuss relevant cost classifications
b) Demonstrate an ability to select cost drivers
c) Apply cost estimation methods to understand cost behaviour to predict costs

Required Readings
• Moodle e-book on Topic 1 (hereafter “Moodle e- book”)
• Langfield-Smith et al. (2022) 9th ed (hereafter “LS” or “Textbook”)
• Chapter 3 p. 72-74, 87-93 and Appendix Part 1.

1.1 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”
“The value that a customer places on particular features of a product” or service
• Elements of customer value • Cost
• Quality – degree to which a product/service meets expectations
• Time (Duration vs. Timeliness)
From Topic 0 Lecture!

1.2 Uses of Management Accounting
From Topic 0 Lecture!
Implementation of Strategies

1.3 Comparing Management Accounting with Financial Accounting Information (LO1)
Financial Management
1 External user focus
2 Must follow externally
imposed rules
3 Financial data almost
exclusively from
accounting system
4 Objective with historical
orientation
5 Reliable and verifiable 6 Highly aggregated
information
1 Internal user focus 2 No mandatory rules
3 Financial & nonfinancial data from many sources
4 Subjective with emphasis on the future
5 Timely and relevant
6 Information provided at
varying levels of details LS p. 8-10

2.1 Understanding Processes • Process
• Group of interdependent activities which, when performed, utilise the resources of a business to produce a definite result
• Moodlee-bookp.27 • Activity
• A unit of work; step in a process
Providing post-sale services
•Group of interdependent activities which, when
Arrange for
Call is Precursory Visit Assigns R&M
performed, utilise the resources of a business to
received Diagnosis (Customer personnel…
produce a definite result • Moodle e-book p. 2

2.1 Understanding Processes
Providing Post-sales Repair and Maintenance Services (R&M)
Can issue be fixed?
Call is received
Precursory Diagnosis
Transfers call (customer service)
Schedules visit
Fix the problem
Assigns R&M personnel (to continue)

2.1 Understanding Processes • Process
• Group of interdependent activities which, when performed, utilise the resources of a business to produce a definite result
• Moodle e-book p.2
• Activity
• A unit of work (LS p. 74); step in a process
• Resources
• “factors of production” • Moodle e-book p. 2
So why should we adopt a processual view of the organization?

2.2 Conducting a Process Analysis
1. Identify the process of interest 2. Chart the process
3. Evaluate the process
Identify opportunities for cost reduction
• Value analysis
• Assessing efficiency and effectiveness identify causes
• Root cause analysis • Fish bone diagram
4. Implement process improvement

2.2 Conducting a Process Analysis
1. Identify the process of interest
• E.g., value chain analysis and benchmarking
2. Chart the process
3. Evaluate the process
Identify opportunities for cost reduction
• Value analysis
• Assessing efficiency and effectiveness identify causes
• Root cause analysis

2.2 Conducting a Process Analysis
1. Identify the process of interest
2. Chart the process
• Draw a business process map

Example: Dry Cleaning Process
• Activities/decisions underlying the process:
Sort clothes into 3 piles – dark, beige, white
Inspect for stains.
• Do they have stains? A
• If yes, pre-treat (multiple activities here), and then load the clothes into the dry cleaning machines and start machines
• If no, load directly into dry cleaning machines and start machines.
Once dry cleaning is completed, unload
Press clothes
• Pressed clothes are combined based on orders and wrapped in plastic
Checks at random to make sure all items in the order D are present
• Are clothes correctly packed?

Example: Business Process Map for Dry Cleaning Process
Sort clothes
Inspect for stains
Press clothes
Unload Machines
Load and start machines
Combine and pack clothes
Random Checks
To continue
No Are orders Yes correct?

2.2 Conducting a Process Analysis
1. Identify the process of interest
2. Chart the process
3. Evaluate the process
Identify opportunities for cost reduction
• Assessing efficiency and effectiveness identify causes
• Root cause analysis • Fish bone diagram
4. Implement process improvement
• Value analysis

2.2.1 Performing a Value Analysis
• Value-added (VA) Activity:
1. Provides essential value to customer (production)
• Does the activity increase service potential to customer – are customers willing to pay?
• Does this activity bring the product one step closer to completion? (e.g., produces a change in state?)
• Is the activity done right the first time? (e.g., not rework)
2. Essentially to the functioning of the business (admin)
• Non-value added (NVA) Activity:
• Does not add value from (1) the customer AND (2)
business perspective
• Potential grey areas – VA or NVA?
Revision: COMM1180; also Moodle e-book p. 7

2.2.2 Assessing Efficiency and Effectiveness
• Efficiency: Resource usage
• Ability of activities to use the fewest possible resources
• Ratio of output to input.
• Effectiveness: Goal attainment
• Ability of activities to meet customer needs • Example: Activity of sorting clothes
Efficiency
Effectiveness
No. of pieces of clothes sorted per hour (for the month of April)
% of clothes correctly sorted (for the month of April)

Characteristics of “Good” Performance Measures
• Objective
• Measure is unbiased and not subjective. Provides the same reading regardless of who or what is being measured, or who is measuring.
• Reliable
• Measure provides the same information, or signal every time a specific event takes place.
• Accurate
• Measure is clear, precise and consistent. Reflects actual performance.
• Unambiguous
• Measure is free of distortion. What is being measured is explicitly and uniquely defined.
Revision: Summarised from COMM1180

Characteristics of “Good” Performance Measures
• Cost-effective
• Measure provides more value to its than the cost of developing or collecting information for the measure
• Consistent
• Measure is conducive to most forms of linear transformation.
• Sensitive
• Measure signals changes in key conditions
• Functionality of the measure
• Measure is linked to the organisation’s critical success factors and motivates desired behavior.
Revision: Summarised from COMM1180

Lecture Exercise: Dry Cleaning Process
Your turn: Provide a good efficiency measure and a good effectiveness measure for each activity below, and explain why you have chosen the measure.
Write down customer order
Packing clothes for each order
Efficiency Measure
No. of mins taken on average to write down a customer’s order (in Feb)
No. of mins taken on average to pack clothes per order (in Feb)
Effectiveness Measure
% of orders are correctly recorded (in Feb)
% of packed orders that passes the random completeness checks (in Feb)

2.2.3 Root Cause Analysis
• Root Cause Analysis (aka Cost Driver Analysis)
• method that identifies root cause cost drivers of activities
• Root cause cost driver
• “Underlying factors that cause activities to be performed and their costs to be incurred” (LS p. 730)
• Why did something happen?
• Most fundamental reason! Choose one!
• E.g., addressing customer complaints about late deliveries

fridge door not
contemination:
Malfunctioning App
Too little notice is
shut properly
Hiring protocol is not
drinking mik straight
fridge not cold
compliant with best
from carton X
Malfunctioning
to the fridge after
Ordering Tablet
milk not put back
provided to restaurants
Spoilt milk in the fridge
Late Deliveries
no one bothered
milk past expiry
Delivery personnel
lack of training on
Poor quality
to replace spoilt
Delivery personnel
packaging material
are poorly qualified
milk storage &
are not motivated
personal hygiene

2.2.5 Framework: 4 Approaches to Reduce Activity Costs
• Activity elimination
• Eliminating the activity
• Activity reduction
• Reducing resources consumed by the activity
• Activity selection
• Choosing an activity with the lowest cost that matches the strategy
• Activity sharing
• Choosing or designing an activity that allows sharing between different products

2.2.6 Types of Process Improvement: BPR vs CI
Business process re-engineering (BPR)
Continuous improvement (CI)
Definition from Moodle e-book p. 10
“…fundamental rethinking and radical redesign of business processes…”
“…small incremental changes to achieve… (CI) of processes…”
1. Scale of change
2. Personnel Involvement
Cross-functional teams
All employees

Examples: 4 Approaches to Reduce Activity Costs vs Type of Process Improvement
Improvements/ changes made to the process
Type of Process Improvement
Elimination
Training delivery personnel
CI (other BPR examples)
Improving hiring processes
Changing hiring criteria

Topic 1: Learning Objectives
1. Understand how management accounting differs from financial accounting
2. Understand processes and demonstrate the ability to conduct process analysis
3. Demonstrate an understanding of costing basics:
b) Demonstrate an ability to select cost drivers
c) Apply cost estimation methods to understand cost behaviour to predict costs
a) Discuss relevant cost classifications

3.1 Cost Classifications (LO3a)
• Recall costs are “the resources given up to achieve a particular objective” (LS p. 40)
• “Different costs for different purposes!”
1. 2. 3. 4. 5. 6.
Refer to LS exhibit 2.2 p.39 Cost Behaviour Patterns Traceability Controllability
Value Chain Manufacturing costs Timing of expense
Revised in Week 1 Tutorial
Extended in this lecture

3.1.1 Traceability: Assigning Costs Using Traditional Costing Systems (or Volume-based Costing Systems) (LO3a)
Cost allocation base(s)/cost driver(s)
For direct vs indirect costs, see LS p. 41-42; for manufacturing costs, see LS p. 44-45. 32
Revision: COMM1170; Week 1 Tutorial
Manufacturing costs
Non- Manufacturing
Direct Materials
Directly traced
Direct Labour
Manufacturing Overhead
Allocate from cost pool(s)
Cost object: Product

3.1.1 Traceability: Assigning Costs Using Traditional Costing Systems (or Volume-based Costing Systems) (LO3a)
Direct costs
Can identify, or trace, the cost to the cost object; AND
in an economically feasible manner; AND
is appropriate to do so.
When the cost object is a product, direct costs are prime costs (i.e.,
 Indirect costs
direct materials and direct labour costs)
1. As long as any one of the three above criteria does not apply.
• When the cost object is a product, indirect costs are manufacturing overhead costs and non-manufacturing costs.
For direct vs indirect costs, see LS p. 41-42; for manufacturing costs, see LS p. 44-45. 33
Revision: COMM1170; Week 1 Tutorial

3.2 Selecting Cost Drivers (LO3b)
• Selecting a cost allocation base:
• Ideally a cause-and-effect relation exists between the cost allocation base (i.e., a “true” cost driver; or
• a relatively “strong” correlation between the cost and cost allocation base.
• Cost-benefit analysis
Example of cost drivers
• # of cars produced;
• # of DL hours worked
4,000 hrs 100 units 34
A cost driver: An activity or a factor that drives (or causes) costs.
100/(200) X $100K = 50% X $100K
Revision: COMM1170; Week 1 Tutorial
Cost pool #1: Assembly Costs

3.2.1 Cost Behaviour (LO3a,b)
Cost behavior
Variable costs
Definition
“a cost that changes, in total, in direct proportion to a change in the level of activity” (LS p. 78)
Fixed costs
“a cost that remains unchanged, in total, despite changes in the level of activity” (LS p. 80)
Revision: COMM1180; Week 1 Tutorial

3.3 Cost Estimation Approaches (LO3c)
• Managerial judgment (A/c classification method) • Engineering method
• Quantitative analysis
• High–low method
• Regression analysis

3.3.1 Managerial Judgement and Engineering Method
• Managerial judgment (A/c classification method)
• Using experience and judgement to classify costs
Disadvantage
1) No. additional data
1) Relies on manager’s abilities
2) No formal analysis
• Engineering method
• Study of processes that result in the incurrence of costs
Disadvantage
1) No past data
2) Direct relationship
2) Depends on worker’s behaviour

3.3.2 High-Low Method
Derive a cost function
• Use observations at 2 points: highest (h) & lowest (l) levels of activity
Variable cost per unit (b) – slope
= Difference in costs/ difference in activity levels
=(Yl -Yh)/(Xl –Xh)
(NB: Total cost = FC + VC)
Fixed cost (a) – y- intercept
= TC @ lowest activity level – VC @ lowest activity level
Y = a + bX
Where: Y is the cost; X is the quantity or level of activity
a – Intercept
b = variable cost per unit (slope of the line)

Lecture Example: High-Low Method
Family Bus Tours has incurred the following bus maintenance costs over the last half of the year:
Highest activity is 22,000 km Lowest activity is 8,000 km
Variable cost per unit
= (12,500 – 11,000)/(22,000-8,000) = $0.107/km
Required: Use the high-low method to estimate bus maintenance cost behavior. Assume that the distance travelled each month lies within the relevant range of activities.
(NB: Total cost = FC + VC) Taking the lowest activity, Fixed cost
= 11,000 – (0.107)*8,000 = $10,144
Cost function:
Y = 10,144 + 0.107X

3.3.2 High-Low Method
 Advantages
 Objective
 Easy computation
 Little Data
 2 data points
 Outliers that lie beyond the relevant range
 1 cost driver
Relevant range

3.3.3 RegressionAnalysis
Simple Regression
• A statistical technique used to estimate the relation between a dependent (Y) and an independent variable (X)
Where: Y is the cost;
X is the quantity of activity;
a is the FC (constant),
b is the VC per unit (coefficient).
• Line of best fit estimated using least square technique
Distance between actual & estimated costs
b = variable cost
per unit (slope of
Relevant range
a – Intercept

3.3.3 RegressionAnalysis
 Advantages
 Objective
 Accurate/complete
 > 1 cost driver (Multiple regression: Y=a+b1X1 +b2X2+…)
 Statistical evaluation
 May be costly
Distance between actual & estimated costs
Relevant range

Lecture Example: Regression Analysis (adapted from LS)
Family Bus Tours has incurred the following bus maintenance costs over the last half of the year:
1) Using regression analysis, derive a cost function for maintenance cost.
2) Predict the maintenance cost for a month where the bus is expected to travel 25,000 km and delivery weight is expected to be 13,000kg. 43

Lecture Example: Regression Analysis (adapted from LS)
1. The dependent variable:
• Y : Bus maintenance costs
2. The independent variable:
• X1 : Distance travelled (km) • X2 : Delivery weight (kg)
3. Collect data
4. Estimate cost function using regression analysis
• Use excel or some other statistical program • (Note: See Appendix to Chapter 3)
5. Evaluate output

Required: 1) Derive Cost Function
Y=FC+VC1X1 +VC2X2
Y = $2,111.60 + $3.77X1 + $1.48X2
where Y= maintenance cost, X1 = Distance travelled,
X2 = Weight delivered.

2) Predict Maintenance Costs where distance travelled = 25,000km & delivery weight = 13,000kg
Y = $2,111.60 + $3.77X1 + $1.48X2
Y = $2,111.60 + $3.77 (25,000) + $1.48 (13,000)
= $115,601.60

3.3.3.1 Regression Analysis: Evaluation of Cost Function
Economic plausibility (non-statistical)
Goodness of fit (adjusted R2/R2)
% variation in Y that is explained by the model
F – statistic (all independent variables)
What is the likelihood that all relationships between the cost
and cost drivers have occurred by chance?
Benchmark for determining significance: p-value < 0.05 (see heading “Significance F” in table) t- statistic (each independent variable) What is the likelihood that the relationship between the cost and each cost driver has occurred by chance? Benchmark for determining significance: p-value < 0.05 3.3.3.1 Regression Analysis: Evaluation of Cost Function Adj R 2: goodness of fit Explain 99.6% of variation Cost function significance Significance F <0.05 Cost driver significance P<0.05 Review Questions 1. Briefly describe one key difference between financial accounting information and management accounting information. 2. Which of the following is a possible root cause of a student failing an exam? (Multiple answers are possible) a) Writing wrong answers for more than half of the questions b) Not understanding more than half of the questions c) Not attending lectures and tutorials d) Failing to study for the exam 3. To reduce the cost of checkout activities, a grocery store replaced all checkout counters and operators with automated self-checkouts. Classify this improvement initiative (i) 程序代写 CS代考加微信: powcoder QQ: 1823890830 Email: powcoder@163.com

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