Introduction:

CHAPTER
The Role,
History, and
Direction of
Management
Accounting
 Objectives
1. Discuss the need for management accounting
information.
2. Differentiate between management accounting and
financial accounting.
The managerial accounting system has three broad objectives:

1. To provide information for costing out services, products,

and other objects of interest to management.

planning, controlling,
2. To provide information for
evaluating, and continuous improvement.

3. To provide information for decision making.

 Management Accounting
Information System
Collecting Special Reports
Measuring Product Costs
Storing Customer Costs
Analyzing Budgets
Economic Reporting Performance Reports
Events Managing Personal Communication

Inputs Processes Outputs

Users
 Management Process

The Management Process is defined by the

following activities: Planning requires setting
objectives and identifying
Planning methods to achieve those
objectives.

Controlling
Decision Making
 Management Process

The Management Process is defined by the

following activities: Controlling is the
managerial activity of
monitoring a plans
Planning implementation and
taking corrective action as
needed.
Controlling
Decision Making
 Management Process

The Management Process is defined by the

following activities:
Planning Control is usually achieved
with the use of feedback.

Controlling
Decision Making
Management Process
Feedback is information
that can be used to evaluate
or correct the steps being
taken to implement a plan.
 Management Process

The Management Process is defined by the

following activities:
Planning Decision making is
the process of
Controlling choosing among
competing
alternatives.
Decision Making
Differentiate Between Management Accounting
and Financial Accounting
Akuntansi keuangan Perbedaan pokok Akuntansi manajemen
Para manajer puncak dan pihak Pemakai laporan akuntansi Para manajer dari berbagai
luar perusahaan jenjang organisai
Perusahaan secara keseluruhan Lingkup informasi Bagian perusahaan
Berorientasi pada masa yang lalu Fokus informasi Berorientasi pada masa yang akan
datang
Kurang fleksibel. Biasanya Rentang waktu Fleksibel, bervariasi dari harian
kuartalan, setengah tahunan, dan sampai periode 10 tahun
tahunan
Dibatasi oleh prinsip akuntansi Kriteria bagi informasi Tidak ada batasan, memandang
berterima umum akuntansi asas manfaat dan biaya
Ilmu ekonomi Disiplin sumber Ilmu ekonomi dan psikologi
sosial
Ringkasan perusahaan scr Isi laporan Bersifat rinci mengenai bagian
keseluruhan dari perusahaan
Ketepatan informasi merupakan Sifat informasi Unsur taksiran dalam informasi
hal yang penting adalah besar
 EXERSICE 1

1. Explain a brief historical description of management

accounting.
2. Identify the current focus of management accounting.
3. Describe the role of management accountants in an
organization.
4. Explain the importance of ethical behavior for managers
and management accountants.
5. List three forms of certification available to management
accountants.
BASIC
CONCEPTS OF
MANAGEMENT
ACCOUNTING
 LEARNING OBJECTIVES

1. Describe the cost assignment process.

2. Define tangible, intangible products, & explain why
there are different product cost definitions.
3. Prepare income statements for manufacturing & service
organizations.
4. Outline differences between functional-based and
activity-based management accounting systems.
 COST: DEFINITION

Cost is the cash or cash-equivalent

value sacrificed for goods and
services that is expected to bring a
current or future benefit to the
organization.
OPPORTUNITY COST

Opportunity cost is the benefit given

up or sacrificed when one alternative
is chosen over another.
COST OBJECT

A cost object is any item such as

product, customer, project, activity & so
on, to which costs are measured and
assigned.
Is there such a thing as TRUE COST?

NO. It is better to be
approximately correct than
precisely inaccurate.
Unit cost is the total cost
associated with the units
produced divided by the number
of units produced.

Unit cost is used for--

Inventory valuation
Income determination
Providing input to a
variety of decisions
such as pricing, make
or buy, and accept or
reject special orders
Product cost is often defined as the sum of
direct materials, direct labor, and
manufacturing overhead.
This definition is required for external financial
reporting.
 Cost measurement consists of
determining the dollar
amounts of direct materials,
direct labor, and overhead
used in production.

assigns the actual costs of

direct materials, direct labor,
Two possible and overhead to products
(actual costing).
measurement
systems are assigns the actual costs of direct
materials and direct labor to
products; however, overhead cots
are assigned to products using
predetermined rates (normal
costing).
 A predetermined overhead
rate is a rate based on
estimated data.

Budgeted (estimated) cost

Estimated activity usage

Units produced
Direct labor hours
Direct labor dollars
Machine-hours
Direct material dollars
 The total overhead assigned to
actual production is called
applied overhead.

Applied Overhead rate

overhead = x
Actual activity output
The process of associating
the costs, once measured,
with the units produced is
called cost assignment.

Cause & effect relationship when

assigning costs to cost objects:
Direct costs are easily traceable
Indirect costs not so easily
traceable
Cost Assignment Methods

Cost of Resources

Direct Driver
Allocation
Tracing Tracing

Physical Causal Assumed

Observation Relationship Relationship

Cost Objects
 LO 2

Tangible products are goods produced by converting raw

materials.
Example: televisions, hamburgers

Services are intangible products. Example: dental

or medical care.

Services differ from products on 4 dimensions

Intangibility
Perishability
Inseparability
Heterogeneity
25
 LO 2

COST ANALYSIS &

INTERNAL VALUE CHAIN

Different costs for different purposes

Strategic profitability analysis
Uses all costs & revenues associated with product
Short run (tactical) profitability analysis
Uses production, marketing, distributing & servicing,
especially for special orders
External financial reporting
Uses only production costs
26
 LO 2

STRATEGIC PROFITABILITY ANALYSIS

27
TACTICAL PROFITABILITY ANALYSIS

28
 LO 2

EXTERNAL FINANCIAL REPORTING

29
 LO 3

INCOME STATEMENT:
MANUFACTURING FIRM

EXHIBIT 2-5
30
Can you name 2 ways to
design a management
accounting system?

Functional based accounting

(FBM) & activity based
accounting (ABM) are 2 ways
to design a management
accounting system.
 Functional-Based

Unit Activity
Overhead Driver
Costing System

Activity-Based

Unit & Non

Unit Activity
Driver
 EXERSICE 2

1. Find the profit and loss report of service,

merchandising, and manufacturing
company and define the difference
among them.
2. Define the differences between FBM and
ABM