MANAGEMENT ACCOUNTING

CODE OF ETHICS OF MANAGERIAL ACCOUNTANTS

●​ It is the process of identification, measurement, accumulation,
analysis, preparation, interpretation, and communication of ●​ The Institute of Management Accountants(IMA) issued the
financial information, which is used by management to plan, Standards of Ethical Conduct for Practitioners of Management
evaluate, and control activities within an organization. Accounting and Financial Management.
●​ Provides financial information and non-financial information to ●​ There are two parts to the standards:
organization’s managers and other internal decision-makers. ○​ General guidelines for ethical behavior
●​ Providing financial information to persons within the 1. Competence - Maintain an appropriate level of professional
organization. expertise and Perform professional duties according to relevant
●​ Concerned with providing information to stockholders as it is laws, regulations, and technical standards.
with providing information to managers. False 2. Confidentiality - Keep information confidential except when
●​ It provides REASONABLE and TIMELY ESTIMATES. disclosure is authorized or legally required.
●​ It emphasizes relevance or timeliness and flexibility rather than 3. Integrity - Refrain from engaging in any conduct that would
precision. prejudice carrying out duties ethically.
●​ Reports need to be presented in conformity with IFRS to be 4. Objectivity - Communicate information fairly and objectively.
able to present more useful data to the management. ○​ Specific guidance concerning ethical misconduct
●​ Special reports containing both historical and projected data. within an organization
●​ Compliance with the law is NOT MANDATORY.
●​ If there is a problem in resolving an ethical conflict, the first
MANAGEMENT ACCOUNTANTS - provides information to managers action that should normally be taken is to discuss the problem
through a variety of reports. with his/her immediate superior.

Management accountants do the following tasks: (1) Scorekeeping or data COST BEHAVIOR: ANALYSIS AND USE
accumulation (evaluate organizational performance and position), (2)
Interpreting and reporting information (operating problems), and (3) ●​ Cost is the monetary measure of the amount of resources given
Problem-solving (quantification of possible courses of action). up or used for some purpose such as obtaining current or future
benefits.
●​ ADMINISTRATIVE FUNCTIONS OF MANAGEMENT ●​ Cost Behavior is how a cost react as changes take place in the
ACCOUNTANT level of business activity.
○​ Planning - setting of goals
○​ Controlling - evaluation of performance TYPES OF COST BEHAVIOR PATTERN
○​ Decision-Making - determination of predictive 1.​ Variable Cost
information (relevant cost) -​ cost that change in total as the level of activity changes in the
short run and within the relevant range.
○​ Short run - time period long enough to allow
FINANCIAL ACCOUNTING management to change the level of production or other
activity within the constraints of current total
●​ Provides data for external and internal users. productive or operating capacity
●​ Financial data should be recorded and presented in accordance ○​ Relevant Range - range activity within which
with IFRS. assumptions relative to variable cost and fixed cost
●​ Reports are still useful even if submitted late and show behavior are valid
summaries of financial consequences of actual and past activities -​ costs that change in total each time an additional unit is
where precision is required. produced or sold.
●​ Reporting for the company as a whole. -​ the more units produced or sold, the higher the total cost.
●​ Required by law -​ Variable cost per unit remains constant; Total Variable Cost
changes

2.​ Fixed Cost

GLOBAL BUSINESS ENVIRONMENT -​ remain constant in total regardless of changes in the level of
●​ The key development that drives the extensive changes - growth activity within the relevant range.
of international markets. -​ fixed cost per unit decreases as the activity level rises and
●​ Global business environment is very competitive and firms need increases per unit as the activity level fall
cost management information to sustain competitiveness. -​ Fixed cost per unit changes; Total Fixed Cost remains constant

3.​ Mixed Cost

●​ Just-in-Time Inventory Method - method applied in some -​ It contains both variable and fixed cost elements, also called
Japanese manufacturing firms that produced significant cost semi-variable cost.
and quality improvements using quality teams and statistical -​ The total cost line slopes upward as the variable cost element is
quality control. added to the fixed cost element.
●​ Speed-to-Market - competitive edge; ability to deliver the -​ Equation: Y= a + bX
○​ Y = The total mixed cost (the dependent variable)
product or service faster than the competition.
○​ a = The total fixed cost (the vertical intercept of the line)
 ○​ b = The variable cost per unit of activity (the slope of the line ●​ It is prepared for management’s own use only
○​ X = The level of activity (the independent variable or the cost driver)

FORMULAS
●​ High-Low Method
Variable cost rate or per unit = Cost (highest activity) - Cost (lowest activity)
Highest activity - Lowest activity
Fixed cost = Total cost (lowest or highest activity) - [Variable cost per unit x (Lowest or
Highest activity stated in units)]

COST-VOLUME-PROFIT ANALYSIS
●​ A systematic examination of the relationships among costs, cost
driver, and profit.
BREAK-EVEN ANALYSIS
●​ The sales volume level (in pesos or in units) where total revenues
Elements of CVP Analysis
equals total cost, that is, there is neither profit nor loss.
1.​ Sales
a. Selling Price
METHOD OF DETERMINING THE BREAK-EVEN POINT
b. Units or Volume
1.​ Graphical Method
2.​ Total Fixed Cost
2.​ Formula Approach (CONTRIBUTION MARGIN METHOD)
3.​ Variable Cost per unit
a.​ SINGLE PRODUCT
4.​ Sale Mix (mix of product sold)
i. Break-even point (pesos) = Total Fixed Cost ÷ Contribution margin
ratio
●​ The following relationships may be established:
ii. Break-even point (units) = Total Fixed Cost ÷ Contribution margin
a.​ Contribution margin per unit or marginal income per unit
per unit
(CMU)
CM per unit = Selling price per unit - Variable cost per unit
-​ This is the excess of unit selling price over unit variable costs.

b.​ Contribution margin ratio (CMR)

CM ratio = Contribution Margin ÷ Sales
-​ It shows how the contribution margin will be affected by a given
peso change in total sales.

b.​ MULTIPLE PRODUCT

i. Break-even point (pesos) = Total Fixed Cost ÷ Weighted Ave
Contribution margin ratio
ii. Break-even point (units) = Total Fixed Cost ÷ Weighted Ave
Contribution margin per unit
iii. Weighted Average CM Ratio = Total CM ÷ Total Sales
iv. Weighted Average CM per Unit = Total CM ÷ Total Units

THE CONTRIBUTION MARGIN INCOME STATEMENT

●​ The cost and expense are classified as to behavior (variable and

fixed)
COMPUTING REQUIRED SALES WITH DESIRED PROFIT
1.​ Sales (Units) =Total Fixed Cost + Desired Profit
Contribution Margin Per Unit
2.​ Sales (Pesos) = Total Fixed Cost + Desired Profit
Contribution Margin Ratio

CVP ANALYSIS FOR MULTI- PRODUCTS