02411950030002 | Dewi Rahmasari | Summary Ch1 and Ch2

CHAPTER I
The Changing Role of Managerial Accounting in a Dynamic Business Environment

The definition of accounting and its role in management processes is a common thing that every
company has and to reach it the company needs some information. Accounting management is the process
of identifying, measuring, analyzing, interpreting, and communicating information in order to achieve its
objectives. So collaboration and integration of all components is important here. Accounting Management
provides tools and perspectives that can help the company operate more effectively and this tool is used by
all managers.
The basic management process can helps organizations achieve their objectives, as an illustration of
the goal of Walt Disney is committed to superior creativity and company with strict financial discipline to
maximize profitability shareholders. The basic of this management process are: a) Decision making by
choose the right alternative, b) Planning means developing strategies for implementing decision making, c)
Directing Operational Activities means breaking down the strategies into day by day basis, d) Controlling
means make sure that operational activities run in goals way.
There are 5 goals of managerial accounting activity that add value to the organization: a) Providing
data and informations for decision making and planning, b) Assisting managers in directing and controlling
operational activities c) Motivating managers and others employees toward the organization’s goals, d)
Measuring the performance of activities, subunits, managers, and other employees within the organization
e) Assessing the organization’s competitive position, and working with other managers to ensure the
organization’s long run competitiveness in its industry. One of the tools that is used to evaluate business
performance name the balanced score card.
What is the different between managerial and financial accounting? The contrast between managerial
and financial accounting are in the users of the information, the regulation, the source of the data, and the
nature of reports and procedures. Managerial accountants located in both of staff and line position and they
will report the informations to senior VP planning and control and senior executive VP chief financial
officer (CFO)
This CFO has responsibility to control all the finance activities in organization and provide some
informations for line managers, this informations is used for decision making, in addition CFO as a treasurer
has responsible for rising the capital and safeguarding the assets, also as an internal auditor that responsible
for reviewing, recording, and reporting all the financial activities. Because the CFO work is collaborative
with another managers so they have important role in the deployment of cross-functional team management.
Managerial accounting is also related with a value of chain, so to survive in the market the
organization must be perform all activities in a lower cost, higher quality level and no greater cost than the
competitors.
Analyze correctly the organization’s capacity and count the cost of providing by that is the critical
information that provide by managerial accounting. It’s very important for them to distinguish among the
cost of resources supplied, used, and unused. The organization use cost management system to increasing
the value of chain and the activity called activity based costing.
To focus on best practice and development in accounting and finance of companies, the managerial
accounting profession has its own certifications and organizations, for who hold the some form of
certification can earn more money than they do not.
For the last but not least ethical behavior by businesspeople in general, and accountants in particular,
is not a luxury or a discretionary “good thing to do.” It is an absolute necessity to the smooth functioning
of the economy.
02411950030002 | Dewi Rahmasari | Summary Ch1 and Ch2

CHAPTER II
Basic Cost Management Concepts

A cost may be defined as the sacrifice made, usually measured by the resources given up, to achieve
a particular purpose. The important point is that different cost concepts and classifications are used for
different purposes.
First is product cost, is the cost used to establish the goods when they are manufactured until sold. In
the period of the sale, this cost are recognized as an expense called cost of goods sold, and it is named
inventory cost when it’s stored before sold. Second, all costs that are not product costs are called period
cost, it’s recognized as expenses during the time period in which they are incurred. All research and
development, selling, and administrative costs are treated as period costs. The distinction between product
costs and period costs is emphasized by examining financial statements from three different types of firms
(services, manufacture, and retail) they have the different inventory cost. This cost (in all types of firm) will
published in financial statement we call as income statement and balance sheet. All of them are perform the
financial situation of the organization.
There are four types of production processes that influence the manufacturing cost: a) job shop (low
production volume, single product), b) batch (low production, multiple product), c) assembly (high volume,
a few major product), d) continuous flow (high volume, high standardized commodity product).
Manufacturing cost it self (production cost) is divided in three categories: a) direct material cost (After raw
material enters production), b) direct labor cost (cost for person who work directly on the manufactured
products), c) manufacturing overhead cost (all other costs beside cost a and b) consist of indirect material,
indirect labor, and other manufacturing cost. When products are finished, their costs are transferred from
work-in-process inventory to finished-goods inventory, we call it cost of goods manufactured, this cost will
store for several time until the goods sold.
The basic cost management concepts are the different cost for the different purposes, the different
characteristics of costs can be important to understand in a variety of managerial circumstances. The
characteristic of an activity or event that causes costs to be incurred by that activity or event is called a cost
driver. A variable cost changes in total in direct proportion to a change in the level of activity (or cost driver)
and a fixed cost remains unchanged in total as the level of activity (or cost driver) varies.
An entity, such as a particular product, service, or department, to which a cost is assigned is called a
cost object. A cost that can be traced to a particular cost object is called a direct cost of that cost object.
Another cost classification that can be helpful in cost control involves the controllability of a cost item by
a particular manager. If a manager can control or heavily influence the level of a cost, then that cost is
classified as a controllable cost of that manager. Costs that a manager cannot influence significantly are
classified as uncontrollable costs of that manager.
In addition to the costs already mentioned above, the team’s members also found themselves using
economic concepts in classifying costs. First, an opportunity cost is defined as the benefit that is sacrificed
when the choice of one action precludes taking an alternative course of action. Second, the sunk costs. Are
the costs that have been incurred in the past. Consequently, they do not affect future costs and cannot be
changed by any current or future action. Third, a differential cost is the amount by which the cost differs
under two alternative actions, the increase in cost from one alternative to another is called an incremental
cost. Forth, the marginal cost, which is the extra cost incurred when one additional unit is produced.
Marginal costs typically differ across different ranges of production quantities because the efficiency of the
production process changes. And the last are the average cost per unit is the total cost, for whatever quantity
is manufactured, divided by the number of units manufactured. Marginal costs and average costs arise in a
variety of economic situations.
Finally, an important task of the managerial accountant is to determine which of these cost concepts
is most appropriate in each situation. The accountant attempts to structure the organization’s accounting
information system to record data that will be useful for a variety of purposes. The benefits of measuring
and classifying costs in a particular way are realized through the improvements in planning, control, and
decision making that the information facilitates.