Key Concepts in Business Analysis and Cost Management
1: Information
- Relevance: Does the data apply to current/future forecasts? Be cautious with past data.
- Ease of Use: Is data accessible and usable?
- Integrity: Verify if the source is reliable and accurate.
- Timeliness: Is the data up-to-date or still relevant?
2: Types of Analytics
- Descriptive: What happened? Uses historical data.
- Predictive: What might happen? Statistical forecasting.
- Diagnostic: Why did it happen? Identifies patterns.
- Prescriptive: What should we do? Provides solutions.
3: Activity-Based
Read MoreKey Accounting and Budgeting Terms: Definitions
Absorption Costing
A costing method that assigns both variable and fixed costs to products.
Contribution Format
An income statement format that is geared to cost behavior in that costs are separated into variable and fixed categories rather than being separated according to the functions of production, sales, and administration.
Contribution Margin Income Statement
An income statement that separates variable and fixed costs; highlights the contribution margin, which is sales less variable expenses.
Contribution
Read MoreEffective Management Control Systems for Business Success
1. Introduction to Management Control
Management Control is the process by which managers ensure that resources are obtained and used in the most efficient way to achieve the organization’s goals. Therefore, it is a tool for assessment defined within an established timetable.
- It involves:
- Strategy definition: mission, external analysis, internal analysis, company goals, strategic plan.
- Organization: hierarchy and responsibility.
- Management Control System: Identify Key Performance Indicators (KPI), measure
Understanding Quantity and Price Standards in Management Accounting
What are Quantity and Price Standards?
A standard is a benchmark or “norm” used to measure performance. In management accounting, two types of standards exist:
- Quantity standards specify how much of an input should be used to make a product or provide a service.
- Price (cost) standards specify how much should be paid for each unit of the input.
Actual quantities and costs are compared to these standards. Deviations from standards deemed significant are brought to the attention of management, a practice
Read MoreBudgeting and Deviation Analysis of General Manufacturing Costs
Forms to Budget the General Manufacturing Costs (GMC)
There are three ways to budget the GMC:
- Unit Budget: This involves establishing a budget for manufacturing overhead recorded for each product or for each type of product. This way, you get the budget of GMC for the manufacturing order simply because of its composition.
- Individual Budget: This consists of performing a budget of GMC for each particular production order.
- Joint or Global Budget: In this case, there is a budget of GMC for the entire