Question

(a) What is management accounting? State the major areas for which management needs information from accounting.

(b) Explain the role of management accounting in different management processes.

(C) "Cost-volume-Profit (C-V-P) analysis is based entirely on unit costs”. Do you agree? Explain.

Answer 1

A.

Management accounting is the process of preparing reports about business operations that help managers make short-term and long-term decisions. It helps a business pursue its goals by identifying, measuring, analyzing, interpreting and communicating information to managers.

Management accounting focuses on all accounting aimed at informing management about operational business metrics. It uses information relating to costs of products or services purchased by the company. Budgets are often used to quantify the decisions made in operational planning. Management accountants use performance reports to note variances between actual results from budgets.

B.

Management accounting helps managers within a company make decisions.

Also known as cost accounting, management accounting is the process of identifying, analyzing, interpreting and communicating information to managers to help achieve business goals.

The data collected encompasses all fields of accounting that informs the management of business operations relating to the costs of products or services purchased by the company. Management accountants use budgets to quantify the business’ plan of operations.

Performance reports are used to note the deviation of actual results compared what was budgeted.

C.

No. Only two of the basic components of cost-volume-profit (CVP) analysis, unit selling prices and variable cost per unit, relate to unit data. The other components, volume, total fixed costs, and sales mix, are not based on per-unit amounts