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MANAGEMENT AND COST ACCOUNTING COLIN DRURY

PART ONE INTRODUCTION TO MANAGEMENT AND COST


ACCOUNTING
CHAPTER ONE INTRODUCTION TO MANAGEMENT
ACCOUNTING
Accounting is the language of business. I will use accounting
information in the following ways:
As a manager of Afreecon, to make decisions and control the
business, I need information on estimated billing rates, costs,
demands, my competitive position and the profitability of the
various services Marketing, Finance, HR etc
As a shareholder in Kleos, I need information on the value of
my investment and the income derived from my shareholding
Outside business, I need information for:
Obtaining a mortgage
Running CRLE
Running Doctors Health Initiative
Management accounting is internal reporting i.e. for me as a
manager and shareholder.
As a manager, I will use accounting information to manage i.e. to
plan, organize, direct and control. I will make decisions in the
following ways:
PLAN:
o Identify my objective profit maximization
o Search for alternative courses of action get
information about future opportunities (products) and
environments (markets). Done through Budgeting.
o Select appropriate courses of action get information
about different criteria (profits, market share, growth
rate). Select most advantageous alternative. Done in
Part 3.
ORGANIZE & DIRECT:
o Implement the decisions. Done through Budgeting
CONTROL:

o Compare actual and planned outcomes. Done in Part


4.
o Respond to divergences from plan (Go back to PLAN:
Search for alternative courses of action)
The following trends in the business environment have impacted
cost accounting:
Globalization and the competition from all across Africa
means that I will have to analyze costs and profit by
geographical location (Nigeria, etc.)
The growth in the service industry and resulting competition
from within Nigeria means that I have to understand my cost
base and determine the sources of profitability for my
products, customers and markets
The speed with which I need to introduce new products (e.g.
Afreecon) means that, to compete successfully, I need to
manage my costs effectively at the design stage of Afreecon,
have the capability to adapt to changing customer
requirements and reduce the time to market of new and
modified products
With SAP and other ERPs, I can derive information directly
from the system. The accountants job is now to interpret the
information
PART TWO
CHAPTER SIX JOINT AND BY-PRODUCT COSTING

CHAPTER ONE SUMMARY - INTRO TO MANAGEMENT


ACCOUNTING
Accounting decisions are used for planning, organizing, directing
and controlling.
Trends in the business environment that have affected cost
accounting are:
SAP/ERP
Globalization
Growth of the service industry
Short product life-cycle