Cost
Accounting: A Managerial Accounting Perspective
IE Business School
Luis Fernández–Revuelta
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Session #1
Introduction
IE Business School
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Cost / Management
Accounting
An important part of management
accounting: cost accounting.
The part of accounting that helps managers in:
Planning Controlling Decision Execution of
making strategy
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1 Cost accumulation
2 Best practices in costs: ABC
3 Capacity problems & pricing
4 C-V-P analysis
5 Budgeting
6 Decision making with cost information
7 Pricing
Cost Accounting
We will see in this subject: 8 Customer profitability analysis
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Managerial Accounting
“... [Cost is defined] as a resource Cost object is that thing we want to A past cost is the cost incurred
sacrificed or forgone to achieve a know the cost of … (historical cost), as distinguished
specific objective” from an actual (nowadays) and a
budgeted (future) cost
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What is a cost system for?
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Many companies now recognize that their cost systems are inadequate for
today’s powerful competition. Systems designed mainly to value inventory
for financial and tax statements are not giving managers the accurate and
timely information they need to promote operating efficiencies and
measure product costs.
Kaplan
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Financial Accounting
There are five characteristics for the
financial accounting.
Conformity to US Financial accounting Economic Historical Classification:
GAAP, IAS, etc reports target transactions, using information by nature
external users up of assets, etc
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Managerial Accounting
There are seven characteristics for the
managerial accounting.
Non-conformity Information Business Forecasted Data are shared Classification Relevance,
to financial targets internal transactions information by financial & by function relevance,
accounting decision- managerial relevance
standards making © IE Business School ● 2019
accounting 9
Types of Costs
Costs Total Unit
1. Variable “varies” in total same per unit
2. Fixed “fixed” in total changes per unit
Cost of the Product Direct
Variable Fixed
Cost of the Period Indirect
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Cost Object
Cost
Cost Object
Accumulation
Cost Object
Cost Accumulation Cost
Allocation
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Beginning direct materials inventory
+ Purchases of direct materials
= Available for use
- Ending direct materials inventory
= Direct materials used
+ Direct manufacturing labor
+ Indirect manufacturing costs (Variable and Fixed)
= Manufacturing costs incurred during the current period
+ Beginning finished goods inventory
Schedule of Cost of = Goods available for sale
Goods Sold - Ending finished goods inventory
= Cost of goods sold
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Income Statement
It shows the company’s revenues and
expenses during a particular period
Revenues Cost of GROSS Operating OPERATING
(Sales) - goods sold
=
MARGIN
-
costs
=
INCOME
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Thank You!
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