Professional Documents
Culture Documents
1. Collection of data
2. Analysis
3. Presentation of data
4. Planning: A management accountant plans the entire accounting
functions.
5. Controlling: Examines the performance against the set standard and
reports it to the management.
6. Reporting: He reports to the management and advises them on future
decisions.
7. Coordinating: preparation of master budget
8. Decision making
Standard costing
2
a) Material Rate Variance or Material Price Variance is the variance in
the rate or price of material actually spent and the material rate/price
estimated.
Thus, even if there is no change in quantity consumed, if there is a
difference in the total cost, then it is due to the difference in the rate at
which material is consumed.
Material Rate Variance can be derived as follows:
MRV = Actual Quantity (Standard Price – Actual Price)
Marginal Costing
4
Break Even Volume can be better explained with the diagram above.
The positive difference between the operating sales volume and the break
even volume is known as the margin of safety. The larger the difference, the
safer the organization is from a loss making situation. It can be calculated
either in cash or in units.
Margin of Safety can be derived as follows:
Margin of Safety = Actual Sales – Break even Sales
Margin of Safety (in cash) = Profit___
P/V Ratio
Margin of Safety (in units) = Profit______
Contribution/unit
Whenever some resources required for products and are not adequately
available, these resources become limiting factor. If there are limiting
factors, then the product which gives more contribution per unit may not
give more amount of total contribution because, it may not make more
profitable use of limited resources.
In such cases, we can calculate contribution per unit of limiting factor and
the product which offers more contribution per unit of limiting factor is to be
treated as more profitable product and the product priority order is to be
accordingly calculated.
Contract Costing
Work Certified: It refers to that part of the running bill, which is approved
by the architect of the contractee.
Basic Rate Concept: Basic Rate concept refers to the method in which a
fixed rate is maintained for the raw materials throughout the contract
irrespective of the fluctuations in the market price of the material.
Abnormal Loss: It is the part of the process loss caused due to abnormal
circumstances in the factory. For Ex, labour strike, break down of
machinery. It is avoidable and controllable by mgmt. Abnormal loss occurs
in addition to normal loss.
Process Costing
For example, two units that are 50 percent complete are the equivalent of
one unit fully completed.
Budgetary Control
8
What are the uses of diff budgets?
It serves a declaration of policies
Defines the objectives/ targets for executives, at all levels.
Means of coordination of activities
Means of communication
Facilitates centralised control
Helps in planning activities