Fundamentals of Management Accounting glossary

Classifies cost by how it responds to a change in activity level:

• Fixed costs: unchanged in total as activity varies.
• Variable costs: change in direct proportion to activity.
• Semi-variable (mixed) costs: a fixed element plus a variable element, which the cost estimation techniques of the next chapter exist specifically to split.

Taught in Management accounting concepts

Maintain the professional knowledge and skill needed to provide a competent service, and act diligently in accordance with applicable technical and professional standards.

Taught in Management accounting concepts

Respect the confidentiality of information acquired through professional and business relationships, and not disclose or use it without proper authority.

Taught in Management accounting concepts

The amount of resource, usually expressed in money, given up or sacrificed to acquire or produce a good or service.

Taught in Management accounting concepts

A professional responsible for recording, analysing and reporting on the costs an organisation incurs.

Taught in Management accounting concepts

The process of recording, classifying, allocating and reporting costs, chiefly to determine the cost of a product, service or activity.

Taught in Management accounting concepts

A location, function, or item of equipment for which costs are accumulated and separately controlled.

Taught in Management accounting concepts

The process of regulating actual costs against a predetermined standard or budget, to keep spending within an accepted level, a continuous, corrective activity.

Taught in Management accounting concepts

The deliberate, planned effort to permanently lower the cost of a product or service without impairing its quality or suitability, a one-off improvement in the cost itself.

Taught in Management accounting concepts

The unit of product, service, or activity for which a cost is separately measured, a unit produced, an order, a department, or a contract.

Taught in Management accounting concepts

Classifies cost as relevant (a future cost that differs between the decision alternatives being compared) or irrelevant (unaffected by the decision, sunk costs), and as controllable or uncontrollable by a given manager.

Taught in Management accounting concepts

Provide information that is reliable and relevant, so that it can be trusted and depended on by the users it is prepared for.

Taught in Management accounting concepts

Use budget and performance information where it affects their targets, bonus schemes or job security.

Taught in Management accounting concepts

Use management accounting information for strategic decisions, resource allocation, and evaluating overall organisational performance.

Taught in Management accounting concepts

Classifies cost by the business function that incurs it: production, administration, selling and distribution, and finance costs.

Taught in Management accounting concepts

Be straightforward and honest in all professional and business relationships.

Taught in Management accounting concepts

A professional who prepares and interprets management accounting information to support managers' planning and decision making.

Taught in Management accounting concepts

The wider process of identifying, measuring, analysing and communicating financial and operating information to help managers plan, control and make decisions, of which cost accounting is one part.

Taught in Management accounting concepts

Classifies cost by the type of resource consumed: materials, labour, or expenses.

Taught in Management accounting concepts

Classifies cost by the production method used to accumulate it, job costing, batch costing, process costing or service costing (each covered in the chapter on costing methods).

Taught in Management accounting concepts

Use cost data (see the chapter on accounting for materials, labour and overheads) to control material, labour and overhead costs within their department, and to assess production efficiency.

Taught in Management accounting concepts

A segment of a business whose manager is accountable for both the revenue it earns and the costs it incurs, and therefore for its profit.

Taught in Management accounting concepts

Classifies cost as:

• Direct: traceable in full to a specific cost unit, direct material and direct labour.
• Indirect/overhead: not traceable to one specific cost unit, and so shared across several, covered under overheads in the chapter on accounting for materials, labour and overheads.

Taught in Management accounting concepts

Any organisational unit whose manager is held accountable for its performance, a cost centre, profit centre, revenue centre or investment centre depending on what the manager controls.

Taught in Management accounting concepts

Use cost and contribution information (see the chapter on break-even analysis) to guide pricing, product mix and sales targets.

Taught in Management accounting concepts

Classifies cost as historical (actual cost already incurred) or predetermined (a standard or budgeted cost estimated in advance, for control purposes).

Taught in Management accounting concepts