Fundamentals of Management Accountancy

Management Accounting refers to accounting information that can help managers in a) Control of operations b) Planning c) Decision Making To appreciate the importance of Management Accountancy we need to understand its evolution which may be traced as follows: Cost Expenditure incurred to manufacture a product or provide a service. Responsibility Centers Responsibility Centers are […]

Management Accountancy – An Introduction

Management Accounting helps managers in answering many important questions which may not be answered by using Financial Accounting information. A few examples of such questions / problems are below A farmer has piece of land on which he can grow six varieties of tomatoes. He needs to decide within the limited available land which variety […]

Overhead Cost Allocation

Costs incurred by cost centers are classified into two types a) Direct Costs b) Indirect Costs Costs which can be traced to the finished products manufactured are called ‘direct costs’. In other words a relationship between costs and finished products manufactured can be established. Costs which cannot be traced to the finished products manufactured are […]

Production Planning and Inventory Control – Example

Production planning involves a decision of ‘quantity to be produced in future’ with efficient use of resources. It is an integrated plan across various functions of the organization. The following aspects are factored in the production planning process. a) Customer orders b) Production capacity / constraints c) Material requirement (including inventory levels, procurement plan and […]

Risk Analysis & Decision Making

In earlier write-ups we have seen, understood the terms Management Accounting, evolution and it’s need. The term Management Accounting has gone a long way and has been constantly getting reinvented in how best it can be used. The economic crisis which has swept the world economy has resulted in increasing the significance of Management Accountant […]

Work Study – Steps involved in time study technique

In our previous post work study, we have discussed basic concept of “Work Study” in brief. Today, we will discuss steps involved under one of the two techniques (Time Study) under ‘work measurement’.   Steps involved in time study 1) Breaking the activity / task into smaller elements (sub-units). 2) Recording time taken to complete […]

Work Study

Work study is a combination of two techniques Method Study and Work Measurement. While Method Study is an examination of the methods used in carrying out an activity, Work Measurement involves a Time and Motion Study of the worker who performs the activities. The objective of Work Study is to standardize the activities performed and […]

Cost Control and Reduction

One of the primary functions of cost accountancy is control and reduction of cost. While cost control deals with not allowing the cost to rise beyond the planned levels, cost reduction involves a real and permanent reduction in unit cost of production rendered without impairing their suitability for the use intended. Cost control ends when […]