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- 20 Marks
Question
a) Management Accounting is that branch of accounting known for management decision-making. It is a more intimate merger of the two older professions of management and accounting, wherein the information needs of the manager determine the accounting means for their satisfaction.
In Management Accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Management accounting information should comply with certain qualities and characteristics to be useful in planning, control, and decision-making.
Required:
i) Identify THREE (3) objectives of Management Accounting. (6 marks)
ii) Explain FIVE (5) qualities of management accounting information. (5 marks)
b) All deployed cost-accounting controls and processes should bring to focus opportunities for improvement and engender decision-makers’ trust in results. Operational control and cost control management approaches are needed to add insight into where and how cost improvements can be implemented.
Required:
Distinguish between operational control and cost control. (4 marks)
c) Specific order costing methods are appropriate for business organizations that are involved in the construction, manufacturing, or assembling of products to individual customers’ specifications.
Required:
State THREE (3) characteristics of Specific Order Costing. (5 marks)
Answer
a)
i) Objectives of Management Accounting
- Planning: Setting the objectives of the organization and designing measures to ensure their achievement.
- Control: Monitoring the actual performance and comparing that with the plan to take action on deviations.
- Decision-making: Providing information for both long-term and short-term decisions, e.g., make or buy, special pricing, and deletion of a segment.
(3 points @ 2 marks each = 6 marks)
ii) Qualities of Management Accounting Information
Management accounting information should comply with various qualities including:
- Verifiability
- Objectivity
- Timeliness
- Comparability
- Reliability
- Understandability
- Relevance
(Any 5 points @ 1 mark each = 5 marks)
b)
Operational Control vs. Cost Control
- Operational Control: A system put in place to ensure that day-to-day activities are directed toward the expected outcomes. (2 marks)
- Cost Control: Monitoring costs to ensure they align with the planned budget. (2 marks)
c)
Characteristics of Specific Order Costing
- Cost of each cost object is calculated separately.
- Expenses are classified into cost elements and traced to the cost unit.
- Several jobs can be undertaken at the same time.
- Each job is identified for cost accumulation purposes.
- Job cards are issued for each job containing details of the customer.
(Any 3 points @ 1.67 marks each = 5 marks)
- Topic: Scope of Management Accounting
- Series: AUG 2022
- Uploader: Joseph