What are Flexible Budget and Flexible Budget Variance?
A budget is a future-oriented strategy. Therefore, budgets are planning tools, and they are often produced prior to the beginning of the budgeted period. However, comparing the budget to the actual results offers useful performance information. Budgets are, therefore, both planning and performance evaluation instruments. Typically, the single most significant budget input is a measure […]
What are the Fixed Costs in Management Accounting?
Fixed costs are expenses that remain constant or unchanged regardless of changes in the level of production or sales within a relevant range. They are often time-related, meaning they are incurred over a specific period, such as a month or a year. The cost of rent and leasing space, wages, energy bills, insurance premiums, and […]
What is Performance Budgeting?
The process of performance budgeting entails evaluating an organization’s performance within the context of the organization’s particular objectives as well as its overarching goals. To do this, there must be no ambiguity whatsoever on either the short-term or the long-term goals of the company. It is important that the different levels of management have their […]
What is Marginal Cost Equation | Practical Application
The marginal cost of an additional unit of output is often referred to as the “prime cost plus variable overhead.” It encompasses all costs that vary according to the amount of output. To determine the marginal cost, a comparison between the cost of manufacturing one unit and the cost of creating the next one must […]
Integrated Accounting System of Cost Accounting
Integrated accounting is defined by the Chartered Institute of Management Accountants (CIMA) as “a collection of accounting records that offers financial and cost accounts using a common data input for all accounting purposes.” Method of Maintaining Books in Integrated Accounting System This method requires the maintenance of a single set of accounting records. The costing […]
What is a Non-Integrated Accounting System?
The non-integrated accounting system is an accounting method whereby accountants keep separate ledgers for cost and financial accounts. In such a system, the cost accounts are limited to just tracking transactions that are related to the good or service being offered. Therefore, expenses related to sales, production, or indeed any other expenses that fall within […]
What is Job Costing? Advantages and Disadvantages
Job costing is a cost accounting system that allocates the costs of producing a good or service to the particular products and services of the company that created them. This gives management a clear picture of where money is being wasted and helps them make more informed decisions about which products and services to produce […]
Introduction to Operating Costing in Cost Accounting
Operating Costing in Cost Accounting Operating costing provides information about the cost of operating a company’s production facilities. It includes the costs of raw materials, labour, and other expenses incurred in the production process. This information is used to determine the selling price of the company’s products and to assess the profitability of its operations. […]
Cost classification according to the accounting treatment
Cost classification in cost accounting is the process of categorizing costs into different groups based on specific characteristics or criteria. It involves classifying costs according to their nature, behaviour, function, or other relevant criteria. The purpose of cost classification is to provide a systematic way to analyze and manage costs within an organization. By classifying […]
Budgeting and Appraisal Techniques [Quiz]
Q1. Choose the best statement regarding non-financial performance indication: a. it is short-sighted to consider that human resources might factor in as an indicator of performance b. absenteeism in the workplace probably indicates the work systems and the environment is stimulating c. being an employer of choice is an excellent example of a non-financial performance […]