Question
L.O.2: Distinguish between the uses and users of cost accounting and financial accounting information. Characteristics Financial Accounting Cost Accounting Reports Users Follows GAAP or IFRS?
L.O.2: Distinguish between the uses and users of cost accounting and financial accounting information.
Characteristics | Financial Accounting | Cost Accounting |
Reports |
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Users |
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Follows GAAP or IFRS? |
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L.O.3: Explain how cost accounting information is used for decision making and performance evaluation in organizations
Using cost data for decision making:
What is a cost driver?
What are AM s cost drivers and the related costs as shown in the example?
What is a differential cost?
What is a differential revenue?
If AM expands, will the expansion result in differential revenue?
Will the expansion result in differential costs? If so, which costs will change and what will cause this change in costs?
After considering the differential revenues and costs associated with AM's possible expansion, is there a net cost or a net benefit to expanding?
What is the amount of the net cost or the net benefit?
Should AM expand?
Using costs for control and evaluation: Responsibility Centers
What is a responsibility center?
Is the manager's salary for each responsibility center included in the center's margin?
Is the president's salary included in the center's margin? Why or why not?
Using costs for control and evaluation: Budgets
What is a budget?
How is it used to control and evaluate performance?
Evaluate the performance of AM Bakery for the month of August. Did the business have more or less cost than expected?
What was the dollar amount of the difference?
What was the primary source of this difference?
Using different data for different decisions:
Should data used to make one decision be used to make all future decisions about the same responsibility center?
Why or why not?
Use the items shown in the income statement on slide #11.
If AM considered opening another store instead of buying a food truck which costs would be differential costs? In other words, which costs would increase and which would decrease?
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