This topic we look at Management accounting and this means we will be focusing on the information managers need to make decisions.
Understanding costs is vital for making good business decisions and so we will first start by understanding what cost means then make the distinction between fixed cost and variable costs.
Generally organizations generate different costs for different purposes and it is important to realize there isn’t such thing as ‘the true cost’. There are always overheads (or variable cost) that goes into supplying/producing and supporting a product or service. Overhead allocation is a difficult area because many overheads are shared by multiple areas.
After studying this topic students will be able to:
Understand the scope of management accounting;
Define costs and explain why cost information is so important to managers;
Explain the major concepts used for analysing the costs of decision alternatives including;
current and future costs,
opportunity costs,
sunk costs, and
differential and non differential costs
Describe the various ways in which costs can be classified and used to inform managers’ decisions and to support the planning and control of costs, including according to
