Acc530_m01 - Module 1 Terms and the cost system...

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Module 1: Terms and the cost system © Curtin Business School 1/8 Introduction In this module you will learn about certain cost terms that you need to familiarise yourself with, as these terms will recur throughout this unit. You will also be introduced to the concept of cost classification in order to explain how a cost behaves. Topics Learning outcomes When you have finished studying this module, you should be able to: Cost terminology apply the cost terminology introduced in this module. We will then look at two different costing systems that are used in businesses: job order costing process costing. Before you begin… You should familiarise yourself with the relevant sections of your textbook before working through these module notes: pages 2 to17 for an introduction, and pages 54 to 70 on cost terminology. If you have any questions regarding the content of these module notes, refer to the textbook for further explanations. If you need to seek clarification from your tutor , make sure that you have carefully read the relevant sections of the textbook and the module notes beforehand. Introduction Management accounting, as the name suggests, is about providing information to managers to enable them to do their jobs. To understand the types of information managers require, it is important to understand the activities that managers carry out. These are: Planning; Decision making;
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Accounting (Managerial) 530 Module 1: Terms and the cost system © Curtin Business School 2/8 Directing; and, Controlling. Management accountants can assist managers in carrying out their duties by providing information for each of the tasks listed above. For example, a manager will need information about the resources available and the resources required in order to plan for the activities of the coming period. They also require cost information to enable them to decide on the activities to be carried out. In order to make efficient use of the available resources, managers also need to know how much resources are being consumed and whether these are in line with the plans developed. Furthermore, to ensure that organizational goals are accomplished, there is a need to control the activities of the organization to ensure that the plans are being followed. Review pages 5 to 9 of the text for an in-depth discussion about management functions and how management accounting adds value to the organization. Product and period cost Two terms that normally come up are product cost and period cost. Product cost is the cost of manufacturing or purchasing goods for resale. In a manufacturing environment, product costs include direct material, direct labour and manufacturing overhead. For a merchandiser, it would be the cost of merchandise inventory (including shipping costs,
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Acc530_m01 - Module 1 Terms and the cost system...

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