In their quest for the continuous improvement of organizational activities

In their quest for the continuous improvement of

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In their quest for the continuous improvement of organizational activities, managers have found that they need to rely more on the people closest to the operating processes and customers, to develop new approaches to performing activities. This has led to employees being provided with relevant information to enable them to make continuous improvements to the output of processes. Allowing employees to take such actions without the authorization by superiors has come to be known as employee empowerment ( they will be able to respond faster to customers, increase process flexibility, reduce cycle time and improve morale. Management accounting is therefore moving from its traditional emphasis on providing information to managers to monitor the activities of employees, to providing information to employees to empower them to focus on the continuous improvement of activities).
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Functions of management accounting. A cost and management accounting system should generate information to meet the following requirements: 1. Allocate costs between cost of goods sold and inventories for internal and external profit reporting; 2. Provide relevant information to help managers make better decisions; 3. Provide information for planning, control, performance measurement and continuous improvement. Cost accounting = concerned with cost accumulation for inventory valuation to meet the requirements of external reporting and internal profit measurement. Management accounting = relates to the provision of appropriate information for decision-making, planning, control and performance evaluation.
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Chapter 2: An introduction to cost terms and concepts. Cost object = any activity for which a separate measurement of costs is desired. Type of cost Description Direct material costs Material costs that can be specifically and exclusively identified with a particular cost object. Direct materials is normally not applicable to merchandising and service organizations. The equivalent term in a merchandising organization is the purchase cost of the items that are for resale. Direct labor costs Labor costs that can be specifically and exclusively identified with a particular cost object. Producing product DL includes the cost of converting raw materials into a product, such as the costs of the machine operatives engaged in the production process in the manufacture of televisions . Indirect costs Can’t be identified specifically and exclusively with a given cost object. They consist of indirect labor, materials and expenses. The term overheads is widely used instead of indirect costs. In a manufacturing organization, overhead costs are categorized as manufacturing, administration or marketing (or selling) overheads. Relevant costs Irrelevant costs Avoidable costs Unavoidable costs Sunk costs Opportunity costs Incremental costs Marginal costs Manufacturing, merchandising and serviced organizations .
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