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Understanding Business Objectives and Accounting Principles Study Guide

This guide provides a comprehensive overview of accounting, explaining its critical role in measuring and communicating economic events. It covers key business objectives, the concept of stakeholders, and the different specialized fields within accounting such as financial, management, cost, tax, and auditing. Learn how to understand financial statements like the Statement of Profit or Loss to analyze a company's performance and make informed decisions. Essential for anyone seeking to grasp the

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Cost Classifications, Allocation, and Decision Analysis

Direct, Indirect, Variable, and Fixed Costs

Factors affecting direct/indirect cost classifications and how costs behave in relation to changes in the volume of activity.

  • direct/indirect cost classifications
  • variable/fixed-cost classifications
  • materiality of the cost
  • information-gathering technology
  • facility design
  • cost objects
  • cost driver
  • volume of activity
  • total cost
  • linear total costs
  • relevant range

Disentangling Mixed Cost Elements

This content explains how to disentangle fixed and variable costs in mixed cost elements using the high-low method to formulate a cost function.

  • mixed costs
  • fixed costs
  • variable costs
  • stepped fixed costs
  • cost driver
  • high-low method
  • cost function

Basics of Decision Relevant Costs

This topic explores decision relevant costs, including sunk costs and opportunity costs, to determine which future outlays satisfy criteria for decision making.

  • Cost-Volume-Profit Analysis
  • Decision Relevant Costs
  • Sunk costs
  • Opportunity costs
  • Future outlay cost
  • Historic cost

Cost-Volume-Profit and Break-Even Analysis

Cost-volume-profit analysis is used to determine the revenues required at any desired profit level through break-even analysis.

  • Break-even analysis
  • Cost-volume-profit analysis
  • Fixed cost
  • Variable cost
  • Total revenues
  • Total costs
  • Break-even point (BEP)
  • Contribution margin (CM)
  • Margin of safety (MoS)
  • Selling price

Principles of Cost Allocation Bases

The main principle of cost allocation based on square meters or maximum number of people per apartment using an allocation key.

  • Allocation bases
  • Cost allocation
  • Allocation key
  • Square meters
  • Maximum number of people

Contribution Margin and Marginal Analysis

Examples and principles regarding contribution margin, limiting factors, and marginal analysis for decision making.

  • Contribution margin
  • Contribution per unit
  • Contribution per hour
  • Fixed cost
  • Variable cost
  • Selling price per unit
  • Machine time
  • Limiting factor
  • Bottleneck
  • Scarce resource
  • Marginal analysis
  • Break-even analysis

Cost Allocation and Product Costing Methods

This topic covers the systematic allocation of direct and indirect costs to cost centers and cost objects using direct, step-down, process, and job costing methods.

  • Cost allocation
  • Direct method of departmental cost allocation
  • Step-down method of departmental cost allocation
  • Overhead surcharges
  • Indirect costs
  • Direct costs
  • Single allocation base approach (SABA)
  • Cost objects
  • Cost centers
  • Overhead absorption rates
  • Product costing
  • Costs of goods manufactured
  • process costing
  • job costing
  • direct cost
  • indirect cost
  • overhead costs
  • full cost per unit
  • overhead allocation
  • direct labor hours

Fundamentals of Accounting and Cost Management

Introduction to Business Objectives and Accounting

Accounting provides relevant information to stakeholders to measure and communicate economic events and business objectives.

  • Business objectives
  • Triple-bottom-line targets
  • Accounting information
  • Financial accounting
  • Management accounting
  • Cost accounting
  • Tax accounting
  • Auditing
  • Bookkeeping
  • Stakeholders
  • Shareholder value orientation
  • Statement of profit or loss

Fundamentals of Financial and Managerial Accounting

Information describing the financial resources, obligations, and activities of an economic entity through financial accounting and management accounting.

  • Financial accounting
  • Management accounting
  • Financial position
  • Results of operations
  • Assets
  • Liabilities
  • Capital and owners’ equity
  • Fundamental accounting equation
  • Statement of financial position
  • Statement of profit or loss
  • Statement of cash flows
  • Income and expenses
  • Operational business transactions
  • Investment-related business transactions
  • Finance-related business transactions
  • Double-entry bookkeeping

Introduction to Management Accounting

Management accounting is concerned with collecting and analyzing financial and other information to provide transparency and support decision making.

  • Management accounting definition
  • Strategic management vs management accounting
  • Decision-facilitating and decision-influencing roles
  • Time horizons: strategic vs operational
  • Cost accounting as a component of management accounting systems
  • Functions of managerial accounting
  • Strategic planning and operational management
  • Performance measurement and monitoring
  • Resource-orientation and coordination

Basics of Cost Accounting

An introduction to cost accounting, managerial accounting, and cost-volume-profit analysis.

  • Managerial Accounting
  • Cost Accounting
  • Cost-Volume-Profit Analysis
  • Income
  • Expense
  • Cost object
  • Fixed costs
  • Variable costs
  • Direct cost
  • Indirect cost
  • Overheads

Accounting Cost Allocations and Managerial Accounting

This course covers basics of cost accounting, cost-volume-profit analysis, full absorption costing, and cost allocations.

  • Financial accounting
  • Managerial accounting
  • Cost-volume-profit analysis
  • Full absorption costing
  • Cost allocations
  • Product costing
  • Budgeting
  • Variance analysis
  • Cash flow calculation
  • Ratio analysis
  • Fixed cost
  • Variable costs
  • Direct cost
  • Indirect cost
  • Break-even analysis
  • Process costing
  • Job costing

Cost-Volume-Profit Analysis and Absorption Costing

This lecture covers Cost-Volume-Profit Analysis and Full (Absorption) Costing.

  • Cost-Volume-Profit Analysis
  • Full (Absorption) Costing
  • Break-even point
  • Margin of safety
  • Total sales revenue
  • Total cost
  • Volume of activity
  • Profit or loss

Pricing Strategies and Decision-Making Methods

Hospitality Industry Pricing Decisions and Elasticity

Establishing prices to maximize revenues involves understanding willingness to pay, the price-sales function, and price elasticity of demand.

  • Pricing decisions
  • Maximizing revenues
  • Informal pricing approaches
  • Follow the leader pricing
  • Intuition pricing
  • Psychological pricing
  • Trial-and-error pricing
  • Willingness to pay (WTP)
  • Dynamic pricing
  • Price-sales function
  • Market price
  • Supply and demand curves
  • Price elasticity of demand
  • Elastic demand
  • Inelastic demand

Cost-Plus Pricing and Markup Approaches

Cost-plus pricing implies pricing products based on full cost and adding a profit mark-up using methods like overhead allocation and markup approaches.

  • Cost-plus pricing
  • Profit mark-up
  • Full costing
  • Overhead allocation
  • Direct labor hours
  • Machine hours
  • Markup approach to pricing
  • Cost of goods sold (COGS)
  • Prime-ingredient approach

Pricing of Hotel Rooms

Methods for pricing hotel rooms including the 1 per 1,000 approach and the Hubbart Formula.

  • 1 per 1,000 approach
  • Hubbart Formula
  • bottom-up approach to pricing rooms
  • average rate
  • project cost per room
  • occupancy

Non Cost-Plus Pricing Strategies

This lecture covers various non cost-plus pricing strategies including target pricing, value-based selling, product bundling, price-penetration, dynamic pricing, and price segmentation.

  • Target pricing
  • Value engineering
  • Value-based selling
  • Cost-based pricing
  • Value-based pricing
  • Product bundling strategy
  • Price-penetration strategy
  • Dynamic pricing
  • Price segmentation

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