AYB225 Lecture Notes - Lecture 11: Whole-Life Cost, Activity-Based Costing, Total Quality Management
Document Summary
Lecture 11 introduction to strategic management accounting. Thus far covered cost accounting referred to as traditional management accounting techniques. Commonly acknowledged limitations of traditional management accounting and the new" techniques that have resulted include: traditional systems were set up in a direct-labour-intensive manufacturing environment. Consequently, using overhead allocations based on direct-labour (or other volume-related bases) in a highly automated environment leads to inaccurate, non-representative product costs, and potentially bad business decisions. The problem is exacerbated because in an automated environment overhead is typically a higher percentage of manufacturing cost than in a traditional environment. (activity based costing and management: product costs have included manufacturing costs only. While it is still necessary to provide information for inventory valuation, in addition relevant information for decision-making is needed. (cost concepts such as opportunity costs, relevant costs, marginal costs: management accounting in the past has been reactive.
