MA 1

Question 1

Difference between Financial and Managerial Accounting

Answer 1

Financial Accounting:

• External stakeholders
• Periodic, objective, historical reports
• Aggregated information for the company as a whole

Managerial Accounting:

• Internal managers
• On-demand, subjective, future-oriented reports
• Detailed or aggregated for specific segments

Question 2

Basic Cost Behaviour Patterns

Answer 2

• Variable Costs: Change in total with activity levels; cost per unit is constant.
• Fixed Costs: Total remains unchanged; cost per unit decreases as activity increases.
• Mixed Costs: Combination of fixed and variable; total cost increases linearly.
• Step Costs: Constant within ranges, shifts to a higher level beyond the range.

Question 3

Relevant Range

in CVP

Answer 3

• Range of activity where fixed costs remain constant.
• Example: Mattel rents storage beyond normal factory capacity during holidays.

Question 4

High-Low Method for Cost Estimation

Answer 4

1. Calculate variable cost per unit: (Cost_high - Cost_low) / (Activity_high - Activity_low)
2. Fixed Costs: Total Cost - (Variable Cost per Unit × Units).

-> linear fit with two points

Question 5

Direct vs Indirect Costs

Answer 5

Direct Costs: Easily traceable to a product (e.g., materials, labour).
Indirect Costs: Not easily traceable or worth tracing (e.g., supervision, utilities).

Question 6

Manufacturing Costs

What are the three categories?

Answer 6

• Direct Materials: Main inputs (e.g., glass for windows).
• Direct Labour: “Hands-on” work (e.g., assembly wages).
• Manufacturing Overhead: All other costs (e.g., equipment maintenance, property taxes).

Question 7

Non-Manufacturing Costs

Answer 7

• Marketing/Selling: Advertising, sales salaries.
• General/Administrative: IT, HR, accounting.

Question 8

Scatter Diagram in Cost Estimation

superfluos in my opinion

Answer 8

• Plot past activity and cost data.
• Use judgment to estimate costs, visualising trends.

Question 9

Least-Squares Regression for Cost Estimation

Answer 9

• Minimises squared deviations between observed data and estimated cost line.
• Includes all data points for accuracy.
• Outputs R²: % variation explained by the model.

Question 10

Variable Costs Characteristics

Answer 10

• Increase as activity increases.
• Zero when activity is zero.
• Equation: Y = bX (b = cost per unit).