Software Engineering – Summary


I didn’t make these, but Nida has kindly made a summary for software engineering and asked me to publish it, so here it is! Read more of this post

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Management Accounting – More Budgeting


More budgeting

Moving on from the last post, let’s talk more about how budgets work and what they’re made of.

Standard costs and variances

Standard costs are the planned cost (per unit) of products or services produced. You can also have standard revenues that work the same way. Read more of this post

Management Accounting – Budgeting


Budgeting

Preparing budgets is what happens right after making long term strategic plans. Budget adjustment sometimes occurs after variances are observed.

A budget is pretty much three smaller budgets that combine to make a ‘superbudget’ of sorts:

Master budget

=

Budgeted balance sheet

AND

Budgeted income statement

AND

Budgeted cash flow statement

Budgets have 5 main benefits:

  1. Promote forward thinking
  2. Co-ordinate various business areas
  3. Provide an authorisation system
  4. Provides a system of control
  5. Motivates managers to perform better

We’ll talk now about how a budget is made and then go through an example or two. Read more of this post

Management Accounting – Pricing


Pricing

If you have a business you want to make sure that you price your products and services appropriately. Your prices should be consistent with the business strategy and also linked to the cost of producing the product or service.

Two pieces or terminology to remember:

  • Price makers: Set their own price
  • Price takers: Have to accept what the market dictates (this can be either a competitor or a customer)

You’ve probably heard of supply and demand before. The basic premise here with supply and demand is that if you sell lots of a product you can afford to reduce the price per unit, and conversely if your sales are low you’ll have to increase the price. Read more of this post

Management Accounting – ABC


ABC

(It’s as easy as 123)

ABC stands for Activity Based Costing. It has a few benefits, such as:

  • It provides more accurate costs for each unit of a product (or service)
  • It gives a better understanding of the business to managers

It’s fairly simple to the more traditional costing methods we’ve looked at already, but with a key difference: ABC looks at activities as a way of accumulating costs, instead of the old method of using cost centres. So with ABC the costs will be driven by: Read more of this post

Management Accounting – Costs On A Departmental Basis


Dealing with overhead costs on a departmental basis

In previous posts we’ve addressed what full costing is and how overheads can be applied in different ways. Now it’s time to talk about how the overheads can be sorted into departments.

Think about a medium to large sized business. They are often separated into departments, for example, sales, customer service, manufacturing etc. So what if, when a product’s cost is calculated, the overheads were allocated depending on how long the product spends in a certain department?

Instead of departments, we’ll refer to the different business areas as┬ácost centres. There can be two types of these: Read more of this post

Globalisation – Skepticism


Skepticism

There are plenty of people who doubt that we live in a globalised society. There are 9 main points to their arguments. This post will outline each of the points in turn.

Globalisation isn’t a new thing

The most famous text to give this argument is ‘Globalization in Question‘ by Hirst and Thompson. One of their main points is that international trade has been around in history for a while and isn’t new. You might they say have a point. Spices and fabrics and things of that nature have been shipped all over the world for centuries. The banana was first brought to Britain in the 1800s. Read more of this post

Globalisation – Introduction


Introduction to globalisation

http://en.wikipedia.org/wiki/Globalization

Globalisation (Note: You might see it spelt with a ‘Z’.. American spelling) is pretty much the spread of a uniformity that eliminates cultural nuances and creates a standardisation.

Think about 40 years ago. If you lived in the UK, were out and wanted a hamburger, the only available fast food chain was Wimpy, famed for it’s horribly named ‘Bender Burger’. But basically, that was the only place you could go. And it was innately British: The food came with a knife and fork, and on a plate. I wasn’t born back then but I can only assume it completed the British theme by having the food brought to you by a comically rude waiter who is inexplicably upper class. Basil Fawlty was probably involved. But what I’m trying to get at is that it was definitely a British thing. Read more of this post

Management Accounting – Full Costing


Full Costing

In our list of ways to define cost, we’re onto number 3:

  • Differential future cash flows (DFC)
  • Cost behaviour in relation to output
  • Assignment to cost object
  • Financial statement perspective
  • Business function Read more of this post

Management Accounting – Operating Gearing, Marginal Analysis


Operating Gearing and Marginal Analysis

If you have an activity, and it has high fixed costs compared to it’s variable costs, then that activity has high operating gearing.

When operating gearing (OG) is high, a small change in sales will have a much bigger effect on profit, so you can say that profits are more sensitive to activity volume when OG is high.

Read more of this post