Duncan
WILLIAMSON

Introduction to Management Accounting

Take a Management Accountant's View of Everything & Mini Project 1

Here's some golden advice: wherever you are and whatever you are doing, take a management accountant's eye view of everything! Seriously, if you really want to be a management accountant, think like a management accountant and take a look at the world around you from the management accountant's point of view.

Many of the examples that follow are based on real live products, real live organisations and real live situations. You are going to see how you can use every day bits of paper to help you to understand, for example, how we might classify costs, see how costs behave. You are going to be shown how your ordinary every day kettle or car or house can be taken apart and put back together in management accounting terms. You are going to be encouraged to

breathe, eat and drink management accounting: look for it everywhere!

Mini Project 1 Have you ever seen a car or van pulling a trailer as it drives around town? You know the sort of thing: attached to the back of the car like a caravan but it's much smaller, open topped and it's just got two wheels and might have a motor bike in it or some building materials … let's consider that from a management accounting point of view:

	Figure 1 shows an example of what we mean by a trailer: it has a steel frame with a wooden base, the wheels are small car wheels which are attached by a metal axle that itself is attached to metal bars that are welded to the frame: figure 2 will help you to understand its design and construction … what could the management accountant possibly do with that I hear you ask?

Task: Prepare a table with two columns to demonstrate how the management accountant would accumulate the costs of manufacture when this trailer is being made. Your two columns should have the headings:

• Operation
  
• Costs accumulated

When you have had a go at this mini project yourself, take a look at the solution before returning here: Solution to Mini Project 1

Go to the Kitchen!

Here's another way of taking a management accountant's eye view of life: take a careful look at what happens in your kitchen or any oldkitchen; and don't dismiss this idea too lightly! Kitchens are often said to be the engine room of a house or hotel or factory and with good reason. Next time you go to your own kitchen take a closer look at the job or process you work on while you're there:

• Making a cup of tea or coffee is a simple one and so is boiling an egg
• Making a cake is more complex and involves

• Raw materials and stocks of raw materials
• Labour
• Equipment
• Use of electricity, water and gas

• Preparing a dinner party for eight people is even more complex and can involve

• Raw materials and stocks of raw materials
  
• Labour
  
• Equipment
  
• Use of electricity, water and gas
  
• Incidental materials such as serviettes
  
• Wine
  
• After dinner mints and other fripperies

See: your kitchen could be your pathway to understanding cost accounting!

Next Solution to Mini Project 1

Previous Management Accounting Within the Organisation

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Duncan Williamson
3 March 2003