Mngmnt Accounting
Pg 150 2018, Colin Drury Mngmnt and Cost Accounting 10th Ed
Direct costing system variable costing system or marginal costing system. A costing system that assigns only direct
manufacturing costs, not fixed manufacturing costs, to products or services.
With a variable costing system, only variable manufacturing costs are assigned to the product; fixed manufacturing
costs are regarded as period costs and written off as a lump sum to the profit and loss account. Between fixed and
variable costs. Variable costing allocates only variable manufacturing costs to the product
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The major advantage of variable costing is that profit is reflected as a function of sales, whereas, with an
absorption costing system, profit is a function of both sales and production. It is possible with absorption
costing, when all other factors remain unchanged, for sales to increase and profit to decline. In contrast,
with a variable costing system, when sales increase, profits also increase. Variable costing avoids fixed
overheads being capitalized in unsaleable inventories
A further advantage of variable costing is that fixed overheads are not capitalized in unsaleable
inventories. The arguments that have been made supporting absorption costing include: (a) absorption
costing does not understate the importance of fixed costs; (b) absorption costing avoids the possibility of
fictitious losses being reported; (c) fixed manufacturing overheads are essential to production and
therefore should be incorporated in the product costs; and (d) internal profit measurement should be
consistent with absorption costing profit measurement that is used for external reporting requirements.
Marginal costing helps management to take decisions regarding the withdrawal of non-profitable
products and the introduction of new products, the purchasing or manufacturing of a product, the closing
down or continuation of production processes and capital investment decisions. – (Els et al) - 8th edition
2017 Fundamentals of Cost Accounting)
Helps in Pricing Decisions: Marginal costing helps managers to determine the right price for their
products. They can decide the right price to yield maximum profits by calculating the total variable costs.
Evaluation of different departments is possible through marginal costing.
It also avoids the carry forward of a portion of the current period’s fixed overhead to the subsequent period.
As such cost and profit are not vitiated. Cost comparisons become more meaningful.
2.1 Management accounting provides information that is useful in planning, controlling and making decisions. The
elements of planning, organizing and decision-making are characteristic of both profit-making and non-profit
organizations.
Non-profit organizations are also concerned with the control of income and expenditure and therefore rely on
management accounting information.
The need to report different project to different partners when you have and with each partner needing your
accounts in a specific format for their accounting purposes For decision making, tracking how far
Buss Law
Conflict will always arise and we cant just let it be we
Q 1 The following clauses are commonly found in contracts:
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Indemnity clause – a term which may exclude a party to the contract from incurring
liability in certain instances
Sponsor shall not have any obligation to defend, indemnify, or hold Indemnitees harmless from
claims, suits, or damages arising as a result of, or in connection with, willful malfeasance or
negligent acts or omissions of Indemnitees. Indemnification clauses allow a contracting party
to: Customize the amount of risk it is willing to undertake in each transaction and with every
counterparty. Protect itself from damages and lawsuits that are more efficiently borne by the
counterparty.
a party may bring a claim for damages resulting from the other party's breach of contract,
subject to any liability .
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Non-variation clause – a term of a contract may not be changed without the written
consent of both parties
No addition to or variation, consensual cancellation or novation of this agreement and no
waiver of any right arising from this agreement or its breach or termination shall be of any force
or effect unless reduced to writing and signed by all the parties or their duly authorised
representatives. The purpose of the non-variation clause is to prevent disputes & problems of
proof that might arise if oral variation were permitted. Any attempt to agree informally on a
topic covered by a non-variation clause (e.g. extension of time for payment or of the purchase
price) will be ineffective
The entrenchment clause A contractual term which provides that the agreement may be
altered only by means of written amendment is known as an entrenchment clause. Such a term
has the effect that the contract may not be varied by an oral agreement, even if the parties are
in complete agreement in regard to the proposed amendment.
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Cancellation clause – this prescribes the manner in which the contract may be
terminated at the instance of the parties
The cancellation clause entitles a contracting party to cancel the contract summarily if the
other party is in breach of contract. If such a term is included in the contract, the party in
whose favour the cancellation clause is stipulated can cancel the contract without further
ado as soon as the other party breaches the contract. It is unnecessary to send a letter of
demand or a notice warning the other party of the intended cancellation of the contract
(CLA Textbook)
This section of the contract must clearly lay out the circumstances under which one or both
parties may terminate the contract, irrespective of the time left under the agreement. For
example, if one of the parties is acquired by another entity, the other party to the contract may
reserve the right to terminate the agreement.
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Domicilium citandi executandi – the parties may agree on the addresses at which they
will accept receipt of any legal documents. The parties will be considered to have
received all documents sent to this address
Domicilium citandi et executandi is a Latin term which, if directly translated to English, means
“house for summoning and upkeep”. The general meaning thereof can be construed as the
address nominated by a party in a legal contract at which it elects to receive all legal notices
and documents
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Jurisdiction – the parties may agree that should a dispute arise regarding the contract,
the matter will have referred to a specific court
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Arbitration – the parties may agree that should a dispute arise regarding the contract,
the matter will be referred to arbitration as oppose to adjudication in court
Arbitration allows the parties to present their arguments to an independent arbitrator of their
choice, in private and at their own convenience. The arbitrator may be legally qualified but
usually he has special knowledge or experience of the subject matter. Sometimes an arbitration panel is used. Both sides agree to be bound by the decision of the arbitrator, which can be
enforced as if it were the judgment of a court. A court appearance can be a very costly and
public way of resolving a dispute. Many in the commercial world seek to avoid the possibility by
agreeing at the outset that any dispute will be referred to arbitration. Such clauses are often
contained in contracts of insur- ance and partnership. Arbitration schemes have also been set
up by trade bodies, such as the Association of British Travel Agents, to deal with complaints
involving their members.
In many contracts, it is now common practice for firms to include an arbitration clause,
requiring the parties to submit to arbitration prior to or in lieu of seeking a remedy via
litigation. This is generally a faster, cheaper way to solve contract-related problems, although
some contracts still allow for traditional legal recourse
In the commercial world, multinational corporations and other businesses will often prefer to
refer a dispute to arbitration rather than take court action, not only because of the
convenience, speed, and cost of arbitration procedure but also to ensure a continuing
relationship with each other. Intro to Buss Law
Question2
The purpose behind a court awarding damages, is to place the aggrieved party in the same
position he would have been in had the other party fulfilled his obligations. The aggrieved party
must be able to prove the following in order to claim damages:
 The amount of loss – interest may be included in this amount
 The breach must be the direct cause of the loss suffered – each case will be judges on its
own facts
 The loss as a result of non-performance must not be remote or unforeseeable
 The loss must be able to measurable in monetary terms
 The aggrieved party must have attempted to mitigate the loss - that is to take all reasonable
steps to reduce
he loss suffered
 The aggrieved party must prove the damages
 The aggrieved party must have attempted to mitigate the loss
In terms of contractual law, the only damages that may be claimed will be for financial loss
suffered
Marketing Mix
In summary, when setting prices, businesses should consider their marketing objectives,
marketing mix strategy, costs, and organizational considerations. By taking these
internal factors into account, businesses can set prices that are aligned with their overall
marketing strategy, cover their costs, and generate a profit.
Internal factors affecting pricing include the company’s overall marketing strategy, objectives,
and marketing mix as well as other organizational considerations
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Pricing - explanation
Marketing Mix
4 Factors (marketing objectives, marketing mix strategy, Costs and Org Considerations)
Case Study
Org Leadership
Fred Fiedler’s contingency theory of leadership proposes that effective group performance
depends on the proper match between a leader’s style of interaction with employees, and the
degree to which the situation gives control and influence to the leader. Fiedler developed an
instrument to measure whether the leader is task oriented or relationship oriented, and he
identified three situational criteria that organisations can manipulate to create a proper
situational match with the behaviour orientation of the leader. According to Fiedler, an
individual’s leadership style is fixed. If, for example, a situation requires a task-oriented leader
and the person in the leadership position is relationship oriented, the organisation must either
change the situation or move the leader to another situation where his/her leadership style is
compatible with the situation.
Paul Hersey and Ken Blanchard proposed a situational leadership model where the premise is
that the work maturity of employees determines the best leadership style for a particular
situation. The employees’ need for achievement, their willingness to accept responsibility, their
task-related ability and their experience determine their work maturity. The manager uses one
of four leadership styles (telling, selling, participating and delegating) to match the employees’
maturity level in a given situation.
The Hersey-Blanchard theory of leadership, also known as the Situational Leadership
Model, suggests that there is no one-size-fits-all approach to leadership. Instead,
leaders must adapt their leadership style to the individual needs of their employees
based on their ability and willingness to perform a task. Here are five scholarly examples
that illustrate the Hersey-Blanchard theory of leadership:
Fielder's Contingency Theory of Leadership proposes that the effectiveness of a leader
depends on the situation. The theory suggests that there is no one-size-fits-all approach
to leadership, and that different leadership styles are more effective in different
situations. Here are five scholarly examples that illustrate the theory: