- Two areas of accounting: one for managers and one for investors
- A salary is a flat payment, not dependent on time nor performance
- Management accounting:
- Produce for MANAGEMENT
- Focus on the FUTURE (therefore, there may be uncertainties)
- Tabulation of REPORTS
- Comply with NO GENERAL ACCEPTANCE ACCOUNTING PRINCIPLES
- The slope of the line is the estimate of your variable cost
- The intercept is the estimate of the fixed cost
- Break-Even = Fixed Cost / Contribution
- Contribution = Selling Price – Variable Costs
- Adding target profit: (Fixed Costs + Target Profit) / Contribution
- Relevant Costing: a cost that changes between alternatives.
- Sunk costs are not relevant to decision making.