This primer is written for students studying management accounting for the first time, and for senior and mid-level managers who use management accounting in their day-to-day activities but who do not aspire to become management accountants. It assumes no prior formal exposure to management accounting concepts or techniques, and, while it demonstrates several techniques in some detail, its primary emphasis is on the use of management accounting information, not its preparation. As such, the primer's goal is to help managers be more effective in a business environment where an understanding of management accounting is important to success. Moreover, the primer aims to give readers an improved ability to communicate with their organizations’ accountants to help assure that the management accounting information provided to line managers and others is as useful as possible for decision making.

Management accounting information can be classified into three areas: full-cost accounting, differential cost accounting, and responsibility accounting. Exhibit 1 lists the primer's specific learning objectives within each of these three areas. As it indicates, many of the learning objectives are either behavioral or organizational in nature, especially in the area of responsibility accounting.

LEARNING OBJECTIVES

Upon completing this primer a student should know:

Full Cost Accounting (Chapters 1, 4, and 5)

• The meaning of terms such as cost object, cost center, direct and indirect costs, overhead cost allocation, and cost systems
• The way costs can be allocated to determine the cost of a particular product or service
• The distinction between production (or mission) centers and service centers
• The nature of the managerial choices inherent in a cost accounting system
• Overhead rates and overhead variances, including predetermined overhead rates
• The distinction between absorption and variable costing
• The concept of activity-based costing (ABC) and second-stage cost drivers

Differential Cost Accounting (Chapters 2 and 3)

• The rationale for the statement “different costs are used for different purposes”
• The distinction between full costs and differential costs, and when each should be used
• The nature of the factors that influence changes in cost, including the distinction among fixed, variable, step-function, and semi-variable costs
• The technique of cost-volume-profit analysis, how to prepare such an analysis, and its uses and limitations
• The nature of alternative choice decision making, and the types of alternative choice decisions that most organizations make
• The concepts of unit contribution margin and total contribution, and their roles in alternative choice decision making

Responsibility Accounting (Chapters 5-12)

• The definition of a responsibility center, the different types of responsibility centers, and the basis for choosing the most appropriate type
• The definition of a transfer price and its role in a responsibility accounting system
• The phases of the management control process and the characteristics of each
• The formal techniques used to asses the financial viability of a capital investment proposal
• The special considerations faced by nonprofit and public sector organizations in capital budgeting
• The key elements of a good operational budgeting process, including its relationship to responsibility centers
• The distinction among the capital budget, the operating budget, and the cash budget.
• The considerations involved in preparing a cash budg