Managerial accounting is the process of identifying, measuring, analyzing, and communicating financial information to managers for their use in planning, decision-making, and controlling operations within an organization.

The primary purpose of managerial accounting is to provide useful financial and non-financial information to managers for making informed business decisions that will help achieve the organization's goals.

Financial accounting primarily serves external stakeholders, such as investors and creditors, by providing financial statements. Managerial accounting serves internal stakeholders, such as managers, by providing relevant information for decision-making and strategic planning.

The three major areas of managerial accounting are cost accounting, budgeting, and performance measurement.

Cost accounting is the process of tracking, recording, and analyzing costs associated with products, services, or operations. It helps managers determine the actual costs of doing business.

Direct costs are costs that can be directly traced to a specific product, service, or department, such as direct materials and direct labor. Indirect costs, also known as overhead costs, cannot be directly traced and must be allocated using a cost allocation method.

A budget is a quantitative plan for acquiring and using financial and non-financial resources over a specified period. It is a tool for planning, coordinating, and controlling an organization's operations.

The main types of budgets used in managerial accounting include operating budgets, financial budgets, capital budgets, and flexible budgets.

Performance measurement involves evaluating the efficiency and effectiveness of an organization's operations, processes, and employees by comparing actual results against planned or expected results.

Common performance measures include financial ratios (e.g., profitability, liquidity, and efficiency ratios), non-financial measures (e.g., customer satisfaction, quality, and productivity), and benchmarking against industry standards or competitors.

A responsibility accounting system is a system that traces revenues and costs to the individuals or units responsible for their control and performance. It helps managers evaluate the performance of individual segments or departments within an organization.

The contribution margin is the amount of revenue remaining after deducting variable costs from sales. It is a useful metric for decision-making, as it represents the amount available to cover fixed costs and generate profit.

A cost-volume-profit (CVP) analysis is a technique used to determine the relationships among costs, revenues, and profits at different levels of production or sales volumes. It helps managers make informed decisions about pricing, product mix, and cost management.

Variance analysis is used to identify and analyze deviations between actual results and budgeted or standard costs. It helps managers understand the causes of these variances and take corrective actions to improve performance.

A balanced scorecard is a strategic performance management tool that translates an organization's mission and strategy into a set of financial and non-financial measures across four perspectives: financial, customer, internal processes, and learning and growth.

Activity-based costing (ABC) is a costing method that assigns costs to products or services based on the activities and resources consumed in their production or delivery. It provides a more accurate way of allocating overhead costs compared to traditional costing methods.

A transfer pricing policy is a set of guidelines used to determine the prices at which goods or services are transferred between divisions or subsidiaries of the same organization. It is important for accurately measuring divisional performance and profitability.

A flexible budget is a budget that adjusts for changes in activity levels or production volumes. It allows for more accurate performance evaluation by comparing actual results to budgeted amounts at the same level of activity.

A fixed cost is a cost that remains constant regardless of changes in production or sales volumes, such as rent or property taxes. A variable cost is a cost that varies in direct proportion to changes in production or sales volumes, such as direct materials or sales commissions.

The break-even point is the level of sales or production at which total revenues equal total costs, resulting in neither a profit nor a loss. It is a useful metric for planning and decision-making, as it helps determine the minimum level of activity required to cover all costs.

A master budget is a comprehensive budget that includes all subsidiary budgets, such as sales, production, materials, labor, and overhead budgets. It serves as a coordinated financial plan for an organization's operations.

A cash budget is a detailed forecast of an organization's expected cash inflows and outflows over a specific period. It helps managers plan and manage cash resources to ensure sufficient liquidity to meet obligations.

A capital budgeting decision involves evaluating and selecting long-term investment projects, such as purchasing new equipment, expanding facilities, or acquiring other companies. It requires careful analysis of expected cash flows, risks, and returns.

The payback period is the length of time it takes for an investment's cumulative net cash inflows to equal the initial cash outlay. It is a simple technique used in capital budgeting decisions to evaluate the risk and liquidity of a project.

A relevant cost is a cost that differs among alternative courses of action being considered and is pertinent to the decision at hand. Relevant costs are the focus of managerial accounting decisions, as they are the costs that will be affected by the decision.

A sunk cost is a cost that has already been incurred and cannot be recovered or changed by any future decision. Sunk costs should be ignored in managerial decision-making, as they are irrelevant to the future outcome.

A differential cost is the difference in costs between two alternative courses of action. It represents the incremental cost or savings associated with choosing one alternative over another and is relevant in decision-making.

A product cost report is a report that summarizes the total costs incurred in manufacturing a product or providing a service. It is used to determine the cost of inventory, cost of goods sold, and pricing decisions.

A process costing system is a costing method used in manufacturing environments where products undergo a continuous or mass production process. Costs are accumulated by production department or process, rather than by individual units.

A job order costing system is a costing method used in environments where products or services are distinct and identifiable, such as custom manufacturing or professional services. Costs are accumulated by individual job or project.

A standard cost is a predetermined or expected cost used as a benchmark for evaluating actual costs. Standard costs are often used in budgeting, variance analysis, and performance measurement.

A direct labor budget is a budget that estimates the direct labor costs required for a planned level of production or service provision. It includes factors such as the number of direct labor hours, wage rates, and benefits.

A sales budget is a budget that estimates the expected sales revenue for a specific period, based on factors such as market demand, pricing, and sales efforts. It is a key input for other budgets, such as production and cash budgets.

A manufacturing overhead budget estimates the indirect costs associated with manufacturing a product, such as indirect materials, indirect labor, utilities, and depreciation. It is used to allocate overhead costs to products or services.

A static budget is a budget that remains fixed and does not adjust for changes in activity levels or production volumes. It is based on a single, predetermined level of activity.

A cost-benefit analysis is a technique used to evaluate the potential costs and benefits of a proposed project or decision. It helps determine whether the expected benefits outweigh the costs and justify the investment.

A sensitivity analysis is a technique used to assess the impact of changes in key variables or assumptions on the outcome of a decision or project. It helps managers understand the risks and uncertainties associated with their decisions.

A fixed budget is a static budget that remains the same regardless of changes in activity levels. A flexible budget is a dynamic budget that adjusts to reflect changes in activity levels, allowing for more accurate performance evaluation.

A kaizen budget is a budget that encourages and provides resources for continuous improvement initiatives within an organization. It supports activities aimed at reducing waste, improving quality, and increasing efficiency.

A responsibility center is a segment or department within an organization that is responsible for specific revenue or cost items. It is used in responsibility accounting to evaluate the performance of managers and their areas of responsibility.

A transfer price is the price charged for goods or services transferred between divisions or subsidiaries of the same organization. It is used to measure the performance of individual segments and facilitate internal resource allocation.

A constraint is a limited resource or factor that restricts an organization's ability to achieve its objectives or increase profitability. Identifying and managing constraints is a key aspect of managerial accounting.

The theory of constraints (TOC) is a management philosophy and methodology that focuses on identifying and managing the constraints or bottlenecks that limit an organization's performance. It aims to optimize the flow of resources and maximize throughput.

A throughput contribution is the amount of revenue generated by a product or service minus the variable costs associated with producing or delivering it. It is a key metric in the theory of constraints and is used to determine the most profitable product mix.

A make-or-buy decision involves determining whether a company should produce a product or component internally or purchase it from an external supplier. It requires a careful analysis of costs, quality, capacity, and strategic considerations.

A target cost is a predetermined cost objective that a product or service must meet to achieve a desired level of profitability or market competitiveness. It is often used in the design and development phases to ensure cost-effective products.

A life cycle costing approach is a costing method that considers the total costs associated with a product or service throughout its entire life cycle, from design and development to usage, maintenance, and eventual disposal.

A material requirements planning (MRP) system is a production planning and inventory control system that determines the materials and components required to meet a production schedule and ensures their timely availability.

A just-in-time (JIT) inventory system is a lean manufacturing approach that aims to minimize inventory levels by receiving materials and components only as they are needed for production. It reduces carrying costs and promotes continuous improvement.

A backflush costing system is a costing method used in lean manufacturing environments where costs are accumulated and assigned to products at the end of the production process, rather than tracking costs through each production stage.