Cost and management accounting shows what happens to a business when its output, prices or costs change. This chapter in SPM Accounting covers four linked skills, each with its own lesson below.
What does this chapter cover?
The four skills build on each other. Classifying costs comes first, because contribution, break-even and budgets all start from knowing which costs move with output.
| Skill | Question it answers |
|---|---|
| Classifying costs | Which costs change with output, and which can be traced to a product? |
| Contribution and break-even | How many units cover all costs? |
| Cash budget | Will cash be enough each month? |
| CVP scenarios | What happens if price or cost changes? |
How do the skills connect?
One small example shows the links. A cake stall sells each cake at RM25, and ingredients and a box use RM15 of that, so each cake contributes RM10.
Stall rent and a fixed salary total RM4 500 for the month. The stall must sell 450 cakes to break even, but it also needs cash at the right time to buy ingredients before customers pay. Break-even needs the cost types, and the timing of cash needs a budget.
Where should I start?
Pick the row that matches your situation.
- Cost labels still blur: begin with classifying costs.
- Formulas feel memorised: go to contribution and break-even, and check each by reading the unit cost table.
- Budget columns get muddled: go to the cash budget lesson.
- Scenario questions stall: try the CVP lesson, then the practice set.
What about questions that mix profit and cash?
Profit, cost and cash answer different questions, and a business can be profitable and still run short of cash. The extra series profit, cost and cash are different questions works through this with supplied tables.
To see timing differences yourself, open the cash profit and transaction timing explorer.
If you would like a teacher to work through these skills with you, see online one-to-one Accounting tuition.