Study Notes management accounting acca f2

Important:
Functional classification may have more heads, depending on the size and number of 
activities of an organization 
Uses:
➢
 
Cost control 
➢
 
Inventory Valuation 
➢
 
Financial Statements, etc. 
 
✓
Product & Period Costs: 
 
Product Costs: 
“Cost of making or buying an item of inventory is called product cost”.
Examples: 
Materials, Labour, Expenses. 
 
Period Costs:
“A cost that does not change, which remains fixed. It relates to the passage of time rather than the 
output of individual product or service is called period cost”.
Examples: 
Salaries, Rent of the building, etc. 

---

F2 Management Accounting
Page 5 of 147 
Uses:
➢
 
Cost control 
➢
 
Inventory valuation 
➢
 
Absorption & Marginal costing, etc. 
✓
Controllable & Uncontrollable Costs: 
Normally all the cost incurred by an organisation are controllable for management. But some costs 
are uncontrollable for a particular manager. 
Controllable: 
“Costs which can be controlled by the manager are called controllable costs.” 
 
Examples: 
Material used for production, labour paid to production workers, etc.
 
 
Uncontrollable: 
“Costs which cannot be controlled by the manager are called controllable costs.” 
 
Example: 
Share in the rental cost of the building, share in the organisation’s bills, etc.
 

By Behaviour: 
In the cost behavior we will see the effect on costs with the change in activity level.