Management Accounting
What the exam tests
This domain tests internal reporting for decision-making: cost behaviour, contribution margin, break-even, relevant costs, responsibility centres, and performance measurement. In Czech practice management accounting (vnitropodnikové účetnictví) is not prescribed by the Accounting Act in the same detail as financial accounting; the exam tests concepts and their application through internal directives.
Core rules
- Management accounting is internally focused and can use any currency, unit, and period. It supports planning, control, and decisions; it does not follow the statutory chart of accounts unless the entity chooses to link the systems.
- Separate fixed and variable costs. Contribution margin = sales - variable costs. Break-even point in units = fixed costs / contribution margin per unit. In sales value = fixed costs / contribution margin ratio.
- Relevant costs are future, incremental cash costs that differ between alternatives. Sunk costs, allocated common costs, and accounting depreciation without cash effect are usually irrelevant.
- Responsibility accounting assigns revenues and costs to centres (cost, profit, investment centres) and compares actual with budget. Transfer prices should be transparent and documented.
- KPIs should be linked to strategy and not reward behaviour that damages long-term value. Use both financial and non-financial measures.
Worked example
A product sells for CZK 500, variable cost is CZK 300, and fixed costs are CZK 600,000. Contribution per unit is 200; break-even is 600,000 / 200 = 3,000 units. At 2,000 units the loss is 600,000 - (2,000 × 200) = 200,000. To earn a target profit of CZK 100,000, required units are (600,000 + 100,000) / 200 = 3,500. If a special order uses spare capacity and adds CZK 20,000 of fixed costs, the relevant comparison is extra contribution against extra fixed cost, not the full allocated fixed cost.
Traps
Treating fixed cost per unit as variable; including sunk development cost in a go/no-go decision; using absorption cost for a short-term special-order decision; ignoring capacity constraints; confusing profit with cash. Do not allocate all corporate overhead to a segment when the decision does not change that overhead.