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Chapter 1 The Changing Role of Managerial Accounting in a Dynamic Business Environment

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Learning Objective 1

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Define Managerial Accounting

Managerial accounting is the process of  Identifying  Measuring  Analyzing  Interpreting  Communicating information

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Learning Objective 2

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Managing Resources, Activities, and People An organization . . .

Directing

Acquires Resources

Hires People

Organized Organized set set of of activities activities

Controlling

Decision Making

Planning

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Learning Objective 3

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


How Managerial Accounting Adds Value to the Organization •• Providing Providing information information for for decision decision making making and and planning. planning. •• Assisting Assisting managers managers in in directing directing and and controlling controlling activities. activities. •• Motivating Motivating managers managers and and other other employees employees towards towards organization’s organization’s goals. goals. •• Measuring Measuring performance performance of of subunits, subunits, activities, activities, managers, managers, and and other other employees. employees. •• Assessing Assessing the the organization’s organization’s competitive competitive position. position. 1-7


The Balanced Scorecard How do we look to owner’s?

Financial Perspective Goals Measures In which activities must we excel?

Customer Perspective Goals Measures

Operations Perspective Goals Measures

How do customers see us?

Innovation Perspective Goals Measures

How can we continue to improve? 1-8


Learning Objective 4

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Managerial versus Financial Accounting Accounting Accounting System System (accumulates (accumulates financial financial and and managerial managerial accounting accounting data data in in the the cost cost accounting accounting system) system) Managerial Managerial Accounting Accounting Information Information for for decision decision making, making, planning, planning, and and controlling controlling an an organization’s organization’s operations. operations. Internal Users

Financial Financial Accounting Accounting Published Published financial financial statements statements and and other other financial financial reports. reports.

External Users 1-10


Managerial versus Financial Accounting Managerial Accounting Users of Information Managers, within the organization. Regulation Not required and unregulated, since it is intended only for management.

Financial Accounting Interested parties, outside the organization. Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. Source of Data The organization's basic accounting system, plus Almost exclusively drawn from the organization's various other sources, such as rates of effective basic accounting system, which accumulates products manufactured, physical quantities of financial information. material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays in airlines. Nature of Reports and Reports often focus on subunits within the Reports focus on the enterprise in its entirety. Procedures organization, such as departments, divisions, Based almost exclusively on historical transaction geographical regions, or product lines. Based on a data. combination of historical data, estimates, and projections of future events. 1-11


Learning Objective 5

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Line and Staff Positions •• AA line line position position is is directly directly involved involved in in achieving achieving the the basic basic objectives objectives of of an an organization. organization. –– Example: Example: AA production production supervisor supervisor in in aa manufacturing manufacturing plant. plant.

•• AA staff staff position position supports supports and and assists assists line line positions. positions. –– Example: Example: AA cost cost accountant accountant in in the the manufacturing manufacturing plant. plant.

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Learning Objective 6

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Controller The The chief chief managerial managerial and and financial financial accountant accountant responsibility responsibility for: for: –– Supervising Supervising accounting accounting personnel personnel –– Preparation Preparation of of information information and and reports, reports, managerial managerial and and financial financial –– Analysis Analysis of of accounting accounting information information –– Planning Planning and and decision decision making making

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Treasurer Responsible Responsible for for raising raising capital capital and and safeguarding safeguarding the the organization’s organization’s assets. assets. –– Supervises Supervises relationships relationships with with financial financial institutions. institutions. –– Work Work with with investors investors and and potential potential investors. investors. –– Manages Manages investments. investments. –– Establishes Establishes credit credit policies. policies. –– Manages Manages insurance insurance coverage coverage

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Internal Auditor Responsible Responsible for for reviewing reviewing accounting accounting procedures, procedures, records, records, and and reports reports in in both both the the controller’s controller’s and and the the treasurer’s treasurer’s area area of of responsibility. responsibility. –– Expresses Expresses an an opinion opinion to to top top management management regarding regarding the the effectiveness effectiveness of of the the organizations organizations accounting accounting system. system.

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Learning Objective 7

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Major Themes in Managerial Accounting Behavioral Behavioral Issues Issues

Costs Costs and and Benefits Benefits

Information Information and and Incentives Incentives

Evolution Evolution and and Adaptation Adaptation

Managerial Accounting 1-19


Evolution and Adaptation in Managerial Accounting E-Business

Product Life Cycles Time-Based Competition

Service vs. Manufacturing Firms Emergence of New Industries

Change

Global Competition Focus on the Customer Cross-Functional Teams

Information and Communication Technology

Just-in-Time Inventory Total Quality Management Continuous Improvement 1-20


Cost Management Systems Objectives Objectives Measure Measure the the cost cost of of resources resources consumed. consumed. Identify Identify and and eliminate eliminate non-value-added non-value-added costs. costs.

Cost Management System

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Cost Management Systems Objectives Objectives Determine Determine efficiency efficiency and and effectiveness effectiveness of of major major activities. activities. Identify Identify and and evaluate evaluate new new activities activities that that can can improve improve performance. performance.

Cost Management System

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Learning Objective 8

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Strategic Cost Management and the Value Chain Product Product Design Design Research Research and and Development Development Securing Securing raw raw materials materials and and other other resources resources

Start

Production Production Marketing Marketing Distribution Distribution Customer Customer Service Service 1-24


Theory of Constraints A sequential process of identifying and removing constraints in a system. Restrictions Restrictions or or barriers barriers that that impede impede progress progress toward toward an an objective objective

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Learning Objective 9

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Ethical Climate of Business The The corporate corporate scandals scandals experienced experienced over over the the last last few few years years have have shown shown us us that that unethical nethical behavior behavior in in business business is is wrong wrong in in aa moral moral sense sense and and can can be be disastrous disastrous in in the the economy. economy. In In addition addition to to Sarbanes-Oxley, Sarbanes-Oxley, there there will will likely likely be be more more reforms reforms in in corporate corporate governance governance and and accounting. accounting.

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Learning Objective 10

McGraw-Hill/Irwin

Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Managerial Accounting as a Career Professional Organizations

Institute of Management Accountants (IMA)

Publishes Publishes Management Management Accounting Accounting and and research research studies. studies.

Administers Administers Certified Certified Management Management Accountant Accountant program program

Develops Develops Standards Standards of of Ethical Ethical Conduct Conduct for for Management Management Accountants Accountants 1-29


Professional Ethics Competence Confidentiality Integrity Credibility

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End of Chapter 1

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