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Chapter 1

The Changing Role of Managerial Accounting in a Dynamic Business Environment

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objective 1

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Define Managerial Accounting

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

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Learning Objective 2

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Managing Resources, Activities, and People


An organization . . .
Directing

Acquires Resources

Organized set of activities

Decision Making

Controlling

Planning

Hires People
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Learning Objective 3

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How Managerial Accounting Adds Value to the Organization


Providing information for decision making and planning. Assisting managers in directing and controlling activities. Motivating managers and other employees towards organizations goals. Measuring performance of subunits, activities, managers, and other employees. Assessing the organizations competitive position.
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The Balanced Scorecard


How do we look to owners? Financial Perspective Goals Measures

Customer Perspective Goals Measures How do customers see us?

In which activities must we excel? Operations Perspective Goals Measures

Innovation Perspective Goals Measures

How can we continue to improve?


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Learning Objective 4

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Managerial versus Financial Accounting


Accounting System (accumulates financial and managerial accounting data in the cost accounting system) Managerial Accounting Information for decision making, planning, and controlling an organizations operations. Internal Users Financial Accounting Published financial statements and other financial reports.

External Users
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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 organizatio 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 Almost exclusively drawn from the accounting system, plus various organization's basic accounting other sources, such as rates of system, which accumulates effective products manufactured, financial information. physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays Nature of Reports Reports often focus on subunits Reports focus on the enterprise in and Procedures within the organization, such as its entirety. Based almost departments, divisions, exclusively on historical geographical regions, or product transaction data. lines. Based on a combination of 1-11 historical data, estimates, and

Learning Objective 5

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Line and Staff Positions


A line position is directly involved in achieving the basic objectives of an organization. Example: A production supervisor in a manufacturing plant. A staff position supports and assists line positions. Example: A cost accountant in the manufacturing plant.

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Learning Objective 6

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

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

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

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Learning Objective 7

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Major Themes in Managerial Accounting


Behavioral Issues Costs and Benefits

Information and Incentives

Evolution and Adaptation

Managerial Accounting
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Evolution and Adaptation in Managerial Accounting


E-Business Service vs. Manufacturing Firms Product Life Cycles Time-Based Competition

Emergence of New Industries


Global Competition Focus on the Customer Cross-Functional Teams

Change

Information and Communication Technology Just-in-Time Inventory Total Quality Management Continuous Improvement
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Cost Management Systems


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

Cost Management System

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Cost Management Systems


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

Cost Management System

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Learning Objective 8

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Strategic Cost Management and the Value Chain


Product Design Production Research and Development Securing raw materials and other resources

Marketing

Distribution Customer Service


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Start

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

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Learning Objective 9

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Ethical Climate of Business


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

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Learning Objective 10

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Managerial Accounting as a Career


Professional Organizations
Institute of Management Accountants (IMA)

Publishes Management Accounting and research studies.

Administers Certified Management Accountant program

Develops Standards of Ethical Conduct for Management Accountants


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Professional Ethics
Competence Confidentiality Integrity Credibility

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End of Chapter 1

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