19-1 CHAPTER19 Managerial Accounting 19-2 PreviewofCHAPTER19 19-3 Managerial Accounting Basics Managerial accounting, a field of accounting that provides economic and financial information for managers and other internal users Activities include: Explaining manufacturing and nonmanufacturing costs (Chapter 19) Computing cost of providing a service or manufacturing a product (Chapters 20 and 21) Determining the behavior of costs and expenses as activity levels change and analyzing cost–volume–profit relationships within a company (Chapter 22) 19-4 Managerial Accounting Basics Managerial accounting, a field of accounting that provides economic and financial information for managers and other internal users Activities include: Assisting management in profit planning and formalizing these plans in the form of budgets (Chapter 23) Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs (Chapters 24 and 25) Accumulating and presenting data for management decision making (Chapter 26) 19-5 Managerial Accounting Basics Comparing Managerial and Financial Accounting 19-6 Illustration 19-1 SO Explain the distinguishing features of managerial accounting Managerial Accounting Basics Question Managerial accounting: 19-7 a Pertains to the entity as a whole and is highly aggregated b Places emphasis on special-purpose information c Is limited to cost data d Is governed by generally accepted accounting principles SO Explain the distinguishing features of managerial accounting Managerial Accounting Basics Management Functions Three broad functions: Planning Directing Requires managers to look ahead and to establish objectives maximizing short-term profits and market share, maintaining a commitment to environmental protection, and contributing to social programs Controlling 19-8 SO Identify the three broad functions of management Managerial Accounting Basics Management Functions Three broad functions: Planning Directing Controlling 19-9 Involves coordinating diverse activities and human resources to produce a smoothrunning operation This function relates to implementing planned objectives, providing necessary incentives to motivate employees, selecting executives, appointing managers and supervisors, and hiring and training employees SO Identify the three broad functions of management Managerial Accounting Basics Management Functions Three broad functions: Planning Directing Controlling 19-10 Process of keeping the company’s activities on track Managers determine whether planned goals are being met When there are deviations from targeted objectives, managers must decide what changes are needed to get back on track SO Identify the three broad functions of management Manufacturing Costs Income Statement 19-26 Illustration 19-5 SO Explain the difference between a merchandising and a manufacturing income statement Manufacturing Costs Income Statement 19-27 Illustration 19-6 Cost of goods sold sections of merchandising and manufacturing income statements SO Explain the difference between a merchandising and a manufacturing income statement Manufacturing Costs Cost of Goods Manufactured Illustration 19-7 Work in Process – partially completed units of product Total Manufacturing Costs – sum of direct material costs, direct labor costs, and manufacturing overhead; all incurred in the current period 19-28 SO Indicate how cost of goods manufactured is determined Manufacturing Costs Illustration 19-8 Cost of goods manufactured schedule 19-29 SO Manufacturing Costs Balance Sheet 19-30 Illustration 19-9 Inventory accounts for a manufacturer SO Explain the difference between a merchandising and a manufacturing balance sheet Manufacturing Costs Balance Sheet 19-31 Illustration 19-10 Current assets sections of merchandising and manufacturing balance sheets SO Explain the difference between a merchandising and a manufacturing balance sheet Manufacturing Costs Product Costing for Service Industries 19-32 U.S economy has shifted toward an emphasis on providing services rather than goods Over 50% of U.S workers are now employed by service companies Trend is expected to continue in the future Most of the techniques learned for manufacturing firms are applicable to service companies SO Explain the difference between a merchandising and a manufacturing balance sheet 19-33 Managerial Accounting Today The Value Chain All activities associated with providing a product or service Illustration 19-13 A manufacturer’s value chain 19-34 SO Identify trends in management accounting Managerial Accounting Today Technological Change Enterprise Resource Planning (ERP) systems provide a comprehensive, centralized, integrated source of information that companies can use to manage all major business processes, from purchasing to manufacturing to human resources Computer-Integrated Manufacturing (CIM) allows companies to manufacture products that are untouched by human hands Business-to-Business (B2B) e-commerce on the Internet 19-35 SO Identify trends in management accounting Managerial Accounting Today Just-In-Time Inventory Methods Goods are manufactured or purchased just in time for use Quality 19-36 JIT inventory system requires increased emphasis on product quality Companies have installed total quality management (TQM) systems to reduce defects in finished products SO Identify trends in management accounting Managerial Accounting Today Activity-Based Costing Allocates overhead based on use of activities Results in more accurate product costing and scrutiny of all activities in the value chain Theory of Constraints 19-37 A specific approach used to identify and manage constraints in order to achieve the company’s goals SO Identify trends in management accounting Managerial Accounting Today Balanced Scorecard 19-38 Evaluates operations in an integrated fashion Uses both financial and non-financial measures Links performance measures to overall company objectives SO Identify trends in management accounting Managerial Accounting Today Question Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful manner? 19-39 a Just-in-time inventory b Total-quality management c Balanced scorecard d Activity-based costing SO Identify trends in management accounting Copyright “Copyright © 2011 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.” 19-40 .. .CHAPTER1 9 Managerial Accounting 19- 2 PreviewofCHAPTER19 19- 3 Managerial Accounting Basics Managerial accounting, a field of accounting that provides economic... decision making (Chapter 26) 19- 5 Managerial Accounting Basics Comparing Managerial and Financial Accounting 19- 6 Illustration 19- 1 SO Explain the distinguishing features of managerial accounting Managerial... and controlling 19- 11 SO Identify the three broad functions of management 19- 12 SO Managerial Accounting Basics Organizational Structure Illustration 19- 2 19- 13 SO Managerial Accounting Basics