Managerial accounting and introduction to concepts methods and user 11e by maher chapter 01

CHAPTER GOAL This chapter provides the groundwork for the book, including tying strategic cost analysis to the value chain... Can/should the financial or tax accounting systems be use

Fundamental Concepts

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Florida Institute of Technology

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Managerial Accounting 11E

CHAPTER GOAL

 This chapter provides the groundwork for the

book, including tying strategic cost analysis to

the value chain.

MANAGERIAL ACCOUNTING:

Definition

MANAGERIAL ACCOUNTING:

Definition

Reports results of activities

to insiders (managers, etc.).

yourself from competition Focus

on order fulfillment, cutting

costs, etc.

Can/should the financial or tax

accounting systems be used for

managerial accounting

purposes?

NO! The objectives and therefore the information available for decision making is

different.

 Treasurer: manages cash flows; raises cash

 Cost accountants/managers: analyze,

manage costs

 Internal audit: provides auditing, consulting

services

 Certified Management Accountant (CMA)

 Certified Public Accountant (CPA)

 Canadian certifications

 Chartered Accountant (CA)

 Certified General Accountant (CGA)

PREVENTING WHITE COLLAR

How do costs and

expenses differ?

While a cost is the sacrifice

of resources, an expense is

a “gone” asset

Variable and fixed costs are presented separately for managerial purposes

Variable and fixed costs lumped together

for financial purposes

Variable and fixed costs lumped together

for financial purposes

ACTIVITY BASED MANAGEMENT (ABM): Definition

ACTIVITY BASED

Examines activities and their associated costs as a means of developing efficiencies and reducing non-value-added

costs.

What are

“non-value-added” activities?

Non-value-added

activities are activities that

can be eliminated without

VALUE CHAIN: Definition

Describes a linked set of activities that increase the usefulness (value) of products/services of an

organization.

EXHIBIT 1.4

Functions of the value chain help management identify value-added

activities

Functions of the value chain help management identify value-added

activities

How do strategic and

decisions differ?

Strategic decisions choose

between production alternatives Tactical decisions make a particular production alternative more cost efficient.

STRATEGY and VALUE

CHAIN

Strategic cost analysis identifies parts

of the value chain that generate

most profits, enabling management

to position their business at the best

profit points.

Strategic cost analysis identifies parts

of the value chain that generate

most profits, enabling management

to position their business at the best

profit points.

ECONOMIC DEPRECIATION:

Definition

ECONOMIC DEPRECIATION:

Definition

Measures decline in value

of assets during a period using either sales value or

replacement cost.

COST OF CAPITAL: Definition

Is the amount a firm could

earn on its assets by putting them to their best

alternative use.

KEY DEVELOPMENTS IN MANAGERIAL ACCOUNTING

 Integrated information systems

Tie managerial accounting, financial reporting, customer

databases, supply chain management and other databases

together

Examples: ERPS, SAP

 Web hosting

Allows companies to focus on core competencies while

outsourcing portions of information systems

 Just-in-Time (JIT) and lean production

Eliminate inventory between production departments and focus

on quality and efficiency

KEY DEVELOPMENTS IN MANAGERIAL ACCOUNTING (cont.)

 Total quality management (TQM)

Measures product reliability and service delivery as well as

profitability while attempting excelling in all dimensions

 Theory of constraints (TOC)

Identifies the weakest part of the process chain (constraint) and

attempts to improve it

 Benchmarking and continuous improvement

Benchmarking: continuous process of measuring products,

services, activities against best performance levels, engaging in

continuous improvement

 Fads

Information is not free Management

must consider costs and benefits of

information when designing an

optimal accounting system.

Information is not free Management

must consider costs and benefits of

information when designing an

optimal accounting system.

The Institute of Management Accountants

promulgated the following standards of ethical

conduct for management accountants.

knowledge and skills in preparing complete reports with relevant and reliable information.

information acquired in the course of their work, except when

RESOLUTION OF ETHICAL CONFLICT

appears that the superior is involved, in which case the problem

should be presented initially to the next higher managerial level

2.If the immediate superior is the chief executive officer or

equivalent, the acceptable reviewing authority may be a group such

as the audit committee, executive committee, board of directors,

board of trustees, or owners

objective advisor to obtain an understanding of possible courses of

action

4.If the ethical conflict still exists after exhausting all levels of

internal review, the management accountant may have no other

recourse on significant matters than to resign from the organization

End of CHAPTER 1