The Changing Role of Managerial Accounting in a Dynamic Business Environment Chapter 1 McGraw-Hill/Irwin Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Learning Objective 1 1-2

Managerial accounting is the process of Identifying Measuring Analyzing Interpreting Communicating information Define Managerial Accounting 1-3

Learning Objective 2 1-4

Managing Resources, Activities, and People An organization... Acquires Resources Hires People Organized set of activities Organized set of activities Decision Making Decision Making Planning Directing Controlling 1-5

Learning Objective 3 1-6

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

The Balanced Scorecard Financial Perspective Goals Measures Customer Perspective Goals Measures Operations Perspective Goals Measures Innovation Perspective Goals Measures How do we look to owners? How do customers see us? How can we continue to improve? In which activities must we excel? 1-8

Learning Objective 4 1-9

Managerial versus Financial Accounting Accounting System (accumulates financial and managerial accounting data in the cost accounting system) Accounting System (accumulates financial and managerial accounting data in the cost accounting system) Managerial Accounting Information for decision making, planning, and controlling an organization’s operations. Managerial Accounting Information for decision making, planning, and controlling an organization’s operations. Financial Accounting Published financial statements and other financial reports. Financial Accounting Published financial statements and other financial reports. InternalUsers ExternalUsers 1-10

Managerial versus Financial Accounting 1-11

Learning Objective

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 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. A staff position supports and assists line positions. Example: A cost accountant in the manufacturing plant. 1-13

Learning Objective

Controller The chief managerial and financial accountant is responsible for: Supervising accounting personnel. Preparation of information and reports, managerial and financial. Analysis of accounting information. Planning and decision making. The chief managerial and financial accountant is responsible for: Supervising accounting personnel. Preparation of information and reports, managerial and financial. Analysis of accounting information. Planning and decision making. 1-15

Treasurer Responsible for raising capital and safeguarding the organization’s assets. Supervises relationships with financial institutions. Work with investors and potential investors. Manages investments. Establishes credit policies. Manages insurance coverage. Responsible for raising capital and safeguarding the organization’s assets. Supervises relationships with financial institutions. Work with investors and potential investors. Manages investments. Establishes credit policies. Manages insurance coverage. 1-16

Internal Auditor Responsible for reviewing accounting procedures, records, and reports in both the controller’s and the treasurer’s area of responsibility. Expresses an opinion to top management regarding the effectiveness of the organization’s accounting system. Responsible for reviewing accounting procedures, records, and reports in both the controller’s and the treasurer’s area of responsibility. Expresses an opinion to top management regarding the effectiveness of the organization’s accounting system. 1-17

Learning Objective7 1-18

ProductDesignProductDesign ResearchandDevelopmentResearchandDevelopment Strategic Cost Management and the Value Chain Securing raw materials and other resources Securing raw materials and other resources ProductionProduction MarketingMarketing DistributionDistribution CustomerServiceCustomerService Start 1-19

Learning Objective

Capacity Theoretical Capacity is the upper limit on the amount of goods or services if everything works perfectly. Practical capacity allows for normal occurrences such as cash register downtime and cashier fatigue or illness. 1-21

Cost Management Systems Objectives Ê Measure the cost of resources consumed. Ë Identify and eliminate non- value-added costs. Objectives Ê Measure the cost of resources consumed. Ë Identify and eliminate non- value-added costs. Cost Management System 1-22

Cost Management Systems Objectives ¸ Determine efficiency and effectiveness of major activities. ¹ Identify and evaluate new activities that can improve performance. Objectives ¸ Determine efficiency and effectiveness of major activities. ¹ Identify and evaluate new activities that can improve performance. Cost Management System 1-23

Learning Objective

Managerial Accounting as a Career Professional Organizations Institute of Management Accountants (IMA) Publishes Management Accounting and research studies. Publishes Management Accounting and research studies. Administers Certified Management Accountant program Administers Certified Management Accountant program Develops Standards of Ethical Conduct for Management Accountants Develops Standards of Ethical Conduct for Management Accountants 1-25

Learning Objective

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. 1-27

Professional Ethics 4 Competence 4 Confidentiality 4 Integrity 4 Credibility 1-28

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