1. Accounting Discipline Overview
Today, most accounting professionals take the perspective that cost information is part of the information collected to make management decisions; therefore the distinction between the two is not clear-cut .
Dr . Mohamed Mousa

2. Major Differences Between Management and Financial Accounting
In this slide, a graphical representation highlighting the major differences between management and financial accounting is presented. The categories compared are the:
Purpose of the information, primary users, focus and emphasis, rules of measurement and reporting, time span and type of reports, and behavioral implications.
This is Exhibit 1-1 from page 23.
Dr . Mohamed Mousa

3. Strategic Decisions and the Management Accountant :
Strategy specifies how an organization matches its own capabilities with the opportunities in the market place.
There are two broad strategies : cost leadership and product differentiation
Strategic cost management describes cost management that specifically focuses on strategic issues.
Deciding between the two broad strategies of cost leadership or product differentiation is a critical part of what managers do. Management accountants work closely with managers in various departments to formulate strategies by providing information about the source of competitive advantage, such as (1) the company’s cost, productivity or efficiency advantage relative to competitors or (2) the premium prices a company can charge over its cost for distinctive product or service features.
Dr . Mohamed Mousa

4. Strategic Decisions and the Management Accountant:
Management accounting information helps managers formulate strategy by answering questions such as the following:
Who are our most important customers and what critical capability do we have to be competitive and deliver value to our customers?
Management accounting information helps managers formulate strategy by answering questions such as the following:
Who are our most important customers and what critical capability do we have to be competitive and deliver value to our customers?
What is the bargaining power of our customers?
What is the bargaining power of our suppliers?
What substitute products exist in the marketplace and how do they differ from our product in terms of features, price, cost and quality?
Will adequate cash be available to fund the strategy, or will additional funds need to be raised?
Dr . Mohamed Mousa

5. Strategic Decisions and the Management Accountant:
What is the bargaining power of our customers?
What is the bargaining power of our suppliers?
What substitute products exist in the market place and how do they differ from our product in terms of features, price, cost and quality?
Will adequate cash be available to fund the strategy, or will additional funds need to be raised?
Management accounting information helps managers formulate strategy by answering questions such as the following:
Who are our most important customers and what critical capability do we have to be competitive and deliver value to our customers?
What is the bargaining power of our customers?
What is the bargaining power of our suppliers?
What substitute products exist in the marketplace and how do they differ from our product in terms of features, price, cost and quality?
Will adequate cash be available to fund the strategy, or will additional funds need to be raised?
Dr . Mohamed Mousa

6. Managerial accounting Function :
managerial accounting helps managers perform three vital activities- planning, controlling, and decision making. Planning involves establishing goals and specifying how to achieve them. Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Decision making involves selecting a course of action from competing alternatives. Now let’s take a closer look at these three pillars of managerial accounting.
Management accounting information helps managers formulate strategy by answering questions such as the following:
Who are our most important customers and what critical capability do we have to be competitive and deliver value to our customers?
What is the bargaining power of our customers?
What is the bargaining power of our suppliers?
What substitute products exist in the marketplace and how do they differ from our product in terms of features, price, cost and quality?
Will adequate cash be available to fund the strategy, or will additional funds need to be raised?
Dr . Mohamed Mousa

7. managerial accounting Function :
1- Planning : Plans are often accompanied by a budget. A budget is a detailed plan for the future that is usually expressed in formal quantitative terms. 2- Controlling : This process would involve gathering, evaluating, and responding to feedback to ensure that this year’s recruiting process meets expectations.
Management accounting information helps managers formulate strategy by answering questions such as the following:
Who are our most important customers and what critical capability do we have to be competitive and deliver value to our customers?
What is the bargaining power of our customers?
What is the bargaining power of our suppliers?
What substitute products exist in the marketplace and how do they differ from our product in terms of features, price, cost and quality?
Will adequate cash be available to fund the strategy, or will additional funds need to be raised?
Dr . Mohamed Mousa

8. Managerial accounting Function :
3- Decision Making : the most basic managerial skill is the ability to make intelligent, data-driven decisions. many of those decisions revolve around the following three questions. What should we be selling? Who should we be serving? How should we execute?
Management accounting information helps managers formulate strategy by answering questions such as the following:
Who are our most important customers and what critical capability do we have to be competitive and deliver value to our customers?
What is the bargaining power of our customers?
What is the bargaining power of our suppliers?
What substitute products exist in the marketplace and how do they differ from our product in terms of features, price, cost and quality?
Will adequate cash be available to fund the strategy, or will additional funds need to be raised?
Dr . Mohamed Mousa

9. Value-chain and Supply-Chain Analysis and Key Success Factors:
Creating value is an important part of planning and implementing strategy.
Value is the usefulness a customer gains from a company’s product or service. The entire customer experience determines the value a customer derives from a product.
Customers demand much more than just a fair price – they expect quality products delivered in a timely manner. That experience is the VALUE derived from purchasing a particular product or service.
Dr . Mohamed Mousa

10. Value-chain and Supply-Chain Analysis and Key Success Factors :
The value chain is the sequence of business functions by which a product is made progressively more useful to customers. The value chain consists of :
Research & Development.
Design of Products and Processes.
Production.
Marketing (including Sales).
Distribution.
Customer Service.
The Value chain is the sequence of business functions by which a product is made progressively more useful to customers.
The Value chain consists of:
Research & development (generating and experimenting with ideas related to new products, services or processes)
Design of Products and Processes (detailed planning, engineering and testing of products and processes)
Production (procuring, transporting and storing, coordinating and assembling resources to produce a product or deliver a service)
Marketing (promoting and selling products or services)
Distribution (processing orders and shipping products or services to customers)
Customer service (providing after-sales service to customers)
Dr . Mohamed Mousa

11. The Value Chain Illustrated :
Different Parts of the Value Chain :
Here we have a pictorial view of the value chain. In addition to each of our functions previously discussed, you see “administration” as an additional function. This includes accounting, human resources, information technology and supports the six primary business functions.
Management accounting provides information to inform each of these functions in the value chain.
You can see this chart as exhibit 1-2 on page 25 of your textbook.
Dr . Mohamed Mousa

12. Decision-making, Planning and Control: The Five-step Decision-making Process :
Identify the problem / uncertainties .
Obtain information .
Make predictions about the future .
Make decisions by choosing among alternatives .
Implement the decision, evaluate performance and learn.
Here are the five steps in the decision making process in planning and control. The first four of these steps fall under Planning and step five falls under Control.
Dr . Mohamed Mousa

13. Planning and Control Systems:
Planning consists of :
selecting an organization’s goals and strategies
predicting results under various alternative ways of achieving those goals
deciding how to attain the desired goals.
communicating the goals and how to achieve them to the entire organization.
On this slide, we see some details of the 4 steps that comprise the planning part of the system.
As we can see, in these 4 steps, we decide on the organization’s goals, including actions that are required for success and estimated outcomes as well as communication to the organization.
The budget (see next slide) is the most important tool for planning.
Dr . Mohamed Mousa

14. Planning and Control Systems:
Management accountants serve as business partners in these planning activities because they understand the key success factors and what creates value.
On this slide, we see some details of the 4 steps that comprise the planning part of the system.
As we can see, in these 4 steps, we decide on the organization’s goals, including actions that are required for success and estimated outcomes as well as communication to the organization.
The budget (see next slide) is the most important tool for planning.
Dr . Mohamed Mousa

15. Planning and Control Systems
taking actions that implement the planning decisions
evaluating past performance.
providing feedback and learning to help future decision making.
Control implements the plan, evaluates performance and provides feedback
A budget is the qualitative expression of a proposed plan.
Dr . Mohamed Mousa

16. Management Accounting Guidelines
Three guidelines help management accountants provide the most value to the strategic and operational decision-making of their companies:
The Cost-benefit approach compares the benefits of an action/purchase to the costs. Generally, of course, the benefits should exceed the costs.
The three guidelines shown here for Management Accountants help management accountants provide the information that is most needed for decision-making.
Dr . Mohamed Mousa

17. Management Accounting Guidelines
2. Behavioral and technical considerations recognize, among other things, that management is primarily a human activity that should focus on encouraging individuals to do their jobs better. 3. Managers use alternative ways to compare costs in different decision-making situations because there are different costs for different purposes.
The three guidelines shown here for Management Accountants help management accountants provide the information that is most needed for decision-making.
Dr . Mohamed Mousa

18. Chapter 2 “An Introduction to Cost Terms and Purposes “
The Next Lecture
Chapter 2 “An Introduction to Cost Terms and Purposes “
Dr . Mohamed Mousa