1. MANAGERIAL ACCOUNTING OVERVIEW & BASIC CONCEPTS
STUDENT CHAPTER 1
MANAGERIAL ACCOUNTING
10TH EDITION BY
MAHER, STICKNEY & WEIL
PowerPoint Presentation by
Gail B. Wright Professor Emeritus of Accounting Bryant University
© Copyright 2008 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star Logo, and South-Western are trademarks used herein under license.
OVERVIEW & BASIC CONCEPTS

2. LEARNING OBJECTIVES
Distinguish between managerial, financial accounting.
Understand how managers use accounting information to implement strategies.
Identify key financial players in the organization.
Understand managerial accounts’ professional environment & ethical responsibilities.
Master concept of cost.
Continued

3. LEARNING OBJECTIVES
Compare, contrast income statements for managerial use & external reporting.
Understand concepts useful for managing costs.
Describe how managerial accounting supports modern production environments.
Understand importance of effective communication between accountants & users of managerial accounting information.
Understand ethical standards that make up IMA code of Ethics (Appendix 1.1).

4. MANAGERIAL APPLICATION
LO 1
MANAGERIAL APPLICATION
How did cost information help Domino’s Pizza survive?
Domino’s dropped its 6-inch pizza when they discovered it was losing money.

5. FINANCIAL ACCOUNTING: Definition
LO 1
FINANCIAL ACCOUNTING: Definition
Reports to users (shareholders, creditors, financial analysts, etc.) outside the organization.

6. MANAGERIAL ACCOUNTING: Definition
LO 1
MANAGERIAL ACCOUNTING: Definition
Reports results of activities to insiders (managers, etc.).

7. LO 2
When a product is a “commodity” how do you compete to achieve/maintain profitability?
Compete by differentiating yourself from competition. Focus on order fulfillment, cutting costs, etc.

8. LO 2
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.

9. Who are the key financial players in the corporation?
LO 3
Who are the key financial players in the corporation?
Key financial players are Financial Vice President, Controller, Treasurer, Cost Accountants/Managers, & Internal Audit.

10. FINANCIAL PROFESSIONALS
LO 3
FINANCIAL PROFESSIONALS
Financial VP: in charge of all accounting & finance
Controller: manages cost & managerial accounting
Treasurer: manages cash flows; raises cash
Cost accountants/managers: analyze, manage costs
Internal audit: provides auditing, consulting services

11. ETHICAL, REGULATORY FRAMEWORK
LO 4
ETHICAL, REGULATORY FRAMEWORK
Standard setting
Cost Accounting Standards Board sets cost accounting standards
Professional organizations
Institute of Management Accounts (IMA) sponsors professional certifications
Certifications
Certified Management Accountant (CMA)
Certified Public Accountant (CPA)
Canadian certifications
Chartered Accountant (CA)
Certified General Accountant (CGA)

12. What should the accounting professional do in cases of conflict?
LO 4
What should the accounting professional do in cases of conflict?
Follow company procedures.
If not resolved, discuss with superiors.
In extreme cases, resign.

13. Is a sacrifice of resources.
LO 5
COST: Definition
Is a sacrifice of resources.

14. TYPES OF COSTS Opportunity costs Direct costs Indirect costs
LO 5
TYPES OF COSTS
Opportunity costs
Is the forgone income from using an asset in its best alternative
Direct costs
Relate directly to the cost object for which cost is to be measured
Indirect costs
Are indirectly related to the cost of a cost object
Variable costs
Change in total as the level of activity changes
Fixed costs
Do not change in total with changes in the level of activity

15. How do financial and managerial income statements differ?
LO 6
How do financial and managerial income statements differ?
Managerial income statements present variable and fixed costs separately while financial income statements do not make this distinction.

16. ACTIVITY BASED MANAGEMENT (ABM): Definition
LO 7
ACTIVITY BASED MANAGEMENT (ABM): Definition
Examines activities and their associated costs as a means of developing efficiencies and reducing non-value-added costs.

17. What are “non-value-added” activities?
LO 7
What are “non-value-added” activities?
Non-value-added activities are activities that can be eliminated without reducing a product’s service potential to the customer.

18. VALUE CHAIN: Definition
LO 7
VALUE CHAIN: Definition
Describes a linked set of activities that increase the usefulness (value) of products/services of an organization.

19. How do strategic and tactical cost management decisions differ?
LO 7
How do strategic and tactical cost management decisions differ?
Strategic decisions choose between production alternatives. Tactical decisions make a particular production alternative more cost efficient.

20. LO 7
STRATEGY & 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.

21. ECONOMIC DEPRECIATION: Definition
LO 7
ECONOMIC DEPRECIATION: Definition
Measures decline in value of assets during a period using either sales value or replacement cost.

22. COST OF CAPITAL: Definition
LO 7
COST OF CAPITAL: Definition
Is the amount a firm could earn on its assets by putting them to their best alternative use.

23. LO 9
INFORMATION
Information is not free. Management must consider costs & benefits of information when designing an optimal accounting system.

24. CHAPTER 1
THE END