1. Chapter One Managerial Accounting in the Information Age

2. Goal of Managerial Accounting Provide managers the information they need for  planning  controlling  decision making

3. Planning Communicates goals to employees and other interested parties Determines resources necessary to achieve the goals The budget is the financial plan for the organization

4. Controlling Evaluates the performance of managers and the operations they are responsible for Performance reports normally compare actual results to planned (budgeted) results Be sure that the comparison is relevant! Management by exception means investigate significant deviations from the plan

5. Decision Making Managers must learn to analyze information to formulate decisions Key is to identify the relevant information

6. Managerial vs. Financial Acct Managerial  Internal users  Pragmatic  Data base information  Not governed by any set of rules Financial  External users  Need to use GAAP  Summary information  Rule oriented

7. Cost Terms to Know Variable vs. fixed cost Sunk costs Opportunity costs Direct vs. indirect costs Controllable vs. noncontrollable costs

8. Fixed versus Variable Cost A fixed cost is the same in total as volume changes, and decreases per unit as volume increases. A variable cost increases (varies) in total as volume increases, and is constant per unit. Fixed or variable refers to TOTAL COST

9. Variable Cost or Fixed Cost? A cost is $10.00 per unit at a volume of 10,000 units and $10.00 per unit at a volume of 12,000 units. Fixed or variable? A cost is $12,000 in total at a volume of 6,000 units and $14,000 in total at a volume of 7,000 units. Fixed or variable? A cost is $10,000 in total at a volume of 5,000 units and $10,000 in total at a volume of 6,000 units. Fixed or variable?

10. Bright Ideas Decision making relies on incremental analysis You get what you measure

11. The Information Age and Managerial Accounting The value chain is composed of an organization, its suppliers and its customers Information technology has changed the very basis of how that information is communicated Think of the options you had to get you textbook this semester…

12. A Framework for Ethical Behavior What decisions alternatives are available? Who has a stake in the outcome of the decision? Who would be harmed by any of the alternatives? Which will do the most good with the least harm?

13. Ethical Decisions (cont) Would someone I respect find any of the alternatives objectionable? After deciding and before acting, ask:  At a gut level, am I comfortable with this?  Will I be comfortable telling my friends and family about this decision?

14. Managerial Accounting Careers The IMA offers the CMA certificate More CEO’s are coming out of the accounting areas Managerial accountants often work in cross functional teams Managerial accountants will work as internal consultants in a variety of areas