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Chapter 1

The Changing Role


of Managerial
Accounting in a
Global Business
Environment

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning
Objective
1

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Define Managerial Accounting

Managerial accounting is the process of


Identifying
Measuring
Analyzing
Interpreting
Communicating information

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Learning
Objective
2

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Managing Resources, Activities,


and People
An organization . . .
Directing

Acquires Resources

Decision
Making

Organized set
of activities

Controlling

Planning

Hires People
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Learning
Objective
3

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

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 organizations goals.
Measuring performance of subunits, activities,
managers, and other employees.
Assessing the organizations competitive position.
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The Balanced Scorecard


How do we
look to
owners?

Financial Perspective
Goals
Measures

Customer Perspective
Goals
Measures

In which
activities
must we
excel?
Operations Perspective
Goals
Measures

How do
customers
see us?
Innovation Perspective
Goals
Measures

How can we
continue to
improve?
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Learning
Objective
4

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Managerial versus Financial


Accounting
Accounting System
(accumulates financial and
managerial accounting data in the
cost accounting system)
Managerial Accounting
Information for decision
making, planning, and
controlling an
organizations
operations.
Internal
Users

Financial Accounting
Published financial
statements and other
financial reports.

External
Users
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Managerial versus Financial Accounting


Managerial Accounting

Financial Accounting

Users of Information
Managers, within the organization.
Regulation Not required and unregulated,
since it is intended only for
management.

Interested parties, outside the organiz


Required and must conform to
generally accepted accounting
principles. Regulated by the
Financial Accounting Standards
Board, and, to a lesser degree,
the Securities and Exchange
Commission.
Source of Data The organization's basic
Almost exclusively drawn from the
accounting system, plus various
organization's basic accounting
other sources, such as rates of
system, which accumulates
effective products manufactured, financial information.
physical quantities of material and
labor used in production,
occupancy rates in hotels and
hospitals, and average take-off
delays
Nature of Reports Reports often focus on subunits
Reports focus on the enterprise in
and Procedures within the organization, such as
its entirety. Based almost
departments, divisions,
exclusively on historical
geographical regions, or product
transaction data.
lines. Based on a combination of
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historical data, estimates, and

Learning
Objective
5

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

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 staff position supports


and assists line positions.

Example: A cost
accountant in the
manufacturing plant.

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Learning
Objective
6

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Controller
The chief managerial and financial accountant
responsibility for:
Supervising accounting personnel
Preparation of information and reports, managerial
and financial
Analysis of accounting information
Planning and decision making

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Treasurer
Responsible for raising capital and safeguarding the
organizations assets.
Supervises relationships with financial institutions.
Work with investors and potential
investors.
Manages investments.
Establishes credit policies.
Manages insurance coverage

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Internal Auditor
Responsible for reviewing accounting procedures,
records, and reports in both the controllers and the
treasurers area of responsibility.
Expresses an opinion to top
management regarding the
effectiveness of the
organizations accounting
system.

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Learning
Objective
7

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Major Themes in Managerial


Accounting
Behavioral
Issues

Costs and
Benefits

Information
and Incentives

Evolution and
Adaptation

Managerial
Accounting
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Evolution and Adaptation in


Managerial Accounting
E-Business

Product Life Cycles


Time-Based
Competition

Service vs.
Manufacturing Firms

Emergence of New
Industries
Global Competition
Focus on the Customer
Cross-Functional Teams

Change

Information and
Communication
Technology
Just-in-Time Inventory
Total Quality Management
Continuous Improvement
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Cost Management Systems


Objectives
Measure the cost of
resources consumed.
Identify and eliminate
non-value-added
costs.

Cost
Management
System

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Cost Management Systems


Objectives
Determine efficiency
and effectiveness of
major activities.
Identify and evaluate
new activities that
can improve
performance.

Cost
Management
System

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Learning
Objective
8

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Strategic Cost Management and


the Value Chain
Product
Design
Production
Research
and
Development
Securing raw
materials and
other resources

Start

Marketing

Distribution
Customer
Service
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Theory of Constraints
A sequential process of identifying and
removing constraints in a system.
Restrictions or barriers that impede
progress toward an objective

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Learning
Objective
9

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

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.

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Learning
Objective
10

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Managerial Accounting as a
Career
Professional Organizations
Institute of Management Accountants (IMA)

Publishes
Management
Accounting
and research
studies.

Administers
Certified
Management
Accountant
program

Develops
Standards of
Ethical
Conduct for
Management
Accountants
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Professional Ethics
Competence
Confidentiality
Integrity
Credibility

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End of Chapter 1

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