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ManagerialAccounting(brief summary)Susan V. Crosson, M.S. Accounting,C.P.ASanta Fe CollegeBelverd E. Needles, Jr., Ph.D., C.P.A.,C.M.A.DePaul University
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Chapter 1:The Changing Business
Environment:A Managers Perspective
Management is expected to ensure thatthe organization uses its resources wisely,
operates profitably, pays its debts, andabides by laws and regulations.
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If organizations are to prosper, they must identify the
factors that arecritical to their success. Key success factors include:
satisfying customer needs,
developing efficient operating processes,
fostering career paths for employees,and
being an innovative leader in marketingproducts and services.
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The role of management accounting is to provide an
information systemthat enables managers and persons throughout anorganization:
to make informed decisions,
to be more effective at their jobs, and
to improve the organizationsperformance.
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Management Accounting and
Financial Accounting:A Comparison
The primary users of managementaccounting information are people inside theorganization.
financial accounting takes the actual resultsof management decisions about operating,investing, and financing activities andprepares financial statements for parties
outside the organizationowners orstockholders, lenders, customers, andgovernmental agencies.
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Management Accountingand the Management Process
the four stages of this process are:
planning,
performing,
evaluating, and
communicating.
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Planning
A companys mission statement describes the
fundamental way in which the company will
achieve its goal of increasing stakeholdersvalue. It also expresses the companys identity
and unique character. The mission statement is
essential to the planning process, which must
consider how to add value through strategic
objectives, tactical objectives, and
operating objectives.
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Performing Planning alone does not guarantee satisfactory operating results. Management must implement the business plan in ways that make
optimal use of available resources in an ethical manner. Smooth operations
require one or more of the following: Hiring and training personnel Matching human and technical resources to the work that must be
done Purchasing or leasing facilities Maintaining an inventory of products for sale
Identifying operating activities, or tasks, that minimize waste andimprove
the quality of products or services
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Evaluating
When managers evaluate operating results,
they compare the organizations actual
performance with the performance levelsthey established in the planning stage. They
earmark any significant variations for further
analysis so that they can correct the
problems. If the problems are the result of a
change in the organizations operatingenvironment, the managers may revise the
original objectives.
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Communicating
Whether accounting reports are preparedfor internal or external use, they must
provide accurate information and clearlycommunicate this information to thereader. Inaccurate or confusing internalreports can have a negative effect on a
companys operations.
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Value Chain Analysis
This concept of how a business fulfills itsmission and objectives
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Advantages of Value ChainAnalysisAn advantage of value chain analysis is
that it allows a company to focus on its
core competencies. A core competencyis the thing that a company does best. It iswhat gives a company an advantageover its competitors.
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Primary Processes and SupportServices Research and development: developing new and better products or services.Lang plans to add value by developing a candy that has less sugar content
than similar confections.
Design: creating improved and distinctive shapes, labels, or packages for
products. For example, a package that is attractive and that describes thedesirable features of Langs new candy will add value to the product.
Supply: purchasing materials for products or services. Lang will want topurchase high-quality sugar, chocolate, and other ingredients for the candy,as well as high-quality packaging.
Production: manufacturing the product or service. To add value to the new
candy, Lang will want to implement efficient manufacturing and packaging
processes.
Marketing: communicating information about the products or services and
selling them. Attractive advertisements will facilitate sale of the new candy to
customers.
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Distribution: delivering the product or service to the customer. Courteousand efficient service for in-store customers will add value to the product. Langmay also want to accommodate Internet customers by providing shipping.
Customer service: following up with service after sales or providing warrantyservice. For example, Lang may offer free replacement of any candy that does
not satisfy the customer. She could also use questionnaires to measure customersatisfaction. The support services that provide the infrastructure for the primary processesare as follows:
Human resources: hiring and training employees to carry out all the functions ofthe business. Lang will need to hire and train personnel to make the new candy. Legal services: maintaining and monitoring all contracts, agreements, obligations,and other relationships with outside parties. For example, Lang willwant legal advice when applying for a trademark for the new candys name
and when signing contracts with suppliers. Information systems: establishing and maintaining technological means ofcontrolling and communicating within the organization. Lang will want acomputerized accounting system that keeps not only financial records butcustomer information as well.
Management accounting: provides essential information in any business.
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Management Tools for
Continuous Improvement
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Just-in-Time OperatingPhilosophy
all resourcesmaterials, personnel, andfacilitiesbe acquired and used only
when they are needed. Its objectives areto improve productivity and eliminatewaste.
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Total Quality Management
all parts of a business focus on quality.TQMs goal is the improved quality of
products or services and the workenvironment. Workers are empowered tomake operating decisions that improvequality in both areas.
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Activity-Based Management
approach to managing an organizationthat identifies all major activities or tasks
involved in making a product or service,determines the resources consumed byeach of those activities and why theresources are used, and categorizes the
activities as either adding value to aproduct or service or not adding value.
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Theory of Constraints
Limiting factors, or bottlenecks, occurduring the production of any product or
service, but once managers identify sucha constraint, they can focus theirattention and resources on it and achievesignificant improvements.
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Achieving ContinuousImprovement
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By focusing attention on continuousimprovement and fine-tuning of
operations, they contribute to the same resultsin any organization:
a reduction in product or service costsand delivery time,
an improvement in the quality of theproduct or service, and
an increase in customer satisfaction.
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The Balanced Scorecardis a framework that links the perspectives of an organizations fourstakeholder groups to the organizations mission, objectives, resources,and performance measures. The four stakeholder groups are asfollows:
Stakeholders with a financial perspective (owners, investors, andcreditors)value improvements in financial measures, such as net income andreturn oninvestment. Stakeholders with a learning and growth perspective (employees)
value highwages, job satisfaction, and opportunities to fulfill their potential. Stakeholders who focus on the businesss internal processes value
the safe and cost-effective production of high-quality products. Stakeholders with a customer perspective value high-quality
products that are low in cost.
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Benchmarking
is a technique for determining acompanys competitive advantage by
comparing its performance with that of itsclosest competitors.
Benchmarks are measures of the bestpractices in an industry.