Post on 31-Dec-2015
transcript
Prepared by Debby Bloom-Hill CMA, CFM
CHAPTER 1CHAPTER 1
Managerial Accounting
In the
Information Age
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Managerial AccountingManagerial Accounting
Managerial accounting is designed for internal users
The goal of Managerial Accounting is to provide the information managers need for Planning Control Decision making
Slide 1-3 Learning objective 1: State the primary goal of managerial accounting
PlanningPlanning
Planning is a key activity for all companies
Communicates a company’s goals to employees Aids coordination of various
functions such as sales and production
Specifies the resources needed to achieve company goals
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PlanningPlanning
Budgets for planning Profit budget
Indicates planned income Cash flow budget
Indicates planned cash inflows and outflows
Production budget Indicates the planned quantity of production and expected costs
Slide 1-5 Learning objective 2: Describe how budgets are used in planning
PlanningPlanning
Slide 1-6 Learning objective 2: Describe how budgets are used in planning
ControlControl
Organizations achieve control by: Evaluating managers to determine
how their performance should be rewarded or punished
Evaluating operations to provide information as to whether they should be changed or not
Slide 1-7 Learning objective 3: Describe how performance reports are used in the control process
Planning and Control Process
Planning and Control Process
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Learning objective 3: Describe how performance reports are used in the control process
Sample Performance ReportSample Performance Report
Slide 1-9 Learning objective 3: Describe how performance reports are used in the control process
Managerial vs Financial Accounting
Managerial vs Financial Accounting
Unlike Financial Accounting, Managerial Accounting: Is directed at internal users May deviate from GAAP Presents more detailed information May present more nonmonetary
information Places more emphasis on the future
Slide 1-10 Learning objective 4: Distinguish between financial and managerial accounting
Cost TerminologyCost Terminology
Variable Costs Change in proportion to changes in
volume or activity
Slide 1-11 Learning objective 5: Define cost terms used in planning, control, and decision making
Cost TerminologyCost Terminology
Fixed Costs Do not change in response to
changes in volume or activity
Slide 1-12 Learning objective 5: Define cost terms used in planning, control, and decision making
Which of the following is most likely to be a variable cost?
a. Depreciationb. Cost of materialsc. Rentd. Advertising
Answer:b. Cost of materials
Slide 1-13 Learning objective 5: Define cost terms used in planning, control, and decision
Which of the following is most likely to be a fixed cost?
a. Cost of materialsb. Rentc. Assembly labor costd. Commissions
Answer:b. Rent
Slide 1-14 Learning objective 5: Define cost terms used in planning, control, and decision making
Cost TerminologyCost Terminology
Sunk Costs Costs incurred in the past Not relevant to present decisions
Opportunity Costs Values of benefits foregone when
selecting one alternative over another
Slide 1-15 Learning objective 5: Define cost terms used in planning, control, and decision making
Costs incurred in the past are:a. Opportunity costsb. Direct costsc. Sunk costsd. Variable costs
Answer:c. Sunk costs
Slide 1-16 Learning objective 5: Define cost terms used in planning, control, and decision making
Cost TerminologyCost Terminology
Direct and indirect costs Direct costs are directly traceable to
a product, activity, or department, indirect costs are not traceable
Controllable and non-controllable costs A manager can influence
controllable costs but cannot influence non- controllable costs
Slide 1-17 Learning objective 5: Define cost terms used in planning, control, and decision making
Direct and Indirect CostDirect and Indirect Cost
Slide 1-18 Learning objective 5: Define cost terms used in planning, control, and decision making
In the past year, Williams Mold & Machine had sales of $8,000,000 and total production costs of $6,000,000. In the coming year, the company believes that production can be increased by 30%, but this will require adding a second shift to work from 4:00 pm to 1:00 am.
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1. Indicate three production costs that are likely to increase because of adding a second production shift.
Material costs, workers’ salaries, and benefits are all likely to increase
Learning objective 5: Define cost terms used in planning, control, and decision making
In the past year, Williams Mold & Machine had sales of $8,000,000 and total production costs of $6,000,000. In the coming year, the company believes that production can be increased by 30%, but this will require adding a second shift to work from 4:00 pm to 1:00 am.
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2. What production cost most likely will not increase when the second shift is added?
Depreciation of the building will not increase
Learning objective 5: Define cost terms used in planning, control, and decision making
Two Key Ideas in Managerial Accounting
Two Key Ideas in Managerial Accounting
Slide 1-21 Learning objective 6: Explain the two key ideas in managerial accounting
Incremental AnalysisIncremental Analysis
Slide 1-22 Learning objective 6: Explain the two key ideas in managerial accounting
• Incremental analysis: Differences in revenues and costs
between alternatives are incremental Incremental revenue minus
incremental cost equals incremental profit
You Get What you MeasureYou Get What you Measure
Performance measures greatly influence the behavior of managers
Slide 1-23 Learning objective 6: Explain the two key ideas in managerial accounting
You Get What you MeasureYou Get What you Measure
Slide 1-24 Learning objective 6: Explain the two key ideas in managerial accounting
Information Age and Managerial AccountingInformation Age and
Managerial Accounting Advances in information
technology have: Increased competition and also
created opportunities and cost savings for firms that use information for strategic advantage
Impacted information flows up and down the value chain (i.e. fundamental activities that a firm engages in to create value)
Slide 1-25 Learning objective 7: Discuss the impact of information technology on competition, business processes and the interactions companies have with suppliers and customers
The Value ChainThe Value Chain
Slide 1-26 Learning objective 7: Discuss the impact of information technology on competition, business processes and the interactions companies have with suppliers and customers
Impact of Software Systems on the Value Chain
Impact of Software Systems on the Value Chain
Enterprise Resource Planning (ERP) Computerize inventory control and
production planning Supply Chain Management (SCM)
Organization of activities between a company and its suppliers
Customer Relationship Management (CRM) Manages a variety of customer
interactions
Slide 1-27 Learning objective 7: Discuss the impact of information technology on competition, business processes and the interactions companies have with suppliers and customers
Ethical and Unethical BehaviorEthical and Unethical Behavior
Examples of unethical behavior Enron managers mislead investors
by hiding debt, i.e. Kenneth Lay, CEO, found guilty of fraud
WorldCom overstated profits Bernard Ebbers, CEO, received a 25 year prison sentence
Dennis Kozlowski, head of Tyco, was charged with avoiding taxes
Sam Waksal, cofounder of IMClone, was charged with insider trading
Slide 1-28 Learning objective 8: Describe a framework for ethical decision making
Sarbanes-Oxley ActSarbanes-Oxley Act
Slide 1-29 Learning objective 8: Describe a framework for ethical decision making
Enacted by Congress in July 2002 Requires CEO and CFO to certify
that the financial statements do not contain any untrue statements or omissions
Bans certain types of work by the company’s auditors to ensure their independence
Sarbanes-Oxley ActSarbanes-Oxley Act
Slide 1-30 Learning objective 8: Describe a framework for ethical decision making
Provides for longer jail sentences and larger fines for executives (i.e. fines up to $5 million and jail terms up to 20 years)
Requires companies to report on the existence and reliability of internal controls
Framework for Ethical Decision Making
Framework for Ethical Decision Making
When evaluating a decision, ask:1. What decision alternatives are
available?2. What individuals or organizations
have a stake in the outcome of my decision?
3. Will an individual or an organization be harmed by any of the alternatives?
4. Which alternative will do the most good with the least harm?
5. Would someone I respect find any of the alternatives objectionable?Slide 1-31 Learning objective 8: Describe a framework
for ethical decision making
Framework for Ethical Decision Making
Framework for Ethical Decision Making
After deciding on a course of action, but before taking action, ask:6. At a gut level, am I comfortable
with the decision I am about to make?
7. Will I be comfortable telling my friends and family about this decision?
Slide 1-32 Learning objective 8: Describe a framework for ethical decision making
Institute of Management Accountants (IMA)
Institute of Management Accountants (IMA)
Slide 1-33 Learning objective 8: Describe a framework for ethical decision making
• Professional organization which focuses on management accounting:
Developed Statement of Ethical Professional Practice
Maintains ethics helpline Publishes Strategic Finance and
Management Accounting Quarterly
Conducts comprehensive examination to test knowledge of management accountants
Duties of OfficersDuties of Officers
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• Controller• Prepares reports to plan and
evaluate company activities• Provides information needed to
make management decisions• Files all financial accounting
reports and tax filings with IRS and other tax agencies
• Coordinates activities of external auditors
Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer
Duties of OfficersDuties of Officers
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• Treasurer Manages cash and marketable
securities Prepare cash forecasts Obtains financing from banks and
other lenders Maintain relationships with
investors, banks, and other creditors
Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer
Duties of OfficersDuties of Officers
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• Chief Information Officer (CIO) Responsible for information
technology and computer systems• Chief Financial Officer (CFO)
• Responsible for accounting and finance operations
Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer
Organizational Chart for the Controller’s Office
Organizational Chart for the Controller’s Office
Slide 1-37 Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer
Decision MakingDecision Making
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