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© 2010 The McGraw-Hill Companies, Inc.
Managerial Accounting and the Business Environment
Chapter 1
McGraw-Hill/Irwin Slide 2
Learning Objective 1
Understand the role of Understand the role of management management
accountants in an accountants in an organization.organization.
McGraw-Hill/Irwin Slide 3
Corporate Organization Chart
Purcha sing Personnel V ice PresidentO pera tions
T rea surer C ontro ller
C hief F ina ncia lO fficer
President
B oa rd of D irectors
Organizational Structure
Decentralization is the delegation of decision-Decentralization is the delegation of decision-making authority throughout an organization.making authority throughout an organization.
Decentralization is the delegation of decision-Decentralization is the delegation of decision-making authority throughout an organization.making authority throughout an organization.
McGraw-Hill/Irwin Slide 4
Line and Staff Relationships
Line positions are directly related to achievement of the basic objectives of an organization.Example: Production
supervisors in a manufacturing plant.
Staff positions support and assist line positions.Example: Cost
accountants in the manufacturing plant.
McGraw-Hill/Irwin Slide 5
The Chief Financial Officer (CFO)
A member of the top management team responsible for: Providing timely and relevant data to support planning
and control activities. Preparing financial statements for external users.
A member of the top management team responsible for: Providing timely and relevant data to support planning
and control activities. Preparing financial statements for external users.
McGraw-Hill/Irwin Slide 6
Learning Objective 2
Understand the basic Understand the basic concepts underlying concepts underlying Lean Production, the Lean Production, the
Theory of Constraints, Theory of Constraints, and Six Sigma.and Six Sigma.
McGraw-Hill/Irwin Slide 7
Process Management
Business functions making up the value chainBusiness functions making up the value chain
Product Customer R&D Design Manufacturing Marketing Distribution Service
A businessprocess is a series of
steps that are followed in order tocarry out some task in
a business.
McGraw-Hill/Irwin Slide 8
Process Management
There are three approaches toimproving business processes . . .
LeanProduction
Theory ofConstraints (TOC)
SixSigma
McGraw-Hill/Irwin Slide 9
Lean Production
Lean thinking can be used to improve business processes that link companies together.
The term supply chain management refers to the coordination of business processes across companies to better serve end consumers.
McGraw-Hill/Irwin Slide 10
A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want.
The Theory of Constraints is based on the observation that effectively managing the constraint is the key to success.
The constraint in a system is determinedThe constraint in a system is determinedby the step that has theby the step that has the smallest smallest capacity.
Theory of Constraints
McGraw-Hill/Irwin Slide 11
Six Sigma
A process improvement method relying on customer feedback and fact-based data gathering and analysis
techniques to drive process improvement.
A process improvement method relying on customer feedback and fact-based data gathering and analysis
techniques to drive process improvement.
Refers to a process that generates no more
than 3.4 defects per million opportunities.
Refers to a process that generates no more
than 3.4 defects per million opportunities.
Sometimes associated
with the term zero defects.
Sometimes associated
with the term zero defects.
McGraw-Hill/Irwin Slide 12
Learning Objective 3
Understand the Understand the importance of upholding importance of upholding
ethical standards.ethical standards.
McGraw-Hill/Irwin Slide 13
Code of Conduct for Management Accountants
The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice
consists of two parts that offer guidelines for: Ethical behavior. Resolution for an ethical conflict.
The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice
consists of two parts that offer guidelines for: Ethical behavior. Resolution for an ethical conflict.
McGraw-Hill/Irwin Slide 14
CompetenceCompetenceFollow applicablelaws, regulationsand standards.
Follow applicablelaws, regulationsand standards.
Maintain professional competence.
Maintain professional competence.
Provide accurate, clear, concise, and timely decision
support information.
Provide accurate, clear, concise, and timely decision
support information.
IMA Guidelines for Ethical Behavior
Recognize and communicate professional limitations that preclude responsible judgment.
Recognize and communicate professional limitations that preclude responsible judgment.
McGraw-Hill/Irwin Slide 15
ConfidentialityConfidentiality
Do not disclose confidential Do not disclose confidential information unless legally information unless legally
obligated to do so. obligated to do so.
Do not disclose confidential Do not disclose confidential information unless legally information unless legally
obligated to do so. obligated to do so.
Ensure that subordinates do Ensure that subordinates do not disclose confidential not disclose confidential
information. information.
Ensure that subordinates do Ensure that subordinates do not disclose confidential not disclose confidential
information. information.
Do not use Do not use confidential confidential
information for information for unethical or illegalunethical or illegal
advantage. advantage.
Do not use Do not use confidential confidential
information for information for unethical or illegalunethical or illegal
advantage. advantage.
IMA Guidelines for Ethical Behavior
McGraw-Hill/Irwin Slide 16
Mitigate conflicts of interest and advise others
of potential conflicts.
Mitigate conflicts of interest and advise others
of potential conflicts.
Abstain from activities that might discredit the
profession.
Abstain from activities that might discredit the
profession.
Refrain from conduct that
would prejudice carrying out
duties ethically.
Refrain from conduct that
would prejudice carrying out
duties ethically.
IntegrityIntegrity
IMA Guidelines for Ethical Behavior
McGraw-Hill/Irwin Slide 17
Communicate information fairly and objectively.
Communicate information fairly and objectively.
Disclose all relevant information that could
influence a user’s understanding of reports and recommendations.
Disclose all relevant information that could
influence a user’s understanding of reports and recommendations.
CredibilityCredibility
IMA Guidelines for Ethical Behavior
Disclose delays or deficiencies in information timeliness, processing, or
internal controls.
Disclose delays or deficiencies in information timeliness, processing, or
internal controls.
McGraw-Hill/Irwin Slide 18
Abandoning ethical standards in business would lead to a lower quality of life with less
desirable goods and services at higher prices.
Why Have Ethical Standards?
Without ethical standards in business, theeconomy, and all of us who depend on it for
jobs, goods, and services, would suffer.
Ethical standards in business are essential for asmooth functioning economy.
Ethical standards in business are essential for asmooth functioning economy.
McGraw-Hill/Irwin Slide 19
Company Codes of Conduct
EmployeesEmployees CustomersCustomers SuppliersSuppliers
And to the communities inwhich the company operates.
And to the communities inwhich the company operates.
Broad-based statements of aBroad-based statements of acompany’s responsibilities to:company’s responsibilities to:Broad-based statements of aBroad-based statements of acompany’s responsibilities to:company’s responsibilities to:
McGraw-Hill/Irwin Slide 20
Corporate Governance
The system byThe system bywhich a company is directedwhich a company is directed
and controlled.and controlled.
Board ofDirectorsBoard ofDirectors
TopManagement
TopManagement
StockholdersStockholders
To pursueobjectives of
Incentives andmonitoring for
McGraw-Hill/Irwin Slide 21
Enterprise Risk Management
A process usedA process usedby a company toby a company to
proactively identifyproactively identifyand manage risk.and manage risk.
Once a company identifies its risks, perhaps themost common risk management tactic is to reduce
risks by implementing specific controls.
Once a company identifies its risks, perhaps themost common risk management tactic is to reduce
risks by implementing specific controls.
Should I try to avoid the risk, share the risk, accept therisk, or reduce the risk?
McGraw-Hill/Irwin Slide 22
Corporate Social Responsibility
CSR extends beyond legal complianceto include voluntary actions that satisfy
stakeholder expectations.
CSR extends beyond legal complianceto include voluntary actions that satisfy
stakeholder expectations.
Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions.
Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions.
Customers Employees CommunitiesSuppliers StockholdersEnvironmental
& Human RightsAdvocates