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8/14/2019 Introduction to Managerial Acct Lecture 1
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Managerial Accounting &the Business Environment
Chapter 1
8/14/2019 Introduction to Managerial Acct Lecture 1
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The McGraw-Hill Companies, Inc., 2McGraw-Hill/Irwin
Managerial Accounting and
Financial Accounting
ManagerialManagerialaccounting
provides information
for managers insideinside an
organization whodirect and control
its operations.
FinancialFinancialaccounting
provides information
to stockholders,
creditors and otherswho are outsideoutside
the organization.
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Work of Management
Planning
Planning
Controlling
Controlling
Directing and
Motivating
Directing and
Motivating
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Planning and Control Cycle
Decision
Making
Formulating long-
and short-term plans
(Planning)
Formulating long-
and short-term plans
(Planning)
Measuring
performance
(Controlling)
Measuring
performance
(Controlling)
Implementing
plans (Directing
and Motivating)
Implementing
plans (Directing
and Motivating)
Comparing actual
to planned
performance
(Controlling)
Comparing actual
to planned
performance
(Controlling)
Begin
Exh.
1-1
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Differences Between Financial
and Managerial Accounting
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The McGraw-Hill Companies, Inc., 2McGraw-Hill/Irwin
C o r p o r a t e O r g a n i z
P u r c h a
P e r s o
V i c e P r
O p e r a
T r e a
C o n t
C h i e f F
O f f i c e
P r e s i d
B o a r d o f
Organizational Structure
Decentralization is the delegation of decision-making
authority throughout an organization.
Decentralization is the delegation of decision-makingauthority throughout an organization.
8/14/2019 Introduction to Managerial Acct Lecture 1
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Line and Staff Relationships
Line position are directlyrelated to achievement ofthe basic objectives of anorganization.
Example: Productionsupervisors in amanufacturing plant.
Staff positions support andassist line positions.
Example: Costaccountants in the
manufacturing plant.
8/14/2019 Introduction to Managerial Acct Lecture 1
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Growth of the internet
Just-in-Time production
Total Quality
Management
International competition
Growth of the internet
Just-in-Time production
Total QualityManagement
International competition
Business environmentchanges in the past
twenty years
The Changing Business
Environment
8/14/2019 Introduction to Managerial Acct Lecture 1
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The Changing Business
Environment
Just-In-Time
Total QualityManagement
Process Reengineering
Theory of Constraints
New tools for
managers!
8/14/2019 Introduction to Managerial Acct Lecture 1
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Complete products
just in time to
ship customers.
Complete products
just in time to
ship customers.
Complete parts
just in time for
assembly into products.
Complete parts
just in time for
assembly into products.
Schedule
production.
Schedule
production.
Receive materials
just in time for
production.
Receive materials
just in time for
production.
Receive
customer
orders.
Receive
customer
orders.
Just-in-Time (JIT) Systems
8/14/2019 Introduction to Managerial Acct Lecture 1
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FlexibleworkforceFlexible
workforceReduced
setup timeReduced
setup time
Zero production
defects
Zero production
defects
JIT Consequences
Improved
plant layout
Improved
plant layout
JIT purchasing
Fewer, but more ultra reliable suppliers.
Frequent JIT deliveries in small lots.
Defect-free supplier deliveries.
JIT purchasingFewer, but more ultra reliable suppliers.
Frequent JIT deliveries in small lots.
Defect-free supplier deliveries.
8/14/2019 Introduction to Managerial Acct Lecture 1
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More rapid
response to
customer orders
More rapidresponse to
customer orders
Freed-up fundsFreed-up fundsReduced
inventory
costs
Reduced
inventory
costs
Greatercustomer
satisfaction
Greatercustomer
satisfactionHigher quality
products
Benefits of a JIT System
Increased
throughput
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Do we needto changethe plan?
Where are we?
Where do we want to go?
How dowe start?
How are we doing?
Check
Plan
Act Dois
Total Quality Management
Benchmarking
Continuous
Improvement
8/14/2019 Introduction to Managerial Acct Lecture 1
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Process Reengineering
The process is
redesigned to include
only those steps that make
our product more valuable.
The process isredesigned to include
only those steps that make
our product more valuable.
Every step in
the business
process must
be justified.
Every step inthe business
process must
be justified.
A business process
is diagrammed
in detail.
A business process
is diagrammed
in detail.
Anticipated results:Anticipated results:
Process is simplified.
Process is completedin less time.
Costs are reduced.
Opportunities forerrors are reduced.
Anticipated results:Anticipated results:
Process is simplified.
Process is completedin less time.
Costs are reduced.
Opportunities forerrors are reduced.
8/14/2019 Introduction to Managerial Acct Lecture 1
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A sequential process ofidentifying and removing constraintsin a system.
Restrictions or barriers that impede
progress toward an objective
Restrictions or barriers that impede
progress toward an objective
Theory of Constraints
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4. Coordinate
processes
4. Coordinate
processes
1. Measure
process
capacity
1. Measure
process
capacity
2. Identify
process
constraints
2. Identify
process
constraints
3. Use
bottlenecks
effectively.
3. Use
bottlenecks
effectively.
Only actions
that strengthen
the weakest link
in the chain
improve the
process.
Theory of Constraints
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Theory of Constraints
Process
Capacity
Process
Capacity
A measure of a
processs ability
to transform
resources into
value products
and services.
A measure of a
processs abilityto transform
resources into
value products
and services.
System
Constraint
System
Constraint
The point in a
system that
limits the overall
output of the
system. Often
called the
bottleneck.
The point in a
system that
limits the overall
output of thesystem. Often
called the
bottleneck.
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International Competition
Meeting world-class competition demands a
world-class management accounting system.
Managers must make decisions to plan,direct, and control a world-class organization.
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E-Commerce
During 2001, many dot.combusinesses failed that might havebenefited from the application of
managerial accounting tools:
cost concepts (Chap. 2) cost estimation (Chap. 5) cost-volume-profit (Chap. 6) activity-based costing (Chap. 8)
budgeting (Chap. 9) decision-making (Chap. 13) capital budgeting (Chap. 14)
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Importance of Ethics
in Accounting
Ethical accounting practices build trust and
promote loyal, productive relationships with
users of accounting information.
Many companies and professionalorganizations, such as the Institute
of Management Accountants (IMA),
have written codes of ethics which
serve as guides for employees.Code of Conduct for Management
Accountants
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IMA Code of Ethics for
Management Accountants
Four broad areas ofresponsibility:Maintain a high level ofprofessional competence
treat sensitive matters withconfidentiality
Maintain personal integrity
Be objective in alldisclosures
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CompetenceCompetence
IMA Code of Ethics for
Management Accountants
Follow applicable laws,
regulations and
standards.
Follow applicable laws,
regulations and
standards.
Maintain
professional
competence.
Maintain
professional
competence.
Prepare complete and clear
reports after appropriate
analysis.
Prepare complete and clear
reports after appropriate
analysis.
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ConfidentialityConfidentiality
IMA Code of Ethics for
Management Accountants
Do not disclose confidential
information unless legally
obligated to do so.
Do not disclose confidential
information unless legally
obligated to do so.
Ensure that subordinates do
not disclose confidential
information.
Ensure that subordinates do
not disclose confidential
information.
Do not use
confidential
information for
personal
advantage.
Do not useconfidential
information for
personal
advantage.
IMA C d f E hi f
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IMA Code of Ethics for
Management Accountants
Avoid conflicts of interest
and advise others of
potential conflicts.
Avoid conflicts of interest
and advise others of
potential conflicts.
Recognize and
communicate personal and
professional limitations.
Recognize and
communicate personal and
professional limitations.
Do not subvert
organizations
legitimate
objectives.
Do not subvert
organizations
legitimate
objectives.
IntegrityIntegrity
IMA C d f Ethi f
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IMA Code of Ethics for
Management Accountants
IntegrityIntegrity
Avoid activities that could
affect your ability to
perform duties.
Avoid activities that could
affect your ability to
perform duties.
Communicate
unfavorable as well as
favorable information.
Communicate
unfavorable as well as
favorable information.
Refrain from
activities
that could
discredit the
profession.
Refrain fromactivities
that could
discredit the
profession.
Refuse gifts
or favors
that might
influence
behavior.
Refuse giftsor favors
that might
influence
behavior.
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IMA C d f Ethi f
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Resolution of Ethical Conflict
Follow established policies.
For unresolved ethical conflicts:
Discuss the conflict with immediatesuperior.
If immediate superior is the CEO, considerthe board of directors or the auditcommittee.
Except where legally prescribed, maintainconfidentiality.
IMA Code of Ethics for
Management Accountants
IMA C d f Ethi f
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Resolution of Ethical Conflict
Clarify issues in a confidentialdiscussion with
an objective advisor.Consult an attorney as to legalobligations.
The last resort is to resign.
IMA Code of Ethics for
Management Accountants
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Th M G Hill C i I 2
End of Chapter 1