View
214
Download
0
Tags:
Embed Size (px)
Citation preview
Stern School of BusinessStern School of BusinessManagerial AccountingManagerial Accounting
Summer 2005 Summer 2005
Instructor: Instructor: Francois Brochet Francois Brochet
An Introduction to Managerial An Introduction to Managerial AccountingAccounting
How Managers Use Managerial Accounting How Managers Use Managerial Accounting InformationInformation
The Managerial Accounting The Managerial Accounting Function Function
Provides Information for Product Provides Information for Product and Service Costingand Service Costing
Provides Information for Planning Provides Information for Planning And Decision Making And Decision Making
Provides Information for Provides Information for Performance EvaluationPerformance Evaluation
Information to Determine the Information to Determine the Cost of Products and ServicesCost of Products and Services
Provides Information to determine the cost of Provides Information to determine the cost of manufactured products and servicesmanufactured products and services
Information for Decision MakingInformation for Decision Making
Calculate the financial consequences of Calculate the financial consequences of alternativesalternatives and and see how costs will differ among the alternatives.see how costs will differ among the alternatives.
Managerial accounting has little to do with recording Managerial accounting has little to do with recording past costs, and much to do with estimating past costs, and much to do with estimating future costsfuture costs..
Information for Planning and Information for Planning and Performance EvaluationPerformance Evaluation
Cost accountants help management develop Cost accountants help management develop effective planning tools and methods to effective planning tools and methods to
evaluate the performance of responsibility evaluate the performance of responsibility centers.centers.
Managerial AccountantsManagerial Accountants
Record, measure,determine andanalyze costs
Analyze operations and coststo find ways to improve operations and product
quality while reducing costs
Managerial Accounting and Managerial Accounting and GAAPGAAP
The primary purpose of The primary purpose of financial accountingfinancial accounting is to is to provide stakeholders provide stakeholders information regarding information regarding company and management company and management performance.performance.
The financial data prepared The financial data prepared for this purpose are governed for this purpose are governed by by GAAP.GAAP.
Generally AcceptedAccounting
Principles (GAAP) are the rules,
standards, andconventions that
guide thepreparation of
financial statementsfor stockholders.
Managerial Accounting and Managerial Accounting and GAAPGAAP
Cost data for managerial use Cost data for managerial use need not comply with GAAP.need not comply with GAAP.
Management is free to set its Management is free to set its own definitions for Managerial own definitions for Managerial Accounting Information.Accounting Information.
Decision makers often require Decision makers often require different information than that different information than that provided in financial statements provided in financial statements to shareholders.to shareholders.
Differences Between Financial Differences Between Financial and Managerial Accountingand Managerial Accounting
Creating Value in OrganizationsCreating Value in Organizations
Each step of the development, production, and Each step of the development, production, and distribution process should add value to the distribution process should add value to the
product or service offered.product or service offered.
Using Managerial Accounting Using Managerial Accounting Information to Increase ValueInformation to Increase Value
Nonvalue-added activities – activities that Nonvalue-added activities – activities that do not do not add add value to the product or service.value to the product or service.
Nonvalue-added
activitiesIdentify Eliminate
Cost-Benefit AnalysisCost-Benefit Analysis
The process of comparing benefits with costs The process of comparing benefits with costs associated with a proposed change within an associated with a proposed change within an
organization.organization.
CostsCosts
BenefitsBenefits
Strategic Cost AnalysisStrategic Cost Analysis
If a company can If a company can eliminate nonvalue-addedeliminate nonvalue-added activities, it can reduce costs without activities, it can reduce costs without reducing product value.reducing product value.
Reduced costs, with no loss in value, means Reduced costs, with no loss in value, means the company has a the company has a competitive advantagecompetitive advantage..
Global StrategiesGlobal Strategies
A strategic advantage exists when your A strategic advantage exists when your company has company has invested resourcesinvested resources that make it that make it difficult for competitors to match.difficult for competitors to match.
New entry into the market is difficult because New entry into the market is difficult because of the magnitude of investment required.of the magnitude of investment required.
E-CommerceE-Commerce
During 2001, many dot.com businesses During 2001, many dot.com businesses failed that might have benefited from failed that might have benefited from
the application of managerial the application of managerial accounting tools:accounting tools:
– cost concepts (Chap. 2) cost concepts (Chap. 2) – cost measurement (Chap. 4)cost measurement (Chap. 4)– cost estimation (Chap. 5)cost estimation (Chap. 5)– cost-volume-profit (Chap. 6)cost-volume-profit (Chap. 6)– activity-based costing (Chap. 8)activity-based costing (Chap. 8)– budgeting (Chap. 9)budgeting (Chap. 9)– decision-making (Chap. 13)decision-making (Chap. 13)
Focusing on CustomersFocusing on Customers
Without customers, the organization Without customers, the organization loses its ability to exist.loses its ability to exist.
Customers provide the organization with Customers provide the organization with its focus.its focus.
Many companies identify customers’ Many companies identify customers’ needs before designing and producing needs before designing and producing products.products.
Users of Managerial AccountingUsers of Managerial Accounting
Who are the“customers” of cost
accounting?
Users of Managerial AccountingUsers of Managerial Accounting
Production needs costinformation to control
and improve operations.
Users of Managerial AccountingUsers of Managerial Accounting
Mid-level managersneed cost information that
serves as a warning signal whenoperations are different
from expectations.
Users of Managerial AccountingUsers of Managerial Accounting
I know that seniormanagers use somecost information to
assess overallperformance of the
company.
Managerial Accounting in High-Managerial Accounting in High-Tech Production SettingsTech Production Settings
Many companies have installed Many companies have installed computer-assisted methods ofcomputer-assisted methods of– Manufacturing products,Manufacturing products,– Merchandising products, orMerchandising products, or– Providing services.Providing services.
New technologies have had a New technologies have had a major impact on Managerial major impact on Managerial Accounting.Accounting.
Just-in-Time MethodJust-in-Time Method
In production or purchasing, each unit is purchased or In production or purchasing, each unit is purchased or produced produced just in timejust in time for its use.for its use.
Lean ProductionLean Production
Companies eliminate inventories between Companies eliminate inventories between production departments . . .production departments . . .– Making the quality and efficiency of production the Making the quality and efficiency of production the
highest priority,highest priority,– Providing the flexibility to change quickly from Providing the flexibility to change quickly from
one product to another, andone product to another, and– Emphasizing training and worker skills.Emphasizing training and worker skills.
Total Quality ManagementTotal Quality Management
The organization is managed to The organization is managed to excel excel on all on all dimensions and quality is ultimately defined dimensions and quality is ultimately defined
by the by the customer.customer.
Benchmarking and Benchmarking and Continuous ImprovementContinuous Improvement
Benchmarking – The Benchmarking – The continuous continuous processprocess of of measuring measuring one’s own one’s own products, services and activities products, services and activities against the against the best levels of best levels of performance.performance.
ContinuousContinuous – Managers and – Managers and employees are not satisfied with employees are not satisfied with a particular performance but a particular performance but seek seek ongoing improvement.ongoing improvement.
Theory of ConstraintsTheory of Constraints
Every organization usually has at least one Every organization usually has at least one bottleneckbottleneck that limits production. that limits production.
Management focuses on maximizing profits Management focuses on maximizing profits by by identifying constraintsidentifying constraints and increasing and increasing capacity.capacity.
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 ConstraintsTheory of Constraints
Activity-Based CostingActivity-Based Costingand Managementand Management
A product costing method that is useful in A product costing method that is useful in industries where industries where overhead is high overhead is high relative to relative to
other costs.other costs.
Activity-based costing assigns costs to Activity-based costing assigns costs to products based on products based on several different several different
activities activities whereas traditional costing whereas traditional costing methods only assign costs to products on methods only assign costs to products on
one one oror twotwo different activitiesdifferent activities.. ABC
Activity-Based CostingActivity-Based Costingand Managementand Management
A product costing method that is useful in A product costing method that is useful in industries where industries where overhead is high overhead is high relative to other relative to other
costs.costs.
ABC Traditionalmethod
Products Products
ActivitiesActivities““cost drivers”cost drivers”
Importance of EthicsImportance of Ethicsin Accountingin Accounting
Ethical accounting practices build trust and Ethical accounting practices build trust and promote loyal, productive relationships with promote loyal, productive relationships with users of accounting information.users of accounting information.
Many companies and professional Many companies and professional organizations, such as the Instituteorganizations, such as the Instituteof Management Accountants (IMA),of Management Accountants (IMA),have written codes of ethics whichhave written codes of ethics which
serve as guides for employees.serve as guides for employees. – Code of Conduct for Management AccountantsCode of Conduct for Management Accountants
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement Accountants
Four broad areas of Four broad areas of responsibility:responsibility:
Maintain a high level of Maintain a high level of professional competenceprofessional competence
treat sensitive matters with treat sensitive matters with confidentialityconfidentiality
Maintain personal integrityMaintain personal integrity Be objective in all disclosuresBe objective in all disclosures
CompetenceCompetence
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement 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.
ConfidentialityConfidentiality
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement 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 use confidential
information for personal
advantage.
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement 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 organization’s
legitimate objectives.
Do not subvert organization’s
legitimate objectives.
IntegrityIntegrity
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement 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 from activities that could
discredit the profession.
Refuse gifts or favors
that might influence behavior.
Refuse gifts or favors
that might influence behavior.
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement Accountants
Communicate information fairly and objectively.
Communicate information fairly and objectively.
Disclose all information that might be useful to
management.
Disclose all information that might be useful to
management.
ObjectivityObjectivity
Resolution of Ethical ConflictResolution of Ethical Conflict
Follow established policies.Follow established policies.
For unresolved ethical conflicts: For unresolved ethical conflicts:
– Discuss the conflict with immediate superior.Discuss the conflict with immediate superior.
– If immediate superior is the CEO, consider the If immediate superior is the CEO, consider the board of directors or the audit committee. board of directors or the audit committee.
– Except where legally prescribed, maintain Except where legally prescribed, maintain confidentiality.confidentiality.
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement Accountants
Resolution of Ethical ConflictResolution of Ethical Conflict
Clarify issues in a confidential discussion Clarify issues in a confidential discussion withwithan objective advisor.an objective advisor.
Consult an attorney as to legal obligations.Consult an attorney as to legal obligations.
The last resort is to resign.The last resort is to resign.
IMA Code of Ethics for IMA Code of Ethics for Management AccountantsManagement Accountants