The changing role of managerial accounting in a dynamic business environment

Chapter 1
The Changing Role
of Managerial
Accounting in a
Dynamic Business
Environment

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Learning
Objective
1

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Define Managerial Accounting

Managerial accounting is the process of
 Identifying
 Measuring
 Analyzing
 Interpreting
 Communicating information

Learning
Objective
2

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Managing Resources, Activities,
and People
An organization . . .

Directing

Acquires Resources

Hires People

Organized
Organized set
set
of
of activities
activities

Controlling

Decision
Making

Planning


Learning
Objective
3

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


How Managerial Accounting
Adds Value to the Organization
•• Providing
Providing information
information for
for decision
decision making
making and
and
planning.
planning.
•• Assisting
Assisting managers
managers in
in directing
directing and
and controlling

controlling
activities.
activities.
•• Motivating
Motivating managers
managers and
and other
other employees
employees
towards
towards organization’s
organization’s goals.
goals.
•• Measuring
Measuring performance
performance of
of subunits,
subunits, activities,
activities,
managers,
managers, and
and other
other employees.
employees.
•• Assessing
Assessing the
the organization’s
organization’s competitive
competitive position.
position.

The Balanced Scorecard
How do we look
to owner’s?

Financial Perspective
Goals
Measures
In which activities
must we excel?

Customer Perspective
Goals
Measures

Operations Perspective
Goals
Measures

How do customers
see us?

Innovation Perspective
Goals
Measures

How can we
continue to
improve?

Learning
Objective
4

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Managerial versus Financial
Accounting
Accounting
Accounting System
System
(accumulates
(accumulates financial
financial and
and
managerial
managerial accounting
accounting data
data in
in the
the
cost
cost accounting
accounting system)
system)

Managerial
Managerial Accounting
Accounting
Information
Information for
for decision
decision
making,
making, planning,
planning, and
and
controlling
controlling an
an
organization’s
organization’s
operations.
operations.
Internal
Users

Financial
Financial Accounting
Accounting
Published
Published financial
financial
statements
statements and
and other

other
financial
financial reports.
reports.

External
Users


Managerial versus Financial
Accounting


Learning
Objective
5

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Line and Staff Positions
•• AA line
line position
position is
is directly
directly
involved
involved in

in achieving
achieving the
the
basic
basic objectives
objectives of
of an
an
organization.
organization.
–– Example:
Example: AA production
production
supervisor
supervisor in
in aa
manufacturing
manufacturing plant.
plant.

•• AA staff
staff position
position supports
supports
and
and assists
assists line
line positions.
positions.
–– Example:

Example: AA cost
cost
accountant
accountant in
in the
the
manufacturing
manufacturing plant.
plant.


Learning
Objective
6

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Controller
The
The chief
chief managerial
managerial and
and financial
financial accountant
accountant
responsibility
responsibility for:

for:
–– Supervising
Supervising accounting
accounting personnel
personnel
–– Preparation
Preparation of
of information
information and
and reports,
reports, managerial
managerial
and
and financial
financial
–– Analysis
Analysis of
of accounting
accounting information
information
–– Planning
Planning and
and decision
decision making
making


Treasurer
Responsible
Responsible for

for raising
raising capital
capital and
and safeguarding
safeguarding the
the
organization’s
organization’s assets.
assets.
–– Supervises
Supervises relationships
relationships with
with financial
financial institutions.
institutions.
–– Work
Work with
with investors
investors and
and potential
potential
investors.
investors.
–– Manages
Manages investments.
investments.
–– Establishes
Establishes credit
credit policies.
policies.

–– Manages
Manages insurance
insurance coverage
coverage


Internal Auditor
Responsible
Responsible for
for reviewing
reviewing accounting
accounting procedures,
procedures, records,
records,
and
and reports
reports in
in both
both the
the controller’s
controller’s and
and the
the treasurer’s
treasurer’s
area
area of
of responsibility.
responsibility.
–– Expresses
Expresses an

an opinion
opinion to
to top
top
management
management regarding
regarding the
the
effectiveness
effectiveness of
of the
the
organizations
organizations accounting
accounting
system.
system.


Learning
Objective
7

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Major Themes in Managerial
Accounting

Behavioral
Behavioral
Issues
Issues

Costs
Costs and
and
Benefits
Benefits

Information
Information
and
and Incentives
Incentives

Evolution
Evolution and
and
Adaptation
Adaptation

Managerial
Accounting


Evolution and Adaptation in
Managerial Accounting
E-Business

Product Life Cycles
Time-Based
Competition

Service vs.
Manufacturing Firms
Emergence of New
Industries
Global Competition
Focus on the Customer
Cross-Functional Teams

Change

Information and
Communication
Technology
Just-in-Time Inventory

Total Quality Management
Continuous Improvement


Cost Management Systems
Objectives
Objectives
Measure
Measure the
the cost

cost of
of
resources
resources consumed.
consumed.
Identify
Identify and
and eliminate
eliminate
non-value-added
non-value-added
costs.
costs.

Cost
Management
System


Cost Management Systems
Objectives
Objectives
Determine
Determine efficiency
efficiency
and
and effectiveness
effectiveness of
of
major

major activities.
activities.
Identify
Identify and
and evaluate
evaluate
new
new activities
activities that
that
can
can improve
improve
performance.
performance.

Cost
Management
System


Learning
Objective
8

McGraw-Hill/Irwin

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Strategic Cost Management and
the Value Chain
Product
Product
Design
Design
Research
Research
and
and
Development
Development
Securing
Securing raw
raw
materials
materials and
and
other
other resources
resources

Start

Production
Production
Marketing
Marketing
Distribution
Distribution

Customer
Customer
Service
Service


Theory of Constraints
A sequential process of identifying and
removing constraints in a system.
Restrictions
Restrictions or
or barriers
barriers that
that impede
impede
progress
progress toward
toward an
an objective
objective