Careful consideration Three responsibilities of decision making Planning Setting goals and objectives Budget Directing Overseeing day to day operations Controlling Evaluating results of operations Controlling Evaluating results of operations against plans and making adjustments as needed Budget versus actual Examples Comparing budgeted sales with actual sales to take corrective actions Comparing budgeted product costs against actual product costs to take corrective actions Issue Primary users Purpose of information Primary accounting product What s included Underlying basis of information Emphasis Business Unit Preparation Verification Information requirements Managerial Internal Plan direct control decide Internal reports useful to management Defined by management Internal and External transactions focus on future Data must be relevant Segments of the business Depends on Management needs Internal audit None Financial External Users make investing and lending decisions General purpose financial statements Determined by GAAP Based on historical transactions with external parties Data must be reliable and objective Company as a whole Annually and quarterly External audit SEC requires publically traded companies to issue audited financial statements N A Impact on employee behavior Board audit committee CEO COO and CFO COO VP of operations CFO Treasurer controller Internal audit audit committee Cross Functional Teams Changing Roles of Management Accountants Impact of technology Ensuring accurate financial records Planning analyzing and interpreting account data Providing decision support Required Skills of Managerial accountants Knowledge of Financial and Managerial accounting Analytical Skills critical thinking Knowledge of how a business functions Ability to work on a team Oral and written communication skills Ethics Competences Expertise Knowledge Skills Qualifications to perform Job duties Maintaining your skills Performing your job duties in accordance s with laws regulations and technical standards Providing decision support that is accurate Confidentiality Keep quiet Integrity Abstaining from engaging in or supporting any activity that would discredit the profession Reporting conflicts of interests Violations Credibility Communicating information fairly and objectively Is your work creditable Regulatory and Business Issues Sarbanes Oxley act of 2002 SOX Restore trust in publicly traded corporations management financial statements and auditors CEO CFO Requirements Financial Statements Internal Control Structure Annual Assessment Independent audit committee White collar crime penalties International Financial Reporting Standards IFRS Results of globalization Consistent reporting standards needed worldwide SEC is studying IFRS Extensible Business Reporting Language XBRL Standardized tagging system for financial reports Advantages Decreases retrieval time Decreases conversion time Facilitates comparisons Customizes information Sustainability The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs Social responsibility Triple bottom line Profit People Planet Shifting economy Shift away from manufacturing toward service Managerial accounting has expanded Competing in the Global Marketplace Barriers to international trade have fallen More accurate and timely needed Advanced Information System Enterprise Resource Planning ERO Systems that integrates a company s functions departments and data Advantages Streamline operations Respond quickly to changes Replace separate software systems Disadvantages Expensive Lean Production Philosophy and business strategy of manufacturing without waste Lowers costs Increases competitive position Just in time JIT Manufacture just in time to fill orders Reduces Raw materials inventory Finished goods inventory Storage costs Handling costs Total Quality Management TQM Goal to provide with superior products and services Continually set higher goals for quality International Organization for Standardization ISO ISO 9001 2008 Service Provides a service No inventory Merchandisers Resell products purchased from suppliers One inventory account Retailers vs wholesalers Manufacturers Use labor and other inputs to convert raw materials into finished products Three inventory Accounts Ray Material Work in process Finished goods Value Chain Activities that add value to products and services and cost money Research on selling satellite service Purchases of merchandise Rearranging store layout before you open the store for business Newspaper ads The wages of store employees Deprec Expense on delivery trucks The cost of operating the corporate payroll department Payment to consultant for advice on location of new store The cost of carpet steamers offered for rent Freight in The cost of gas and oil sold at the store Salespersons salaries Store utilities Customer complaint department The CEO s salary The cost of chainsaws The cost of national advertising Total Costs used internally only will see this later Inventoriable Product Costs used for external reporting Production and purchases Period costs Research and development Design Cs Distribution Marketing Period costs operating expense sga Treatment of costs Inventoriable product costs Costs stay on the balance sheet as inventory until sold when sold expensed on the income statement cost of goods sold Period costs Expense immediately on the income statement SGA operating expenses Inventoriable Product Costs Merchandiser Purchase price from suppliers Cost to get ready for sale Freight in Import duties or tariffs Manufacturing overhead Indirect costs related to manufacturing that are not direct material or direct layout Indirect materials Indirect labor Other indirect manufacturing overhead Direct and indirect labor costs include Salaries and Wages Fringe Benefits Payroll taxes The total inventorial product costs are purchases Freight in Cost Objective Anything for which managers want to separate measurement of cost Direct cost Cost that can be traced directly to a cost object Indirect Cost Cost that cannot be traced directly to a cost objective Allocated to the cost of the object R D Purchases Design Marketing Direct trace Distribution Indirect allocate R D Direct trace Purchases Direct trace Marketing Direct trace CS Indirect allocate Direct trace Indirect allocate 1 Income Statement a b Service Company Simplest All costs are period costs Operating