SECTION 1 1 1 Managerial Accounting 1981 interpretation and communication of financial information used by management to plan evaluate and control within an organization and to assure appropriate use of and accountability for its resources The process of identification measurement accumulation analysis preparation 2 Managerial Accounting 2008 A profession that involves partnering in management decision making devising planning and performance management systems and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization s strategy 3 Managerial Accounting making activities the generation and analysis of relevant information to support managers strategic decision Information provided by managerial accountants is not released to the public Adds value by helping managers do their jobs more efficiently and effectively Managerial accounting benefits internal users Managerial accounting has NO reporting rules i e GAAP Completely optional Because most managerial decisions are made at an operating segment level managerial accounting must focus on similar units of the company Managerial accounting is historical in nature but helps make decisions that will affect the future Precision is sacrificed for timeliness Someone with authority must take responsibility for decisions and directing the manager 4 Managerial accounting is designed to assist managers with 4 activities 1 Planning 2 Controlling 3 Evaluating 4 Decision Making 5 Managers participate in both short term and long term planning activities 1 Long term planning Strategic 2 Short term planning Operational establishes the direction in which an organization wishes to go translates the long term strategy into a short term plan to be completed 6 Controlling within the next year requires monitoring operations to identify problems requiring corrective action Ex monitor operations to ensure smooth operations Frequency depends on consequences Faster corrected better results once operations have been completed managers review the info and compare actual results to planned 7 8 Evaluating results may lead to changes Decision Making the forefront of managerial activity Managerial accounting information can be provided by a controller a plant accountant a cost accountant a financial analyst a budget or cost analyst a general accountant or a chief financial officer Not just number crunchers but decision makers SECTION 1 2 A company MUST have goals 1 2 Monitoring different strategies requires different accounting information 3 4 5 Product differentiation will look for innovation i e quality design or service Low cost production will set itself apart by offering a lower sales price A company that focuses on production differentiation must monitor product costs because if too much money is spent on quality the sales price will be too high to be competitive There are 4 strategies that can be classified based on a firm s approach to market share 6 1 Build 2 Hold Company aims to increase its market share and competitive position relative to others in the industry even at the expense of short term earnings and cash flows Company seeks to maintain its current market share and generate a reasonable return on investment Information needed Percentage of sales from repeat customers market share return on investment and gross margin 4 3 Harvest Divest Company focuses on short term profits and cash even at the expense of market share Information needed Gross margin and cash sales Appropriate when a company desires to exit a particular market Companies that want to build market share need information about sales volumes sales growth market share growth sales from new customers and customer satisfaction 7 Balanced Scorecard measures that track an organization s progress toward achieving its goals developed in the early 1990s by David Norton and Robert Kaplan a collection of performance The selections of performance measures to be included on the scorecard is driven by the organization s strategy Used to communicate the corporate strategy throughout the organization Places equal emphasis on financial and nonfinancial performance measures i e financial customer internal business processes and learning and growth 8 Managers should NOT be limited to what financial results or projections imply 9 Supply Chain final products and deliver the final products to customers through a distribution system a network of facilities that procure raw materials transform them into intermediate goods and then into An interdependent system of suppliers and customers that organizations operate within Goal is to get the right product to the right location in the right quantities and the right time at the right cost Supply chain management systems are for economic or strategic advantage an inventory strategy that focuses on reducing waste and inefficiency by ordering inventory 10 Just in time Inventory JIT items so that they arrive just when they are needed Eliminated extra inventory and it s added costs JIT inventory management results in a shorter production cycle and reduced financial investment in inventory Must rearrange equipment for efficiency in some cases and quality is a MUST due to no extras in stock 11 Enterprise Resource Planning ERP system such as SAP and Oracle to accumulate data and provide information to decision makers integrates all data from the company s many business processes into a single information system SECTION 1 3 1 Sarbanes Oxley Act dictates rules for ethics code 2 Managers must act ethically just like employees Walk the walk 3 Top unethical behaviors company resource abuse abusive or intimidating behavior lying to employees and email or internet abuse Usually observed by mergers 4 Commitment to ethicality experience better financial performance according to research SECTION 2 1 1 2 Cost Behavior Variable Cost refers to the way in which total costs change in response to changes in the level of activity and total cost that varies in proportion to a business activity any repetitive event that serves as a measure of output or usage such as units sold units produced i e 1 per minute Activity minutes talked or miles driven Variable costs are two main characteristics 1 2 does not change with activity level Fixed Cost The total cost varies in proportion to changes in the level of activity The cost per unit remains constant regardless of the level of activity 3 Fixed costs have two
View Full Document
Unlocking...