acs ch 1.ppt

1 - 1©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster

The Accountant’s Rolein the Organization

The Accountant’s Rolein the Organization

Chapter 1


Learning Objective 1Learning Objective 1

Describe how cost accounting supports

management accountingand financial accounting.


Management AccountingManagement Accounting

It measures and reports financial andnonfinancial information that helps

managers make decisions to fulfill thegoals of an organization.


Financial AccountingFinancial Accounting

Its focus is on reporting to external parties.

It provides financial statements based ongenerally accepted accounting principles.

It measures and records business transactions.


Cost AccountingCost Accounting

It provides information for both management accounting and financial accounting.

It measures and reports financial and nonfinancial data.


Cost ManagementCost Management

It describes the activities of managers in planning and control of costs.

It is a key part of general management strategies and their implementation.

It includes the continuous reduction of costs.



Understand how management accountants affect strategic decisions.


Strategic Cost ManagementStrategic Cost Management

Developing strategy

Building resources and capabilities

Implementing strategy


Strategic Cost ManagementStrategic Cost Management

Current Assets

Long-TermProductive

Assets

Intangible Assets

Building resources and capabilities



Distinguish between theplanning and control

decisions of managers.


Planning and ControllingPlanning and Controlling

Management Decision Management Accounting System

Planning

Control

PerformanceEvaluation

Budgets

AccountingSystem

PerformanceReports

Fee

db

ack


Planning and Controlling

What is planning?

Settinggoals

Predictingresults

Deciding howto attain goals



What is control?

Decidingand

takingactions

Deciding onperformanceevaluation

and feedback



What are budgets?

They arequantitativeexpressions

of a proposedplan of action.

They aid in thecoordination

andimplementation

of the plan.



What are performance reports?

These are reports thatcompare actual results

with budgeted amounts.


Performance Report ExamplePerformance Report Example

Budget Actual VarianceRevenues $59,000 $60,000 $1,000 FCost of goods sold 42,000 43,400 1,400 UWages 6,700 7,000 300 UGeneral 1,300 900 400 FFixed costs 5,000 5,000 0 Operating income $ 4,000 $ 3,700 $ 300 U

Boone Shop, July 2003


Performance Report ExamplePerformance Report Example

Actual cost of goods sold were72% of revenues instead of the budgeted 71%.

Budget % Actual %Revenues $59,000 100 $60,000 100Cost of goods sold 42,000 71 43,400 72Gross margin $17,000 29 $16,600 28


FeedbackFeedback

This involves managers examining past performanceand systematically exploring alternative ways to

make better informed decisions in the future.



Distinguish among the problem-solving, scorekeeping, andattention-directing roles of management accountants.


Problem SolvingProblem Solving

This involves comparative analysisfor decision making.

This role asks: Of the several alternativesavailable, which is the best?


ScorekeepingScorekeeping

This involves accumulating data andreporting reliable results toall levels of management.

This role asks: How is the business doing?


Attention DirectingAttention Directing

This involves helping managersproperly focus their attention.

This role asks: Which opportunities andproblems should be emphasized first.

Attention directing should focus on allopportunities to add value to an organization,

not just cost-reduction opportunities.



Identify four themes managersneed to consider for attaining success.


Key Themes in ManagementDecision Making

Key Themes in ManagementDecision Making

Customer Focus

Value Chainand

Supply ChainAnalysis

Key Success Factors:Cost and Efficiency,

Time, Quality,Innovation

ContinuousImprovement

andBenchmarking


Customer FocusCustomer Focus

The challenge facing managers is to continueinvesting sufficient (but not excessive)

resources in customer satisfactionsuch that profitable customers

are attracted and retained.

The challenge facing managers is to continueinvesting sufficient (but not excessive)

resources in customer satisfactionsuch that profitable customers

are attracted and retained.


Value Chain andSupply Chain Analysis


This theme has two related aspects:

1. Treat each of the business functions in the value chain as an essential and valued contributor.1. Treat each of the business functions in the value chain as an essential and valued contributor.

2. Integrate and coordinate the efforts of all business functions in addition to developing the capabilities of each individual business function.

2. Integrate and coordinate the efforts of all business functions in addition to developing the capabilities of each individual business function.




Supply chain – describes the flow of goods,services, and information from cradle to grave,regardless of whether those activities occur inthe same organization or other organizations.

Supply chain – describes the flow of goods,services, and information from cradle to grave,regardless of whether those activities occur inthe same organization or other organizations.


Key Success FactorsKey Success Factors

These are operational factors that directly affectthe economic viability of the organization.

Cost – organizationsare under continuous

pressure to reduce costs.

Cost – organizationsare under continuous

pressure to reduce costs.

Quality – customersare expecting higher

levels of quality.

Quality – customersare expecting higher

levels of quality.


Key Success FactorsKey Success Factors

Time – organizations are under pressure tocomplete activities faster and to meet

promised delivery dates more reliably.

Time – organizations are under pressure tocomplete activities faster and to meet

promised delivery dates more reliably.

Innovation – there is now heightened recognitionthat a continuing flow of innovative products

or services is a prerequisite to the ongoingsuccess of most organizations.

Innovation – there is now heightened recognitionthat a continuing flow of innovative products

or services is a prerequisite to the ongoingsuccess of most organizations.


Continuous Improvementand Benchmarking

Continuous Improvementand Benchmarking

Continuous improvement by competitors createsa never-ending search for higher levels ofperformance within many organizations.

Continuous improvement by competitors createsa never-ending search for higher levels ofperformance within many organizations.



Describe the set of businessfunctions in the value chain.


Value ChainValue Chain

The term “value chain” refers to the sequence ofbusiness functions in which usefulness is addedto the products or services of an organization.

The term “value” is used because as the usefulnessof the product or service is increased, so is its value

to the customer.



Management accountants providedecision support for managers in the

following six business functions:



R & D Design Production

Marketing Distribution Service

Management Accounting


Value Chain FunctionsValue Chain Functions

Research and Development

It is the process that is conducted to generateand experiment with ideas related to new

products, services, or processes.



It is the detailed planning and engineering of products, services, or processes.

Design



It is the acquisition, coordination, andassembly of resources to produce

a product or deliver a service.

Production



It is the manner by which companiespromote and sell their products

or services to customers or prospective customers.

Marketing



It is the delivery of products orservices to the customer.

Distribution



It is the after-sale support activitiesprovided to customers.

Service



Describe three waysmanagement accountants

support managers.


Key GuidelinesKey Guidelines

1. Cost-benefit approach

2. Full recognition of behavioral as well as technical considerations

3. Using different costs for different purposes


Cost-Benefit ApproachCost-Benefit Approach

A cost-benefit approach should be used in orderto spend resources if they promote decisionmaking that better attains organization goals

in relation to the costs of those resources.


Behavioral and TechnicalConsiderations

Behavioral and TechnicalConsiderations

A management accounting system should have twosimultaneous missions for providing information:

1. To help managers make wise economic decisions

2. To help managers and other employees to aim and strive for goals of the organization


Different Costs forDifferent PurposesDifferent Costs forDifferent Purposes

A cost concept used for the external reportingpurpose need not be the appropriate conceptfor the purpose of internal routine reporting

to managers.



Understand how cost managementaccounting fits into an

organization’s structure.


Line and Staff RelationshipsLine and Staff Relationships

Line management is directly responsible forattaining the objectives of the organization.

Staff management exists to provide adviceand assistance to line management.



C o n tro ller A u d it T a x T rea su ry R iskM a n a g em en t

In v esto rR ela tio n s

C h ief F in a n cia l O fficer (C F O )

P res id en tC h ief O p era tin g O fficer (C O O )

C h a irm a nC h ief E x ecu tiv e O fficer (C E O )

B o a rd o f D irecto rs



* G lo b a l F in a n cia l P la n n in g /B u d g etin g* O p era tio n s A d m in is tra tio n* P ro fita b ility R ep o rtin g* In v en to ry

* R o y a lties* G en era l L ed g er* A cco u n ts P a y a b le a n d R eceiv a b le* S u b s id ia ry a n d L ia iso n A cco u n tin g

E x a m p les o f F u n ctio n s:

C o n tro ller



Understand whatprofessional ethics mean

to management accountants.


Professional EthicsProfessional Ethics

Confidentiality

Integrity

Objectivity

Competence


Ethical GuidelinesEthical Guidelines

The Institute of Management Accountants (IMA)is the largest association of management

accountants in the United States.

The IMA has issued a Standards of EthicalConduct for Management Accountant.


End of Chapter 1End of Chapter 1

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acs ch 1.ppt