Managerial accounting.

M.A. Luz María Chávez Alcántar (lmchavez@itesm.mx)

Welcome!

Managerial Accounting and the Business Enviromnent

My Background• Sep 06- May 08, Tecnológico de Monterrey, Campus

Querétaro, Master in Business Administration, 2008• Jan 01 – Dec 05, Tecnológico de Monterrey Campus

Querétaro, B.A. Finance and Acconting• Grupo KUO: Treasury and Financing Specialist.• Tecnológico de Monterrey: Consultant in the

business incubator.• MAN Truck and Bus México: Cost and financial

analyst.• Kellogg de México: Financial Professional• Sika Mexicana: Financial Planning.

Methodology•Check the activities that correspond to each

session before, during and after it.•Our course will involve three different work

scenarios:•Interactive Teaching: active participation,

solving exercises and clarification of doubts.•Autonomous learning: previous reading,

self- assesment.•Collaborative learning: working teams

Code of ethics and class policies•PUNCTUALITY: Access to the classroom

will be only during the first 5 minutes of class time. Once started the class, the door will be closed

•ASSISTANCE: Remember that by regulation, there is a limit of 4 absences if your grade average is less than 83 during the semester

•TEST TOPICS. Any material covered in class or for homework is a topic for tests

•CLASS REPLACEMENT: It will have to replace the classes not given, according to available time for students and teacher.

•DELIVERY OF HOMEWORK. It is YOUR RESPONSIBILITY to deliver on time each of the homework assigned. Each has a deadline. If it is not delivered within the corresponding period, it will be not be received by email or printed (no exceptions under any condition).

•Remember that homework must meet certain requirements, such as:

•Present no misspellings.•The fist page must include the homework

title, name, student number, teacher’s name, subject name and date of delivery.

•It is important that you mention and reference all the bibliographical sources used to perform your homework

• QUICK QUIZZES AND HOMEWORKS. The copy in exams and assignments is penalized.

• AD (Academic Dishonesty)• copy of homework is also penalized with 1 / 100

of grade in the homework• PASSING GRADE. The minimum passing grade for

partial and final test is 70.00 (seventy out of a hundred).

• CELL PHONES AND NEXTEL. It is not allowed to enter the classroom with cell phones on. The fact that any cell phone or nextel ring during class hours will be penalized

Official Analytical Program of Management Accounting•Cost classification and cost segmentation.•Financial Planning (Master Budget).•The Cost – Volume – Profit Model•Costing Systems•Marginal Analysis and short term decision

making.•Introduction to Control Management

Course Evaluation• Partial Grades:• Individual Homework 15%• Team Homework 15%• Tests 70%• Total 100%

• Final Grades:• Partial Grades (3): 75%• Final Test: 25%• Total: 100%

Course Objective•To the end course the student must be

able to use:

Marketing

Economics

Operation

Concepts

With ManagerialAccounting Conceptsand techniques for planning and decisionmaking

Bibliography:•Garrison, Ray and Noreen, Eric,

Managerial Accounting, Last edition, Ed. McGraw-Hill

Managerial Accounting and the Business Enviromnent

All types of organizations…

…have a need for accounting information

What is accounting?

Is the process of:

• Measure (in $)• Register• Classify• Summarize• Report

events and transactions of a financial nature

communicate this information to its users to facilitate decision making

A Contemporary View of Accounting Information.

Accounting Information

Traditional Financial Accounting Information Nonfinancial Information

Qualitative Information

* Customer satisfaction.* Employee satisfaction.* Product or service quality..* Reputation

Financial Information* Assets* Liabilities* Revenues* Gross margin* Operating expenses

Other Quantitive Information

* Percentage of defects.* Number of customer complaints.*Warranty claims.* Unit in inventory* Budgeted hours.

A comparison of Financial and Managerial Accounting

Financial accounting

Preparation and use of financial

statements

* Creditors* Investors* External users

Managerial accounting

Generating financial and non financial

information

* Internal users

Users•Stockholders•Potential investors•Creditors•Goverment taxing agencies ,•Regulators•Suppliers•Customers•And others outside the companyExtern

al Users

•Individual employees•Teams•Departments•Regions•Top Management•Others inside the company (managers)Internal Users

External users

External users of financial information, such as banksor potential donors to nonprofit organizations, still need accounting information to make the properdecision about lending or donating money.

Potential contributors to nonprofit organizations mayhave a need for both financial information, such ashow much of the Red Cross’ budget is spent forcharitable purposes, and nonfinancial information, such as how many woman with children are served bythe local homeless shelter

Suppliers and customers are also external users…

Suppliers ofcar parts to

Need detailed informationon inventory levels ofspecific parts

In order to know

When to manufacture

Ship parts

Internal users: Planning Activities

Planning involves

The development of

Short-term(operational)

Long-term(strategic)

Objectives and goalsof an organization

The identificationof the resourses neededto achieve them

Operational planning involves

Development of short-termobjectives and goals

Those to be achieved in less than one year

Examples of operational planning

Include planning the raw materialand production needs for each type of ice cream for the next four quarters

Determining the company’s short-termcash needs.

Strategy A strategyis a “game plan”

that enables a companyto attract customers

by distinguishing itselffrom competitors.

The focal point of acompany’s strategy should

be its target customers.

Strategic planning•Addresses long-term questions of how an

organization positions and distinguishes itself from competitors.

Ben & Jerry’s strategy for producing high-quality ice cream

Is very different

From that used by a company producinga store brand of lower-priced ice cream

• The day-to-day operation of a business

Operating Activities

• The motivation and monitoring of employees and the evaluation of people and other resources used in the operations of the organization

Controlling

activities

The Functional Areas of Management

Operations and

production function

•Produces the products or services that an organization sells to its customers.

Marketing function

•Involved with the process of developing, pricing, promoting, and distributing goods and services sold to customers.

Finance function •Responsible for managing the financial resources of

the organization.

Human resource function

•Concerned with the utilization of human resources to help an organization reach its goals

External and internal users of accounting information

Users Type of Accounting Information Needed

Source

External

Shareholders and creditors

Sales, gross profit, net income, cash flow, assets and liabilities, earnings per share, etc. Although this information is primarly financial, it may also include nonfinancial information (units in inventory). This information is often provided in summary form (for the company as a whole) and typically is historical in nature.

Annual reports, financial statements, and other available documents.

External and internal users of accounting information

Users Type of Accounting Information Needed

Source

External

Government agencies

Varies by agency but includes taxable income, sales, assets, comparisons of actual expenditures to budgets, etc. This information is usually provides for the company as a whole and is historical in nature. It can include both financial and nonfinancial information.

Tax returns and other reports

External and internal users of accounting information

Users Type of Accounting Information Needed

Source

External

Customers and suppliers

Order status, shipping dates, inventory levels, etc. This information must be very detailed and timely to be useful.

Limited-access databases available to specific customers and suppliers.

External and internal users of accounting information

Users Type of Accounting Information Needed

Source

Internal Marketing, operations and production, finance, and human resource managers.

Timely and detailed information on sales and expenses, product costs, budget information, and measures of performance. Often includes nonfinancial data (direct labor hours, units to break even, etc.). Accounting information is often n eeded for segments of an organization and is more likely future oriented than historical

Cost reports, budgets, and other internal documents.

Managerial Accounting vs Financial AccountingRecording and reporting information:

•Managerial Accounting: helpful, buy not mandatory.

•Financial Accounting: required and provided on a regular basis.

Managerial Accounting vs Financial AccountingStandards of reporting and data format:

•Managerial Accounting: any way that managers find it useful, without restrictions.

•Financial Accounting: subject to principles in his presentations (Generally Accepted Accounting Principles).

Managerial Accounting vs Financial AccountingType of information presented:

•Managerial Accounting: recent actual data and estimated future data.

•Financial Accounting: historical data.

Managerial Accounting vs Financial AccountingApproach information:

•Managerial Accounting: segment information.

•Financial Accounting: information of the organization as a whole.

Managerial Accounting vs Financial AccountingInformation providers:

•Managerial Accounting: managerial accountants, engineers, economists, sales and marketing specialists, etc.

•Financial Accounting: financial accountants and auditors

Managerial Accounting vs Financial Accounting•Similarities:

•Both are based on the same information system.

•Both issued reports on the activities of the organization concerning in a given period of time.

Objectives of Managerial Accounting•Facilitate the operational planning

•Facilitate the follow up of the plans that are being implemented.

•Give the necessary data for the operational control.

•Give the necessary data for decision making

Homework # 1• Homework No. : 1• Delivery format: Individual• Delivery date: August 11, 2011• Estimated time: 1.5 hours•  • Objective:To know the main ideas and concepts on the topic that

we will learn during the second session: “Costs Segmentation” and present your questions clearly and accurately.

• Instructions: • Read the chapter 2 of textbook (Garrison and Noreen) for the

topic: “Managerial Accounting and Cost Concepts”.• Take note of your questions to be answered during class.• Answer the questions 2-2, 2-6, 2-9 and 2-13 (page 58)