Managerial Accounting by James Jiambalvo

Managerial Accounting
by James Jiambalvo
Chapter 1:
Introduction to Managerial
Accounting
Slides Prepared by:
Scott Peterson
Northern State University
Chapter 1: Introduction to
Managerial Accounting
Chapter Themes:
Its all about using
information to plan,
control and make
decisions.
Accountants produce
information and managers
use information.
Learning Objectives:
1.
2.
3.
4.
5.
6.
7.
State the primary goal of

managerial accounting.
Describe how budgets are used in
planning
Describe how performance
reports are used in the control
process.
Distinguish between financial and
Define cost terms used in
planning, control and decision
making.
Explain the two key ideas in
Discuss the duties of the
controller, the treasurer and the
chief financial officer (CFO).
Primary Goal of Managerial

Accounting
Effective managers must be
adept at planning, controlling
and decision making.
Related Learning Objectives:

1.
2.
3.
4.
5.
6.
7.

planning
process.
making.
Planning
Planning has to do with
budgeting in a managerial
context. It is in this way that a
companys goals are
communicated to all
employees.

1.
2.
3.
4.
Budgets include profit

budgets, cash-flow budgets,
production budgets and
many others.
5.
6.
7.

Describe how budgets are used
in planning.
process.
making.
Controlling
The notion of managerial control
has to do with measuring and
evaluating the performance of
both the manager and the
operation(s) for which the
manager is responsible.
There is an important distinction

to be made here. A manager is
evaluated, at least in part, based
on her overall performance. Each
operation for which she is
responsible is evaluated in order
to optimize future goals and
objectives.

1.
2.
3.
4.
5.
6.
7.

planning.
process.
making.
Decision Making
An integral part of the
planning and controlling
process, decision making
includes both rewarding or
punishing managers for their
performance AND dropping,
adding or otherwise changing
some aspect of operations
going forward.

1.
2.
3.
4.
5.
6.
7.

Describe how budgets are used
in planning.
process.
making.
A Comparison of Managerial
and Financial Accounting
Managerial accounting:
1.
Is meant primarily for
internal users while
financial accounting is
meant for external users.
2.
Is not driven by GAAP.
3.
May be much more
detailed than financial
(external) accounting
reports.
4.
May include much
nonfinancial data.
5.
Is forward looking rather
than retrospective.

1.
2.
3.
4.
5.
6.
7.

planning.
process.
Distinguish between financial
and managerial accounting.
making.
Similarities Between Financial

and Managerial Accounting
Although managerial
accounting is meant for
internal users (management)
and financial accounting is
meant for external users,
managers DO make use of
financial accounting
information.

1.
2.
3.
4.
5.
6.
7.

planning.
process.
Distinguish between financial
and managerial accounting.
making.
Cost Terms
The term cost appears in
many contexts and carries a
number of meanings.
Different categories of cost

terms are merely different
ways to look at costs or to
slice and dice cost
information. They are not
necessarily complementary
to or mutually exclusive of
other cost categories.
3.
1.
2.
4.
5.
6.
7.

planning.
process.
making.
Variable and Fixed Costs

Variable costs: costs
that increase or
decrease (in total)
relative to increases or
decreases in the level of
business activity.

1.
2.
3.
4.
Fixed costs: costs that

do not change (in total)
relative to changes in
business activity.
5.
6.
7.

planning.
process.
making.
Sunk Costs
Sometimes called past
costs. These costs are NOT
relevant to the decision
making process.

1.
2.
3.
4.
5.
6.
7.

planning.
process.
making.
Opportunity Costs
These are the values of
potential benefits foregone
when a decision is made.

1.
2.
3.
4.
5.
6.
7.

planning.
process.
making.
Direct and Indirect Costs

Direct costs: costs that are
directly traceable to some
object such as a product,
activity or department.

1.
2.
3.
Indirect costs: costs that are

NOT directly traceable to a
product, activity or
department.
4.
5.
6.
7.

planning.
process.
making.
Controllable and
Noncontrollable Costs
Yet another way to slice and dice
costs. This time it has to do with
the degree of influence a
manager has over the cost. If a
management decision can
impact the cost in the short term,
it is considered controllable.
Conversely, if a manager cannot
influence (control) the cost in the
short term, then it is
noncontrollable. A managers
performance should NOT include
an assessment of
noncontrollable costs.

1.
2.
3.
4.
5.
6.
7.

planning.
process.
making.
Two Key Ideas in Managerial

Accounting
They are:

1.
1.
2.
Decision making relies

on incremental
analysisan analysis of
revenues and costs that
increase or decrease if a
particular decision
alternative is selected.
You get what you
measure!
2.
3.
4.
5.
6.
7.

planning.
process.
making.
Decision Making Relies on

Incremental Analysis
Incremental means
difference. Here decision
making looks at the
difference between revenues
and expenses if selection (a)
is made as opposed to
selection (b).

1.
2.
3.
4.
5.
6.
7.

planning.
process.
making.
You Get What You Measure

Performance measurement
impacts management
behavior.

1.
2.
3.
4.
5.
6.
7.

planning.
process.
making.
The Controller As the Top

Management Accountant
Controller: The top management
accountant responsible for
preparing information for
planning, controlling and
decision making.

1.
2.
3.
Treasurer: The treasury function

is custodial in nature; custody of
assets.
4.
5.
Chief Financial Officer (CFO):

The senior executive to whom
both the controller and CFO
report.
6.
7.

planning.
process.
making.
Copyright
2001 John Wiley & Sons, Inc. All rights reserved. Reproduction or
translation of this work beyond that permitted in Section 117 of the 1976
United States Copyright Act without the express written permission of the
copyright owner is unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley & Sons, Inc. The
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use of the information contained herein.

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Managerial Accounting

State the primary goal of

Primary Goal of Managerial

Related Learning Objectives:

State the primary goal of

Related Learning Objectives:

Budgets include profit

State the primary goal of

There is an important distinction

Related Learning Objectives:

State the primary goal of

Related Learning Objectives:

State the primary goal of

Related Learning Objectives:

State the primary goal of

Similarities Between Financial

Related Learning Objectives:

State the primary goal of

Related Learning Objectives:

Different categories of cost

State the primary goal of

Variable and Fixed Costs

Related Learning Objectives:

Fixed costs: costs that

State the primary goal of

Related Learning Objectives:

State the primary goal of

Related Learning Objectives:

State the primary goal of

Direct and Indirect Costs

Related Learning Objectives:

Indirect costs: costs that are

State the primary goal of

Related Learning Objectives:

State the primary goal of

Two Key Ideas in Managerial

Related Learning Objectives:

Decision making relies

State the primary goal of

Decision Making Relies on

Related Learning Objectives:

State the primary goal of

You Get What You Measure

Related Learning Objectives:

State the primary goal of

The Controller As the Top

Related Learning Objectives:

Treasurer: The treasury function

Chief Financial Officer (CFO):

State the primary goal of

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