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Chapter 1

The Changing
Role of
Managerial
Accounting in a
Dynamic Business
Environment

Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Define Managerial Accounting

Managerial accounting is the process of


Identifying
Measuring
Analyzing
Interpreting
Communicating information

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Managing Resources, Activities, and
People
An organization . . .

Directing

Acquires Resources Decision


Organized
Organized setset Making
of
of activities
activities

Controlling Planning
Hires People
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How Managerial Accounting Adds
Value to the Organization
Providing
Providing information
information for
for decision
decision making
making and
and
planning.
planning.
Assisting
Assisting managers
managers in in directing
directing and
and
controlling
controlling activities.
activities.
Motivating
Motivating managers
managers andand other
other employees
employees
towards
towards organizations
organizations goals.
goals.
Measuring
Measuring performance
performance of of subunits,
subunits, activities,
activities,
managers,
managers, andand other
other employees.
employees.
Assessing
Assessing the
the organizations
organizations competitive
competitive
position.
position.

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Managerial versus Financial
Accounting
Accounting
Accounting System
System
(accumulates
(accumulates financial
financial and
and
managerial
managerial accounting
accounting data
data in
in the
the
cost
cost accounting
accounting system)
system)

Managerial
Managerial Accounting
Accounting Financial
Financial Accounting
Accounting
Information
Information for
for decision
decision Published
Published financial
financial
making,
making, planning,
planning, and
and statements
statements andand other
other
controlling
controlling an
an financial
financial reports.
reports.
organizations
organizations
operations.
operations.
Internal External
Users Users
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Line and Staff Positions
A
A line
line position
position is
is A
A staff
staff position
position supports
supports
directly
directly involved
involved in
in and
and assists
assists line
line
achieving
achieving the
the basic
basic positions.
positions.
objectives
objectives ofof an
an Example:
Example: A A cost
cost
organization.
organization. accountant
accountant in in the
the
manufacturing
manufacturing plant.
plant.
Example:
Example: A
A
production
production supervisor
supervisor
in
in aa manufacturing
manufacturing
plant.
plant.

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Controller
The
The chief
chief managerial
managerial and and financial
financial accountant
accountant
is
is responsible
responsible for:
for:
Supervising
Supervising accounting
accounting personnel.
personnel.
Preparation
Preparation of
of information
information andand reports,
reports,
managerial
managerial and
and financial.
financial.
Analysis
Analysis of
of accounting
accounting information.
information.
Planning
Planning and
and decision
decision making.
making.

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Treasurer
Responsible
Responsible for for raising
raising capital
capital and
and safeguarding
safeguarding
the
the organizations
organizations assets.
assets.
Supervises
Supervises relationships
relationships with
with financial
financial
institutions.
institutions.
Work
Work with
with investors
investors and
and potential
potential
investors.
investors.
Manages
Manages investments.
investments.
Establishes
Establishes credit
credit policies.
policies.
Manages
Manages insurance
insurance coverage
coverage

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Internal Auditor
Responsible
Responsible for
for reviewing
reviewing accounting
accounting procedures,
procedures,
records,
records, and
and reports
reports inin both
both the
the controllers
controllers and
and the
the
treasurers
treasurers area
area ofof responsibility.
responsibility.
Expresses
Expresses an
an opinion
opinion toto top
top
management
management regarding
regarding thethe
effectiveness
effectiveness of
of the
the
organizations
organizations accounting
accounting
system.
system.

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Strategic Cost Management and the
Value Chain

Product
Product
Design
Design
Production
Production
Research
Research
and
and
Development
Development Marketing
Marketing
Securing
Securing raw
raw
materials
materials and
and Distribution
Distribution
other
other resources
resources
Customer
Customer
Start Service
Service

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Capacity
Theoretical Capacity is the upper limit on
the amount of goods or services if
everything works perfectly.

Practical capacity allows for normal


occurrences such as cash register downtime
and cashier fatigue or illness.

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Cost Management Systems
Objectives
Objectives
Measure
Measure the
the cost
cost
of
of resources
resources
consumed.
consumed.
Identify
Identify and
and Cost
eliminate
eliminate non-
non- Management
System
value-added
value-added costs.
costs.

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Cost Management Systems
Objectives
Objectives
Determine
Determine efficiency
efficiency
and
and effectiveness
effectiveness of of
major
major activities.
activities.
Identify
Identify and
and evaluate
evaluate
new
new activities
activities that
that Cost
can
can improve
improve Management
performance.
performance. System

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Managerial Accounting as a
Career
Professional Organizations

Institute of Management Accountants (IMA)

Develops
Develops
Publishes
Publishes Administers
Administers Standards
Standards ofof
Management
Management Certified
Certified Ethical
Ethical
Accounting
Accounting Management
Management Conduct
Conduct for
for
and
and research
research Accountant
Accountant Management
Management
studies.
studies. program
program Accountants
Accountants
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Ethical Climate of Business
The
The corporate
corporate scandals
scandals experienced
experienced over over the
the
last
last few
few years
years have
have shown
shown usus that
that unethical
unethical
behavior
behavior inin business
business is
is wrong
wrong inin aa moral
moral sense
sense
and
and can
can be
be disastrous
disastrous in
in the
the economy.
economy. In In
addition
addition to
to Sarbanes-Oxley,
Sarbanes-Oxley, there
there will
will likely
likely be
be
more
more reforms
reforms in
in corporate
corporate governance
governance and and
accounting.
accounting.

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Professional Ethics

Competence
Confidentiality
Integrity
Credibility

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