acs ch 1.ppt
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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
1 - 2©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 1Learning Objective 1
Describe how cost accounting supports
management accountingand financial accounting.
1 - 3©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Management AccountingManagement Accounting
It measures and reports financial andnonfinancial information that helps
managers make decisions to fulfill thegoals of an organization.
1 - 4©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 5©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Cost AccountingCost Accounting
It provides information for both management accounting and financial accounting.
It measures and reports financial and nonfinancial data.
1 - 6©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 7©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 2Learning Objective 2
Understand how management accountants affect strategic decisions.
1 - 8©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Strategic Cost ManagementStrategic Cost Management
Developing strategy
Building resources and capabilities
Implementing strategy
1 - 9©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Strategic Cost ManagementStrategic Cost Management
Current Assets
Long-TermProductive
Assets
Intangible Assets
Building resources and capabilities
1 - 10©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 3Learning Objective 3
Distinguish between theplanning and control
decisions of managers.
1 - 11©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Planning and ControllingPlanning and Controlling
Management Decision Management Accounting System
Planning
Control
PerformanceEvaluation
Budgets
AccountingSystem
PerformanceReports
Fee
db
ack
1 - 12©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Planning and Controlling
What is planning?
Settinggoals
Predictingresults
Deciding howto attain goals
1 - 13©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Planning and Controlling
What is control?
Decidingand
takingactions
Deciding onperformanceevaluation
and feedback
1 - 14©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Planning and Controlling
What are budgets?
They arequantitativeexpressions
of a proposedplan of action.
They aid in thecoordination
andimplementation
of the plan.
1 - 15©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Planning and Controlling
What are performance reports?
These are reports thatcompare actual results
with budgeted amounts.
1 - 16©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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
1 - 17©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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
1 - 18©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
FeedbackFeedback
This involves managers examining past performanceand systematically exploring alternative ways to
make better informed decisions in the future.
1 - 19©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 4Learning Objective 4
Distinguish among the problem-solving, scorekeeping, andattention-directing roles of management accountants.
1 - 20©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Problem SolvingProblem Solving
This involves comparative analysisfor decision making.
This role asks: Of the several alternativesavailable, which is the best?
1 - 21©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
ScorekeepingScorekeeping
This involves accumulating data andreporting reliable results toall levels of management.
This role asks: How is the business doing?
1 - 22©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 23©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 5Learning Objective 5
Identify four themes managersneed to consider for attaining success.
1 - 24©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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
1 - 25©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 26©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value Chain andSupply Chain Analysis
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.
1 - 27©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value Chain andSupply Chain Analysis
Value Chain andSupply Chain Analysis
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.
1 - 28©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 29©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 30©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 31©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 6Learning Objective 6
Describe the set of businessfunctions in the value chain.
1 - 32©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 33©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value ChainValue Chain
Management accountants providedecision support for managers in the
following six business functions:
1 - 34©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value ChainValue Chain
R & D Design Production
Marketing Distribution Service
Management Accounting
1 - 35©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 36©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value Chain FunctionsValue Chain Functions
It is the detailed planning and engineering of products, services, or processes.
Design
1 - 37©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value Chain FunctionsValue Chain Functions
It is the acquisition, coordination, andassembly of resources to produce
a product or deliver a service.
Production
1 - 38©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value Chain FunctionsValue Chain Functions
It is the manner by which companiespromote and sell their products
or services to customers or prospective customers.
Marketing
1 - 39©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value Chain FunctionsValue Chain Functions
It is the delivery of products orservices to the customer.
Distribution
1 - 40©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Value Chain FunctionsValue Chain Functions
It is the after-sale support activitiesprovided to customers.
Service
1 - 41©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 7Learning Objective 7
Describe three waysmanagement accountants
support managers.
1 - 42©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Key GuidelinesKey Guidelines
1. Cost-benefit approach
2. Full recognition of behavioral as well as technical considerations
3. Using different costs for different purposes
1 - 43©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 44©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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
1 - 45©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 46©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 8Learning Objective 8
Understand how cost managementaccounting fits into an
organization’s structure.
1 - 47©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 48©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Line and Staff RelationshipsLine and Staff Relationships
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
1 - 49©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Line and Staff RelationshipsLine and Staff Relationships
* 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
1 - 50©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Learning Objective 9Learning Objective 9
Understand whatprofessional ethics mean
to management accountants.
1 - 51©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Professional EthicsProfessional Ethics
Confidentiality
Integrity
Objectivity
Competence
1 - 52©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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.
1 - 53©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
End of Chapter 1End of Chapter 1