Chapter 1

The Changing Role

of Managerial
Accounting in a
Dynamic Business
Environment

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning
Objective
1

1-2

Define Managerial Accounting

Managerial accounting is the process of

Identifying
Measuring
Analyzing
Interpreting
Communicating information

1-3

Learning
Objective
2

1-4

Managing Resources, Activities,

and People
An organization . . .

Directing

Acquires Resources

Hires People

Organized
Organized set
set
of
of activities
activities

Controlling

Decision
Making

Planning

1-5

Learning
Objective
3

1-6

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 and
and other
other employees
employees
towards
towards organizations
organizations goals.
goals.
Measuring
Measuring performance
performance of
of subunits,
subunits, activities,
activities,
managers,
managers, and
and other
other employees.
employees.
Assessing
Assessing the
the organizations
organizations competitive
competitive position.
position.
1-7

The Balanced Scorecard

How do we
look to
owners?

Financial Perspective
Goals
Measures

Customer Perspective
Goals
Measures

In which
activities
must we
excel?
Operations Perspective
Goals
Measures

How do
customers
see us?
Innovation Perspective
Goals
Measures

How can we
continue to
improve?
1-8

Learning
Objective
4

1-9

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
Information
Information for
for decision
decision
making,
making, planning,
planning, and
and
controlling
controlling an
an
organizations
organizations
operations.
operations.
Internal
Users

Financial
Financial Accounting
Accounting
Published
Published financial
financial
statements
statements and
and other
other
financial
financial reports.
reports.

External
Users
1-10

Managerial versus Financial

Accounting

1-11

Learning
Objective
5

1-12

Line and Staff Positions

AA line
line position
position is
is directly
directly
involved
involved in
in achieving
achieving the
the
basic
basic objectives
objectives of
of an
an
organization.
organization.
Example:
Example: AA production
production
supervisor
supervisor in
in aa
manufacturing
manufacturing plant.
plant.

AA staff
staff position
position supports
supports
and
and assists
assists line
line positions.
positions.
Example:
Example: AA cost
cost
accountant
accountant in
in the
the
manufacturing
manufacturing plant.
plant.

1-13

Learning
Objective
6

1-14

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

1-15

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

1-16

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

1-17

Learning
Objective
7

1-18

Major Themes in Managerial

Accounting
Behavioral
Behavioral
Issues
Issues

Costs
Costs and
and
Benefits
Benefits

Information
Information
and
and Incentives
Incentives

Evolution
Evolution and
and
Adaptation
Adaptation

Managerial
Accounting
1-19

Evolution and Adaptation in

Managerial Accounting
E-Business

Product Life Cycles

Time-Based
Competition

Service vs.
Manufacturing Firms
Emergence of New
Industries
Global Competition
Focus on the Customer
Cross-Functional Teams

Change

Information and
Communication
Technology

Just-in-Time Inventory
Total Quality Management
Continuous Improvement
1-20

Cost Management Systems

Objectives
Objectives

Measure
Measure the
the cost
cost of
of
resources
resources consumed.
consumed.

Identify
Identify and
and eliminate
eliminate
non-value-added
non-value-added
costs.
costs.

Cost
Management
System

1-21

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
can
can improve
improve
performance.
performance.

Cost
Management
System

1-22

Learning
Objective
8

1-23

Strategic Cost Management and

the Value Chain
Product
Product
Design
Design
Research
Research
and
and
Development
Development
Securing
Securing raw
raw
materials
materials and
and
other
other resources
resources

Start

Production
Production
Marketing
Marketing
Distribution
Distribution
Customer
Customer
Service
Service
1-24

Theory of Constraints
A sequential process of identifying and removing
constraints in a system.
Restrictions
Restrictions or
or barriers
barriers that
that impede
impede
progress
progress toward
toward an
an objective
objective

1-25

Learning
Objective
9

1-26

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 us
us that
that unethical
nethical behavior
behavior
in
in business
business is
is wrong
wrong in
in 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.

1-27

Learning
Objective
10

1-28

Managerial Accounting as a
Career
Professional Organizations

Institute of Management Accountants (IMA)

Publishes
Publishes
Management
Management
Accounting
Accounting
and
and research
research
studies.
studies.

Administers
Administers
Certified
Certified
Management
Management
Accountant
Accountant
program
program

Develops
Develops
Standards
Standards of
of
Ethical
Ethical
Conduct
Conduct for
for
Management
Management
Accountants
Accountants
1-29

Professional Ethics
Competence
Confidentiality
Integrity
Credibility

1-30

End of Chapter 1

1-31