Cost Accounting, Chapter 1 11ch01

(1)

The Accountant’s Role

in the Organization

The Accountant’s Role

in the Organization

(2)

Learning Objective 1

(3)

Management Accounting

It measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the

(4)

Financial Accounting

Its focus is on reporting to external parties.

(5)

Cost Accounting

It provides information for both management accounting and financial accounting.

(6)

Cost 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.

(7)

Learning Objective 2

Understand how management

accountants affect

(8)

Strategic Cost Management

Developing strategy

(9)

Strategic Cost Management

Current Assets

Long-Term Productive

Assets

Intangible Assets

(10)

(11)

Planning and Controlling

Management Decision Management Accounting System

(12)

What is planning?

Setting goals

Predicting results

(13)

What is control?

Deciding and

taking actions

Deciding on performance

(14)

What are budgets?

They are quantitative expressions of a proposed plan of action.

They aid in the coordination

and

(15)

Planning and Controlling

What are performance reports?

(16)

Performance Report Example

Budget Actual Variance

Revenues $59,000 $60,000 $1,000 F

Cost of goods sold 42,000 43,400 1,400 U

Wages 6,700 7,000 300 U

General 1,300 900 400 F

Fixed costs 5,000 5,000 0

Operating income $ 4,000 $ 3,700 $ 300 U

(17)

Performance Report Example

Actual cost of goods sold were

72% of revenues instead of the budgeted 71%.

Budget % Actual %

Revenues $59,000 100 $60,000 100

Cost of goods sold 42,000 71 43,400 72

(18)

Feedback

This involves managers examining past performance and systematically exploring alternative ways to

(19)

Distinguish among the

problem-solving, scorekeeping, and

(20)

Problem Solving

This involves comparative analysis for decision making.

(21)

Scorekeeping

This involves accumulating data and reporting reliable results to

all levels of management.

(22)

Attention Directing

This involves helping managers properly focus their attention.

This role asks: Which opportunities and problems should be emphasized first. Attention directing should focus on all

(23)

Learning Objective 5

Identify four themes managers

need to consider for

(24)

Key Themes in Management

Decision Making

Key Themes in Management

Decision Making

Customer Focus Value Chain and Supply Chain Analysis

Key Success Factors: Cost and Efficiency,

(25)

Customer Focus

The challenge facing managers is to continue investing sufficient (but not excessive)

resources in customer satisfaction such that profitable customers

are attracted and retained.

The challenge facing managers is to continue investing sufficient (but not excessive)

resources in customer satisfaction such that profitable customers

(26)

Value Chain and

Supply Chain Analysis

Value Chain and

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.

(27)

Value Chain and

Supply chain – describes the flow of goods, services, and information from cradle to grave,

regardless of whether those activities occur in the same organization or other organizations.

Supply chain – describes the flow of goods, services, and information from cradle to grave,

(28)

Key Success Factors

These are operational factors that directly affect the economic viability of the organization.

Cost – organizations are under continuous pressure to reduce costs.

Quality – customers are expecting higher

levels of quality.

Quality – customers are expecting higher

(29)

Key Success Factors

Time – organizations are under pressure to complete activities faster and to meet promised delivery dates more reliably.

Time – organizations are under pressure to

complete activities faster and to meet promised delivery dates more reliably.

Innovation – there is now heightened recognition that a continuing flow of innovative products

or services is a prerequisite to the ongoing

Innovation – there is now heightened recognition that a continuing flow of innovative products

(30)

Continuous Improvement

and Benchmarking

Continuous Improvement

and Benchmarking

Continuous improvement by competitors creates a never-ending search for higher levels of

performance within many organizations.

Continuous improvement by competitors creates a never-ending search for higher levels of

(31)

Learning Objective 6

(32)

Value Chain

The term “value chain” refers to the sequence of business functions in which usefulness is added

to the products or services of an organization. The term “value” is used because as the usefulness of the product or service is increased, so is its value

(33)

Value Chain

Management accountants provide decision support for managers in the

(34)

Value Chain

R & D Design Production

Marketing Distribution Service

(35)

Value Chain Functions

Research and Development

It is the process that is conducted to generate and experiment with ideas related to new

(36)

Value Chain Functions

It is the detailed planning and engineering of products, services, or processes.

(37)

It is the acquisition, coordination, and assembly of resources to produce

(38)

It is the manner by which companies promote and sell their products

or services to customers or prospective customers.

(39)

Value Chain Functions

It is the delivery of products or services to the customer.

(40)

It is the after-sale support activities provided to customers.

(41)

Describe three ways

(42)

Key Guidelines

1. Cost-benefit approach

2. Full recognition of behavioral as well as technical considerations

(43)

Cost-Benefit Approach

A cost-benefit approach should be used in order to spend resources if they promote decision making that better attains organization goals

(44)

Behavioral and Technical

Considerations

Behavioral and Technical

Considerations

(45)

Different Costs for

Different Purposes

Different Costs for

Different Purposes

A cost concept used for the external reporting purpose need not be the appropriate concept

(46)

Understand how cost management

accounting fits into an

(47)

Line and Staff Relationships

Line management is directly responsible for attaining the objectives of the organization.

(48)

C o n t r o l l e r A u d i t T a x T r e a s u r y R i s k I n v e s t o r C h i e f F i n a n c i a l O f f i c e r ( C F O )

P r e s i d e n t

C h i e f O p e r a t i n g O f f i c e r ( C O O ) C h a i r m a n

(49)

* G l o b a l F i n a n c i a l P l a n n i n g / B u d g e t i n g * O p e r a t i o n s A d m i n i s t r a t i o n

* P r o f i t a b i l i t y R e p o r t i n g * I n v e n t o r y

* R o y a l t i e s

* G e n e r a l L e d g e r

* A c c o u n t s P a y a b l e a n d R e c e i v a b l e * S u b s i d i a r y a n d L i a i s o n A c c o u n t i n g

E x a m p l e s o f F u n c t i o n s :

(50)

Understand what

professional ethics mean

(51)

Professional Ethics

Confidentiality

Integrity

(52)

Ethical Guidelines

The Institute of Management Accountants (IMA) is the largest association of management

accountants in the United States.

(53)