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Chapter 1
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Learning Objective 1
Describe how cost
accounting supports
management accounting
and financial accounting.
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Management Accounting
It measures and reports financial and
nonfinancial information that helps
managers make decisions to fulfill the
goals of an organization.
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Financial Accounting
Its focus is on reporting to external parties.
It measures and records business transactions.
It provides financial statements based on
generally accepted accounting principles.
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Cost Accounting
It provides information for both management
accounting and financial accounting.
It measures and reports financial
and nonfinancial data.
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Cost Management
It describes the activities of managers in
planning and control of costs.
It includes the continuous reduction of costs.
It is a key part of general management
strategies and their implementation.
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Learning Objective 2
Understand how management
accountants affect
strategic decisions.
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Current
Assets
Long-Term
Productive
Assets
Intangible
Assets
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Learning Objective 3
Distinguish between the
planning and control
decisions of managers.
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Planning
Budgets
Control
Accounting
System
Performance
Evaluation
Performance
Reports
Feedback
Management Decision
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Setting
goals
Predicting
results
Deciding how
to attain goals
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Deciding on
performance
evaluation
and feedback
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Actual
$60,000
43,400
7,000
900
5,000
$ 3,700
Variance
$1,000 F
1,400 U
300 U
400 F
0
$ 300 U
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Feedback
This involves managers examining past performance
and systematically exploring alternative ways to
make better informed decisions in the future.
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Learning Objective 4
Distinguish among the problemsolving, scorekeeping, and
attention-directing roles of
management accountants.
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Problem Solving
This involves comparative analysis
for decision making.
This role asks: Of the several alternatives
available, which is the best?
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Scorekeeping
This involves accumulating data and
reporting reliable results to
all levels of management.
This role asks: How is the business doing?
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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
opportunities to add value to an organization,
not just cost-reduction opportunities.
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Learning Objective 5
Identify four themes managers
need to consider for
attaining success.
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Value Chain
and
Supply Chain
Analysis
Continuous
Improvement
and
Benchmarking
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Customer Focus
The
The challenge
challenge facing
facing managers
managers isis to
to continue
continue
investing
investing sufficient
sufficient (but
(but not
not excessive)
excessive)
resources
resources in
in customer
customer satisfaction
satisfaction
such
such that
that profitable
profitable customers
customers
are
are attracted
attracted and
and retained.
retained.
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Continuous Improvement
and Benchmarking
Continuous
Continuous improvement
improvement by
by competitors
competitors creates
creates
aa never-ending
never-ending search
search for
for higher
higher levels
levels of
of
performance
performance within
within many
many organizations.
organizations.
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Learning Objective 6
Describe the set of business
functions in the value chain.
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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
to the customer.
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Value Chain
Management accountants provide
decision support for managers in the
following six business functions:
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Value Chain
R&D
Design
Production
Management Accounting
Marketing
Distribution
Service
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Learning Objective 7
Describe three ways
management accountants
support managers.
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Key Guidelines
1. Cost-benefit approach
2. Full recognition of behavioral as well as
technical considerations
3. Using different costs for different purposes
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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
in relation to the costs of those resources.
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Learning Objective 8
Understand how cost management
accounting fits into an
organizations structure.
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P r e s id e n t
C h ie f O p e r a tin g O ffic e r (C O O )
C h ie f F in a n c ia l O ffic e r (C F O )
C o n tr o lle r
A u d it
Tax
T reasu ry
R is k
M an agem en t
In v e sto r
R e la tio n s
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G lo b a l F in a n c ia l P la n n in g /B u d g e tin g
O p e r a tio n s A d m in is tr a tio n
P r o fita b ility R e p o r tin g
In v e n to r y
*
*
*
*
R o y a ltie s
G en eral L ed ger
A c c o u n ts P a y a b le a n d R e c e iv a b le
S u b s id ia r y a n d L ia is o n A c c o u n tin g
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Learning Objective 9
Understand what
professional ethics mean
to management accountants.
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Professional Ethics
Competence
Integrity
Confidentiality
Objectivity
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Ethical 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 Ethical
Conduct for Management Accountant.
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End of Chapter 1
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