Managerial Accounting and the Business Organization1 - *
Introduction to Management Accounting
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Chapter 1
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Users of Accounting Information
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Scorekeeping: Evaluate Organizational Performance
Decision Making
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Process of gathering, organizing, and
Communicating financial information
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Influences on Accounting Systems
Foreign Corrupt Practices Act
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Sarbanes-Oxley Act
statement verifying the accuracy of
the company’s financial statements.
External auditors must examine and report
on the company’s internal control system.
Learning
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Ethics
ensuring reliability as high ethical
standards of accountants.
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Service and Nonprofit Organizations
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Cost-Benefit and Behavioral Considerations
useful to managers.
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Decision Making
from among a set of alternative courses
of action designed to achieve some objective.
Planning: Setting objectives and outlining how the objectives will be obtained.
Control: Implementing plans and using feedback to evaluate the attainment of objectives.
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The Nature of Planning and Controlling
Planning
Increase
Profitability
Control
– Actions
– Evaluations
Budgets,
Special
Reports
Accounting
System
Performance
Reports
Customer
surveys
Competitor
analysis
Advertising
impact
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Budget and Performance Reports
Performance reports:
provide feedback by comparing results with plans
highlight variances
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Performance Reports
Store labor 12,000 11,600 400 F
Other labor 6,000 6,050 50 U
Utilities, etc. 4,500 4,500 0
Total expenses $44,500 $46,650 $2,150 U
Operating income $ 5,500 $ 3,350 $2,150 U
U= Unfavorable – actual exceeds budget
F – Favorable – actual is less than budget.
Mayfair Starbucks Store, March 31, 20X7
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Product Life Cycle
stages through which a product passes.
No Sales
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Econ. Can Help Explain Life-Cycle:
Returns to Scale in Production (the Cost Side)
U-Shaped Average Cost Curve
Demand can cut Average Cost at Decreasing or Increasing Average Costs
Network Returns to Scale in Demand
User-Networks Build Value
Microsoft Case (see articles by Paul Krugman and Brian Arthur)
©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton
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The Value Chain
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Management Accountant’s Role as
Internal Consultant
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Organizational Authority and Responsibility
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Accounting Function
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Career Opportunities in Management Accounting
The Certified Management Accountant (CMA)
CMAs must pass a four-part examination:
Business Analysis
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Management Accounting Change Drivers
Shift from a manufacturing-based
to a service-based economy
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Major Influences on Management Accounting
Business process reengineering:
Just-in-time (JIT) philosophy
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Standards of Ethical Conduct
Management Accounting Members
Competence,
Confidentiality,
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Ethical Dilemmas
Significant value conflicts among differing interests.
Real alternatives that are all justifiable, and
Significant consequences on stakeholders in the situation.
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Unethical Behavior Temptations
Practice full and fair disclosure to convey company’s performance.
Emphasis on short-term results:
Ignoring the small stuff:
Economic cycles:
A downturn market can reveal what an upturn market conceals.
Vigilance in all stages of economic markets maintains high ethical standards.
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The End