Managerial Accounting:

An Introduction To Concepts, Methods, And Uses

9th Edition

Maher, Stickney and Weil

Chapter 1

Overview and Basic Concepts

Learning Objectives (Slide 1 of 2)

Distinguish between managerial & financial accounting.

Understand how managers can use accounting information to implement strategies.

Identify the key financial players in the organization.

Understand managerial accountants’ professional environment and ethical responsibilities.

Master the concept of cost.

Learning Objectives (Slide 2 of 2)

Compare and contrast income statements prepared for managerial use and those prepared for external reporting.

Describe how managerial accounting supports modern production environments.

Understand the importance of effective communication between accountants and users of managerial accounting information.

Understand the ethical standards that comprise the Institute of Management Accountants’ Code of Ethics. (Appendix 1.1)

Compare Financial & Managerial Accounting

Financial Accounting

Managerial Accounting

Discuss Implementing Strategies

Review Misuses of Accounting Information

Key Financial Players

President and

Chief Operating Officer

Industrial Department

Staff and Administrative Departments

Finance Vice-President

OtherVice-Presidents

Including Engineering,Legal, Employee Relations

Treasurer Controller Internal Audit

CostAccounting

FinancialReporting

Tax

Partial Organizational Chart

Professional Environment

(Slide 1 of 2)

Institute of Management Accountants (IMA) Sponsors Certified Management Accountant

& Certified Financial Management programs

Publishes a journal, policy statements and research studies on accounting issues

Certified Public Accountant

Cost Accounting Standards Board Sets accounting standards for contracts

between the U.S. government and defense contractors

Professional Environment

(Slide 2 of 2)

Ethical issues, while always important, have taken on added significance due to recent accounting failures

The IMA has developed a Code of Conduct mandating that management accountants have a responsibility to maintain the highest levels of ethical conduct

Define the Following Basic Cost Concepts (Slide 1 of

4)

A cost

Opportunity cost

Basic Cost Concepts (Slide

2 of 4)

Distinguish between a cost and an expense

Basic Cost Concepts (Slide

3 of 4)

A cost object is any item for which the manager wishes to measure cost

Differentiate between Direct and Indirect Costs

Basic Cost Concepts (Slide

4 of 4)

What is the distinction between fixed and variable costs? It is important since it affects strategic decision-making

Income Statement For External Reporting

Sales Revenue $400,000

Less Cost of Goods Sold 210,000

Gross Margin $190,000

Less Mktg. & Admin Exp. 80,000

Net Income Before Taxes $110,000

Contribution Margin Format Income Statement

Sales Revenue $400,000

Less Variable Costs:

Variable Cost of Sales $160,000

Variable Mktg & Admin 8,000 168,000

Contribution Margin $232,000

Less Fixed Costs:

Fixed Cost of Sales $50,000

Fixed Mktg & Admin 72,000 122,000

Net Income Before Taxes $110,000

Match Terms & Definitions

Cost

Expense

Cost Object

Direct Cost

Opportunity Cost

Indirect Cost

The return that could not be realized from the best forgone alternative use of a resource

A cost charged against revenue

Costs not directly related to a cost object

Any item for which a manager wants to measure a cost

Costs directly related to a cost object

A sacrifice of resources

Managing Costs

Be able to identify cost behavior & present costs in this manner in order to effectively plan & manage them

Activity-based management (ABM) requires understanding how the activities produce a product & affect its cost, therefore by managing the activities you can control its costs

Effective cost control requires an understanding of how producing a product involves activities & how those activities cause costs to be incurred

Activity-based management studies the need for activities & whether they are operating efficiently

Value-Added Activities

Value-added activities increase the product’s service to customers Managers try to eliminate non-value-added

activities to reduce costs without reducing the product’s service potential to customers

The value chain describes the linked set of activities that add value to the products or services of the organization

Describe the Value Chain

Managerial Accounting in Modern Production

Environments Key developments that reshaped

Managerial Accounting include:

Integrated information systems

Web hosting

Just-in-time and lean production

Total Quality Management

Theory of constraints

Benchmarking and continuous improvement

If you have any comments or suggestions concerning this PowerPoint Presentation for Managerial Accounting, An Introduction To Concepts, Methods, And Uses please contact:

Dr. Michael Blue, CFE, CPA, CMA blue@bloomu.edu

Bloomsburg University of Pennsylvania