managerial accounting and the business environment
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Managerial Accounting and the Business Environment. Chapter 1. Strategic Management Skills. A strategy is a “game plan” that enables a company to attract customers by distinguishing itself from competitors. The focal point of a company’s strategy should be its target customers. LO 1. - PowerPoint PPT PresentationTRANSCRIPT
Copyright © 2012 McGraw-Hill Ryerson Limited
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PowerPoint Author:
Robert G. Ducharme, MAcc, CAUniversity of Waterloo, School of Accounting and Finance
MANAGERIALACCOUNTINGNinth Canadian Edition GARRISON, CHESLEY, CARROLL, WEBB, LIBBY
MANAGERIALACCOUNTINGNinth Canadian Edition GARRISON, CHESLEY, CARROLL, WEBB, LIBBY
Managerial Accounting and the Business Environment
Chapter 1
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Copyright © 2012 McGraw-Hill Ryerson Limited
Strategic Management Skills
A strategyis a “game plan”
that enables a companyto attract customers
by distinguishing itselffrom competitors.
The focal point of acompany’s strategy should
be its target customers.
The focal point of acompany’s strategy should
be its target customers.
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Customer Value Propositions
Understand and respond toindividual customer needs.Understand and respond toindividual customer needs.
CustomerIntimacyStrategy
OperationalExcellenceStrategy
Deliver products and servicesfaster, more conveniently,
and at lower prices.
Deliver products and servicesfaster, more conveniently,
and at lower prices.
ProductLeadership
StrategyOffer higher quality products.Offer higher quality products.
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Work of Management
PlanningPlanning
ControllingControlling
Directing andMotivating
Directing andMotivating
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Planning
Identifyalternatives.
Identifyalternatives.
Select alternative that does the best job of furtheringorganization’s objectives.
Select alternative that does the best job of furtheringorganization’s objectives.
Develop budgets to guideprogress toward theselected alternative.
Develop budgets to guideprogress toward theselected alternative.
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Directing and motivating involves managing day-to-day activities to keep the organization running smoothly. Employee work assignments. Routine problem solving. Conflict resolution. Effective communications.
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Directing and Motivating
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Controlling
The control function ensuresthat plans are being followed. The control function ensuresthat plans are being followed.
Feedback in the form of performance reportsthat compare actual results with the budgetare an essential part of the control function.
Feedback in the form of performance reportsthat compare actual results with the budgetare an essential part of the control function.
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Planning and Control Cycle
DecisionMaking
Formulating long-and short-term plans
(Planning)
Formulating long-and short-term plans
(Planning)
Measuringperformance (Controlling)
Measuringperformance (Controlling)
Implementing plans (Directing and Motivating)
Implementing plans (Directing and Motivating)
Comparing actualto planned
performance (Controlling)
Comparing actualto planned
performance (Controlling)
Begin
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A business plan consists of information about the company’s basic product or service and about the steps to be taken to reach its potential market. The plan includes information about: production methods competition management team, and details on how the business will be financed.
The business plan is a key document for: the organization’s internal management, and external use in attracting creditors and investors.
New businesses typically formalize their strategic planning in the form of a business plan.
New businesses typically formalize their strategic planning in the form of a business plan.
Business Plans
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Comparison of Financial and Managerial Accounting: Seven Key Differences
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Corporate Organization Chart
Purcha sing Personnel V ice PresidentO pera tions
T rea surer C ontro ller
C hief F ina ncia lO fficer
President
B oa rd of D irectors
Organizational Structure
Decentralization is the delegation of decision-Decentralization is the delegation of decision-making authority throughout an organization.making authority throughout an organization.
Decentralization is the delegation of decision-Decentralization is the delegation of decision-making authority throughout an organization.making authority throughout an organization.
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Line and Staff Relationships
Line positions are directly related to achievement of the basic objectives of an organization. Example: Production
supervisors in a manufacturing plant.
Staff positions support and assist line positions. Example: Cost
accountants in the manufacturing plant.
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The Controller
A member of the top management team responsible for: Providing timely and relevant data to support
planning and control activities. Preparing financial statements for external
users.
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The Professional Management Accountant
Three types of professional accountants work as management accountants in Canada:CGACACMA
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Certified Management Accountant
A management accountantwho has the necessary qualifications
and who passes a rigorous professional exam earns the right to be known as a
Certified Management Accountant (CMA).
A management accountantwho has the necessary qualifications
and who passes a rigorous professional exam earns the right to be known as a
Certified Management Accountant (CMA).
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Professional Ethics forManagement Accountants
CMA Ontario provides clear guidance concerning what professional ethical standards to follow, including:
Accountants must maintain a level of competence appropriate to their designation.
Confidentiality is essential because of the importance of the information they analyze.
Integrity is maintained by avoiding conflicts of interest with their employers or clients, by communicating the limits of professional competence, and by not accepting favours that would compromise their judgment.
Objectivity must be present in communications, so that recipients can receive both favourable and unfavourable information.
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CompetenceCompetenceFollow applicablelaws, regulationsand standards.
Follow applicablelaws, regulationsand standards.
Maintain professional competence.
Maintain professional competence.
Provide accurate, clear, concise, and timely decision
support information.
Provide accurate, clear, concise, and timely decision
support information.
CMA Guidelines for Ethical Behavior
Recognize and communicate professional limitations that preclude responsible judgment.
Recognize and communicate professional limitations that preclude responsible judgment.
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ConfidentialityConfidentiality
Do not disclose confidential information unless legally
obligated to do so.
Do not disclose confidential information unless legally
obligated to do so.
Ensure that subordinates do not disclose confidential
information.
Ensure that subordinates do not disclose confidential
information.
Do not use confidential
information for unethical or illegal
advantage.
Do not use confidential
information for unethical or illegal
advantage.
CMA Guidelines for Ethical Behavior
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Mitigate conflicts of interest and advise others
of potential conflicts.
Mitigate conflicts of interest and advise others
of potential conflicts.
Abstain from activities that might discredit the
profession.
Abstain from activities that might discredit the
profession.
Refrain from conduct that
would prejudice carrying out
duties ethically.
Refrain from conduct that
would prejudice carrying out
duties ethically.
IntegrityIntegrity
CMA Guidelines for Ethical Behavior
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Communicate information fairly and objectively.
Communicate information fairly and objectively.
Disclose all relevant information that could
influence a user’s understanding of reports and recommendations.
Disclose all relevant information that could
influence a user’s understanding of reports and recommendations.
CredibilityCredibility
CMA Guidelines for Ethical Behavior
Disclose delays or deficiencies in information timeliness, processing, or
internal controls.
Disclose delays or deficiencies in information timeliness, processing, or
internal controls.
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Abandoning ethical standards in business would lead to a lower quality of life with less
desirable goods and services at higher prices
Why Have Ethical Standards?
Without ethical standards in business, theeconomy, and all of us who depend on it for
jobs, goods, and services, would suffer
Ethical standards in business are essential for asmooth functioning advanced market economy
Ethical standards in business are essential for asmooth functioning advanced market economy
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Corporate Governance
The system bywhich a company is directed
and controlled.
The system bywhich a company is directed
and controlled.
Board ofDirectorsBoard ofDirectors
TopManagement
TopManagement
ShareholdersShareholders
To pursueobjectives of
Incentives andmonitoring for
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Corporate Governance
And the communities inwhich the company operates.
And the communities inwhich the company operates.
An effective corporate governance system should also protect the interests of the
company’s other stakeholders.
An effective corporate governance system should also protect the interests of the
company’s other stakeholders.
EmployeesEmployees CustomersCustomers SuppliersSuppliersCreditorsCreditors
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Corporate Social Responsibility
CSR extends beyond legal complianceto include voluntary actions that satisfy
stakeholder expectations.
CSR extends beyond legal complianceto include voluntary actions that satisfy
stakeholder expectations.
Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions.
Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions.
Customers Employees CommunitiesSuppliers ShareholdersEnvironmental
& Human RightsAdvocates
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Process Management
Business functions making up the value chain
Product Customer R&D Design Manufacturing Marketing Distribution Service
A businessprocess is a series of
steps that are followed in order tocarry out some task in
a business.
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Process Management
There are four approaches toimproving business processes . . .
LeanProduction
SixSigma
EnterpriseSystems
RiskManagement
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Forecast Sales Order components
Produce goods in Anticipation of Sales
Make Sales from Finished Goods
Inventory
Store Inventory
StoreInventory
Traditional “Push” Manufacturing Company
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Traditional “push”manufacturing
Largeinventories
Finishedgoods
Rawmaterials
Work inprocess
Materials waitingto be processed.Materials waitingto be processed.
Completed products awaiting sale.
Completed products awaiting sale.
Partially completed products requiring more work before
they are ready for sale.
Partially completed products requiring more work before
they are ready for sale.LO 5
Traditional “Push” Manufacturing Company
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Lean ProductionExhibit
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The lean thinkingmodel is a fivestep approach.
The lean thinkingmodel is a fivestep approach.
Identify valuein specific
products/services.
Identify valuein specific
products/services.
Identify thebusiness process
that delivers value.
Identify thebusiness process
that delivers value.
Organize workarrangements around
the flow of thebusiness process.
Organize workarrangements around
the flow of thebusiness process.
Create a pullsystem that respondsto customer orders.
Create a pullsystem that respondsto customer orders.
Continuously pursueperfection in the
business process.
Continuously pursueperfection in the
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Lean Production
Customer places an order
Create Production Order
Generate component requirements
Production begins as parts arrive
Goods delivered when needed
Components are ordered
Lean Production is often called Just-In-Time (JIT) production.Lean Production is often called Just-In-Time (JIT) production.
The five step process results in a “pull” manufacturing system that reduces inventories, decreases defects, reduces wasted
effort, and shortens customer response times.
The five step process results in a “pull” manufacturing system that reduces inventories, decreases defects, reduces wasted
effort, and shortens customer response times.
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Lean Production
Lean thinking may be used to improve business processes that link companies together.
The term supply chain management refers to the coordination of business processes across
companies to better serve end consumers.
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Six Sigma
A process improvement method relying on customer feedback and fact-based data gathering and analysis
techniques to drive process improvement.
A process improvement method relying on customer feedback and fact-based data gathering and analysis
techniques to drive process improvement.
Refers to a process that generates no morethan 3.4 defects per million opportunities.
Refers to a process that generates no morethan 3.4 defects per million opportunities.
Sometimes associatedwith the term zero defects.
Sometimes associatedwith the term zero defects.
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Six Sigma
Stage GoalsDefine ● Establish the scope and purpose of the project.
● Diagram the flow of the current process.● Establish the customer's requirements for the process.
Measure ● Gather baseline performance data related to the existing process.● Narrow the scope of the project to the most important problems.
Analyze ● Identify the root cause(s) of the problems identified in the Measure stage.
Improve ● Develop, evaluate, and implement solutions to the problems.
Control ● Ensure that problems remain fixed.● Seek to improve the new methods over time.
The Six Sigma DMAIC Framework
Exhibit1-9
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Enterprise Systems
A single software system thatintegrates data across an organization,
thereby enabling all employees to have simultaneous access to a
common set of data.
All data are recorded onlyonce in the company’scentralized database.
All data are recorded onlyonce in the company’scentralized database.
The unique data elementscontained within a database
can be linked together.
The unique data elementscontained within a database
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Enterprise Risk Management
A process usedA process usedby a company toby a company to
proactively identifyproactively identifyand manage risk.and manage risk.
Once a company identifies its risks, perhaps themost common risk management tactic is to reduce
risks by implementing specific controls.
Once a company identifies its risks, perhaps themost common risk management tactic is to reduce
risks by implementing specific controls.
Should I try to avoid the risk, accept the risk, or
reduce the risk?
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Enterprise Risk Management
Examples of Controls toExamples of Business Risks Reduce Business Risks
● Products harming customers ● Develop a formal and rigorous new product testing program
● Losing market share due to the ● Develop an approach for legally unforeseen actions of competitors gathering information about
competitors' plans and practices● Poor weather conditions shutting ● Develop contingency plans for down operations overcoming weather-related
disruptions● Website malfunction ● Thoroughly test the website
before going "live" on the Internet● A supplier strike halting the flow ● Establish a relationship with two of raw materials companies capable of providing
raw materials● Financial statements unfairly ● Count the physical inventory on reporting the value of inventory hand to make sure that it agrees
with the accounting records● An employee accessing ● Create passwords barriers that unauthorized information prohibit employees from obtaining
information not needed to do their jobs
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Measurement Skills
A good manager compliments an understanding of
strategy, risks, and business processes with
data-driven analysis.
The key to effective analysis is to understand that the question you are addressing defines what you
measure and how you analyze the data.
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Measurement Skills
Directing andMotivating
Directing andMotivating
PlanningPlanning
ControllingControlling
The primary purpose of this course is to teach measurement skills that managers
use to support planning, directing and motivating, and
controlling activities.
The primary purpose of this course is to teach measurement skills that managers
use to support planning, directing and motivating, and
controlling activities.
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