© 2010 The McGraw-Hill Companies, Inc.

Managerial Accounting and the Business Environment

Chapter 1

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Learning Objective 1

Understand the role of Understand the role of management management

accountants in an accountants in an organization.organization.

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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 Chief Financial Officer (CFO)

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.

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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Learning Objective 2

Understand the basic Understand the basic concepts underlying concepts underlying Lean Production, the Lean Production, the

Theory of Constraints, Theory of Constraints, and Six Sigma.and Six Sigma.

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Process Management

Business functions making up the value chainBusiness 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 three approaches toimproving business processes . . .

LeanProduction

Theory ofConstraints (TOC)

SixSigma

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Lean Production

Lean thinking can 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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A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want.

The Theory of Constraints is based on the observation that effectively managing the constraint is the key to success.

The constraint in a system is determinedThe constraint in a system is determinedby the step that has theby the step that has the smallest smallest capacity.

Theory of Constraints

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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 more

than 3.4 defects per million opportunities.

Refers to a process that generates no more

than 3.4 defects per million opportunities.

Sometimes associated

with the term zero defects.

Sometimes associated

with the term zero defects.

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Learning Objective 3

Understand the Understand the importance of upholding importance of upholding

ethical standards.ethical standards.

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Code of Conduct for Management Accountants

The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice

consists of two parts that offer guidelines for: Ethical behavior. Resolution for an ethical conflict.

The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice

consists of two parts that offer guidelines for: Ethical behavior. Resolution for an ethical conflict.

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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.

IMA 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 Do not disclose confidential information unless legally information unless legally

obligated to do so. obligated to do so.

Do not disclose confidential Do not disclose confidential information unless legally information unless legally

obligated to do so. obligated to do so.

Ensure that subordinates do Ensure that subordinates do not disclose confidential not disclose confidential

information. information.

Ensure that subordinates do Ensure that subordinates do not disclose confidential not disclose confidential

information. information.

Do not use Do not use confidential confidential

information for information for unethical or illegalunethical or illegal

advantage. advantage.

Do not use Do not use confidential confidential

information for information for unethical or illegalunethical or illegal

advantage. advantage.

IMA 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

IMA 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

IMA 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 economy.

Ethical standards in business are essential for asmooth functioning economy.

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Company Codes of Conduct

EmployeesEmployees CustomersCustomers SuppliersSuppliers

And to the communities inwhich the company operates.

And to the communities inwhich the company operates.

Broad-based statements of aBroad-based statements of acompany’s responsibilities to:company’s responsibilities to:Broad-based statements of aBroad-based statements of acompany’s responsibilities to:company’s responsibilities to:

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Corporate Governance

The system byThe system bywhich a company is directedwhich a company is directed

and controlled.and controlled.

Board ofDirectorsBoard ofDirectors

TopManagement

TopManagement

StockholdersStockholders

To pursueobjectives of

Incentives andmonitoring for

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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, share the risk, accept therisk, or reduce the risk?

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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 StockholdersEnvironmental

& Human RightsAdvocates