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Page 1: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

© The McGraw-Hill Companies, Inc., 2005McGraw-Hill /Irwin

Brewer/Garrison/Noreen

Introduction to Managerial Accounting

Second Edition

Page 2: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

Prologue

Managerial Accounting and the Business Environment

Page 3: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

© The McGraw-Hill Companies, Inc., 2005McGraw-Hill /Irwin

The Changing Business Environment

A more competitive environment emphasizing:

Global competition

Lower prices and costs

Higher quality products

More product choices

Business environment changes in the past

twenty years

Page 4: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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The Changing Business Environment

Just-In-Time

Total Quality Management

Process Reengineering

Theory of Constraints

New tools for managers!

Page 5: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

© The McGraw-Hill Companies, Inc., 2005McGraw-Hill /Irwin

Just-in-Time (JIT) Systems

Receivecustomer

orders.

Scheduleproduction.

Receive materialsjust in time for

production.

Complete partsjust in time for

assembly into products.

Complete productsjust in time to

ship customers.

Page 6: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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More rapidresponse to

customer orders

More rapidresponse to

customer orders

Less warehousespace needed

Less warehousespace needed

Reducedinventory

costs

Reducedinventory

costs

Greatercustomer

satisfaction

Greatercustomer

satisfaction

Just-in-Time (JIT)

Higher quality products

Higher quality products

Zero defects

Zero defects

Page 7: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Do we need to change the plan?

Where are we?

Where do we want to go?

How do we start?

How are we doing?

Check

Plan

Act Dois

Total Quality Management (TQM)

Benchmarking

ContinuousImprovement

Page 8: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Process Reengineering

A business processis diagrammed

in detail.

The process isredesigned to include

only those steps that makeour product more valuable.

Every step inthe businessprocess mustbe justified.

Page 9: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

© The McGraw-Hill Companies, Inc., 2005McGraw-Hill /Irwin

Process Reengineering

A business processis diagrammed

in detail.

The process isredesigned to include

only those steps that makeour product more valuable.

Every step inthe businessprocess mustbe justified.

Anticipated results: Process is simplified. Process is completed in less time. Costs are reduced. Opportunities for errors are reduced.

Page 10: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Theory of Constraints (TOC)

A sequential process of identifying and removing constraints in a system.

Restrictions or barriers that impedeprogress toward an objective

Page 11: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

© The McGraw-Hill Companies, Inc., 2005McGraw-Hill /Irwin

International Competition

Meeting world-class competition demands a world-class management accounting

system.

Page 12: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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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

An organization is a group of peopleunited for a common purpose.

An organization is a group of peopleunited for a common purpose.

Page 13: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Decentralization

Decentralizatio

n

decision–making

Decentralization

decision–making

Delegation of decision-making authority throughout an organization.

Delegation of decision-making authority throughout an organization.

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

Page 14: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

© The McGraw-Hill Companies, Inc., 2005McGraw-Hill /Irwin

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.

Page 15: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

© The McGraw-Hill Companies, Inc., 2005McGraw-Hill /Irwin

The Chief Financial Officer (CFO)

The CFO is: A member of top management. Responsible for providing timely and relevant

data for planning and control activities. Responsible for external financial reporting.

The CFO is: A member of top management. Responsible for providing timely and relevant

data for planning and control activities. Responsible for external financial reporting.

Page 16: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Professional Ethics

Ethical practices in business build trust and promote productive relationships. They are necessary for the functioning of a market economy.

Many companies and professional organizations, such as the Instituteof Management Accountants (IMA),have written codes of ethics whichserve as guidelines for employees.

Page 17: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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IMA’s Standard of Ethical Conduct

Competence

Confidentiality

Integrity

Objectivity

Resolution of Ethical Conflict

Competence

Confidentiality

Integrity

Objectivity

Resolution of Ethical Conflict

Page 18: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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IMA’s Standard of Ethical Conduct

Follow applicable laws, regulations and

standards.

Prepare complete and clear reports after appropriate

analysis.

Maintain professional competence.

Competence

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IMA’s Standard of Ethical Conduct

Do not disclose confidential information unless legally

obligated to do so.

Ensure that subordinates do not disclose confidential

information.

Do not use confidential

information for personal

advantage.

Confidentiality

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IMA’s Standard of Ethical Conduct

Integrity

Refrain from activities that

could discredit the profession.

Avoid activities that could affect your ability to perform

duties.

Avoid conflicts of interest and advise others of potential

conflicts.

Refuse gifts or favors that might

influence behavior.

Do not subvert organization’s

legitimate objectives.

Communicate unfavorable as well

as favorable information.

Recognize and communicate personal

and professional limitations.

Page 21: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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IMA’s Standard of Ethical Conduct

Objectivity

Communicate information fairly and objectively.

Disclose all information that might be useful to

management.

Page 22: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Resolution of Ethical Conflict

Follow established policies.

For unresolved ethical conflicts:

Discuss the conflict with immediate superior.

If immediate superior is the CEO, consider the board of directors or the audit committee.

Except where legally prescribed, maintain confidentiality.

Resolution of Ethical Conflict

Follow established policies.

For unresolved ethical conflicts:

Discuss the conflict with immediate superior.

If immediate superior is the CEO, consider the board of directors or the audit committee.

Except where legally prescribed, maintain confidentiality.

IMA’s Standard of Ethical Conduct

Page 23: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Resolution of Ethical Conflict Clarify issues in a confidential discussion with

an objective advisor.

Consult an attorney as to legal obligations.

The last resort is to resign.

Resolution of Ethical Conflict Clarify issues in a confidential discussion with

an objective advisor.

Consult an attorney as to legal obligations.

The last resort is to resign.

IMA’s Standard of Ethical Conduct

Page 24: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Other Codes of Conduct

CompanyMany companies have adopted formal ethics

codes of conducts that provide broad guidelines for proper behavior.

InternationalThe International Federation of Accountants’ (IFAC) Guidelines on Ethics for Professional

Accountants governs the activities of all accountants throughout the world.

Page 25: © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Brewer/Garrison/Noreen Introduction to Managerial Accounting Second Edition.

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Certified Management Accountant (CMA)

Rigorous Professional

Exam

Greater Responsibilities

Higher Compensation

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End of Prologue


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