Managerial Accounting: Conceptual Framework Chapter 1 Managerial Accounting Concepts and Empirical...
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Transcript of Managerial Accounting: Conceptual Framework Chapter 1 Managerial Accounting Concepts and Empirical...
Managerial Accounting:Conceptual Framework
Chapter 1
Managerial Accounting
Concepts and Empirical Evidence
Manageri
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ccou
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Manageri
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Conce
pts
and E
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ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Managerial Accounting
DECISION MAKING (planning and control)
INFORMATION
MANAGERIAL ACCOUNTING:Design and use of information systems for
managerial planning and control
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Setting Organizational Objectives
Setting Organizational Objectives
Planning and Control Framework
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Planning and Control Framework
Setting Organizational Objectives
Setting Organizational Objectives
Identifying Opportunitiesand/or Problems
Identifying Opportunitiesand/or Problems
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Planning and Control Framework
Setting Organizational Objectives
Setting Organizational Objectives
Identifying Opportunitiesand/or Problems
Identifying Opportunitiesand/or Problems
Selecting Course ofAction and Allocating
Resources
Selecting Course ofAction and Allocating
Resources
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Setting Organizational Objectives
Setting Organizational Objectives
Evaluating Accomplishmentsof Organizational
Objectives
Evaluating Accomplishmentsof Organizational
Objectives
Identifying Opportunitiesand/or Problems
Identifying Opportunitiesand/or Problems
Selecting Course ofAction and Allocating
Resources
Selecting Course ofAction and Allocating
Resources
Planning and Control Framework
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Three-Way Classification Scheme of Information
Nonfinancial
Ex post
Internal
Manageri
al A
ccou
nti
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Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Three-Way Classification Scheme of Information
ExternalNonfinancial
Ex postInternal
Financial
Ex ante
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Data for Example
• MaLa Toy Corporation - Introduction of New Toy
• Estimate of revenues = $2,000,000• Estimates of costs of new toy = $1,000,000 or
$2,500,000, with equal probabilities• Cost of developing specialized information system
to help predict toy costs = $40,000• Cost prediction is 80% accurate with specialized
information system
Manageri
al A
ccou
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ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Mala Toy CorporationInformation Economics
Prediction withoutSpecialized Information
System
Revenues = $ 2,000,000Costs = $ 1,000,000
Probability (p) = 0.5
Low Costs
High Costs
Revenues = $ 2,000,000 Costs = $ 2,500,000 p = 0.5
EV = ($ 2,000,000 - $ 1,000,000)*.5 + ($ 2,000,000 - $ 2,500,000)*.5 = $ 250,000
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Mala Toy CorporationInformation Economics
Prediction withSpecialized Information
System
Low-Cost Signal, p = 0.8
High-Cost Signal, p = 0.2
High-Cost Signal, p = 0.8
Low-Cost Signal, p = 0.2
Prediction withoutSpecialized Information
System
Revenues = $ 2,000,000Costs = $ 1,000,000
Probability (p) = 0.5
Low Costs
High Costs
Revenues = $ 2,000,000 Costs = $ 2,500,000 p = 0.5
EV = ($ 2,000,000 - $ 1,000,000)*.5 + ($ 2,000,000 - $ 2,500,000)*.5 = $ 250,000
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Mala Toy CorporationInformation Economics
Prediction withSpecialized Information
System
Low-Cost Signal, p = 0.8
High-Cost Signal, p = 0.2
High-Cost Signal, p = 0.8
Low-Cost Signal, p = 0.2
Expected payoff
Do not Produce
Do not Produce
= (.5)*(.8)*($ 2,000,000 - $ 1,000,000) = $ 400,000
= (.5)*(.2)*($ 2,000,000 - $ 2,500,000) = $ -50,000
Expected Value (EV) = $ 350,000Less: Cost of Specialized Information System - 40,000
Net EV $ 310,000
Since $ 310,000 > $ 250,000 (by $60,000), install Specialized Information System
Prediction withoutSpecialized Information
System
Revenues = $ 2,000,000Costs = $ 1,000,000
Probability (p) = 0.5
Low Costs
High Costs
Revenues = $ 2,000,000 Costs = $ 2,500,000 p = 0.5
EV = ($ 2,000,000 - $ 1,000,000)*.5 + ($ 2,000,000 - $ 2,500,000)*.5 = $ 250,000
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Decision Support Systems Overview
• Computer-based information systems designed to support managerial planning and control
User
User
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Decision Support Systems Overview
• Computer-based information systems designed to support managerial planning and control
Data Base
Data base Management System
User
User
Manageri
al A
ccou
nti
ng
Manageri
al A
ccou
nti
ng
Conce
pts
and E
mpir
ical Evid
ence
Conce
pts
and E
mpir
ical Evid
ence
Decision Support Systems Overview
• Computer-based information systems designed to support managerial planning and control
Model Base
Model base Management System
Data Base
Data base Management System
User
User