Chapter 1

The Changing Role

of Managerial
Accounting in a
Dynamic Business
Environment

McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Define Managerial Accounting

Managerial accounting is the process of

Identifying
Measuring
Analyzing
Interpreting
Communicating information

1-2

Managing Resources, Activities,

and People
An organization . . .

Directing

Acquires Resources

Hires People

Organized
Organized set
set
of
of activities
activities

Controlling

Decision
Making

Planning

1-3

How Managerial Accounting Adds

Value to the Organization
Providing
Providing information
information for
for decision
decision making
making and
and
planning.
planning.
Assisting
Assisting managers
managers in
in directing
directing and
and controlling
controlling
activities.
activities.
Motivating
Motivating managers
managers and
and other
other employees
employees
towards
towards organizations
organizations goals.
goals.
Measuring
Measuring performance
performance of
of activities,
activities, managers,
managers,
and
and other
other employees.
employees.
Assessing
Assessing the
the organizations
organizations competitive
competitive position.
position.
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Managerial versus Financial

Accounting

1-5

Line and Staff Positions

AA line
line position
position is
is directly
directly
involved
involved in
in achieving
achieving the
the
basic
basic objectives
objectives of
of an
an
organization.
organization.
Example:
Example: AA production
production
supervisor
supervisor in
in aa
manufacturing
manufacturing plant.
plant.

AA staff
staff position
position supports
supports
and
and assists
assists line
line positions.
positions.
Example:
Example: AA cost
cost
accountant
accountant in
in the
the
manufacturing
manufacturing plant.
plant.

1-6

Controller
The
The chief
chief managerial
managerial and
and financial
financial accountant
accountant
responsibility
responsibility for:
for:
Supervising
Supervising accounting
accounting personnel
personnel
Preparation
Preparation of
of information
information and
and reports,
reports, managerial
managerial
and
and financial
financial
Analysis
Analysis of
of accounting
accounting information
information
Planning
Planning and
and decision
decision making
making

1-7

Treasurer
Responsible
Responsible for
for raising
raising capital
capital and
and safeguarding
safeguarding the
the
organizations
organizations assets.
assets.
Supervises
Supervises relationships
relationships with
with financial
financial institutions.
institutions.
Work
Work with
with investors
investors and
and potential
potential
investors.
investors.
Manages
Manages investments.
investments.
Establishes
Establishes credit
credit policies.
policies.
Manages
Manages insurance
insurance coverage
coverage

1-8

Internal Auditor
Responsible
Responsible for
for reviewing
reviewing accounting
accounting procedures,
procedures, records,
records,
and
and reports
reports in
in both
both the
the controllers
controllers and
and the
the treasurers
treasurers
area
area of
of responsibility.
responsibility.
Expresses
Expresses an
an opinion
opinion to
to top
top
management
management regarding
regarding the
the
effectiveness
effectiveness of
of the
the
organizations
organizations accounting
accounting
system.
system.

1-9

Major Themes in Managerial

Accounting
Behavioral
Behavioral
Issues
Issues

Costs
Costs and
and
Benefits
Benefits

Information
Information
and
and Incentives
Incentives

Evolution
Evolution and
and
Adaptation
Adaptation

Managerial
Accounting
1-10

Cost Management Systems

Objectives
Objectives

Measure
Measure the
the cost
cost of
of resources
resources
consumed.
consumed.

Identify
Identify and
and eliminate
eliminate nonnonvalue-added
value-added costs.
costs.

Determine
Determine efficiency
efficiency and
and
effectiveness
effectiveness of
of major
major
activities.
activities.

Identify
Identify and
and evaluate
evaluate new
new
activities
activities that
that can
can improve
improve
performance.
performance.

Cost
Management
System

1-11

Strategic Cost Management and

the Value Chain
Product
Product
Design
Design
Research
Research
and
and
Development
Development
Securing
Securing raw
raw
materials
materials and
and
other
other resources
resources

Start

Production
Production
Marketing
Marketing
Distribution
Distribution
Customer
Customer
Service
Service
1-12

Ethical Climate of Business

The
The corporate
corporate scandals
scandals experienced
experienced over
over the
the last
last
few
few years
years have
have shown
shown us
us that
that unethical
nethical behavior
behavior
in
in business
business is
is wrong
wrong in
in aa moral
moral sense
sense and
and can
can be
be
disastrous
disastrous in
in the
the economy.
economy. In
In addition
addition to
to
Sarbanes-Oxley,
Sarbanes-Oxley, there
there will
will likely
likely be
be more
more reforms
reforms
in
in corporate
corporate governance
governance and
and accounting.
accounting.

1-13

Managerial Accounting as a
Career
Professional Organizations

Institute of Management Accountants (IMA)

Publishes
Publishes
Management
Management
Accounting
Accounting
and
and research
research
studies.
studies.

Administers
Administers
Certified
Certified
Management
Management
Accountant
Accountant
program
program

Develops
Develops
Standards
Standards of
of
Ethical
Ethical
Conduct
Conduct for
for
Management
Management
Accountants
Accountants
1-14

Professional Ethics
Competence
Confidentiality
Integrity
Credibility

1-15