Goal of Managerial AccountingGoal of Managerial AccountingGoal of Managerial AccountingGoal of Managerial Accounting

The goal of Managerial Accounting is to provide the information managers need for planning, control, and decision making.

PlanningPlanningPlanningPlanning

Planning Budgets for Planning

– Profit Budget– Cash-Flow Budget– Production Budget

ControlControlControlControl

Control Performance Reports for Controls Management by Exception

Decision MakingDecision MakingDecision MakingDecision Making

The profitability and survival of a company depends on how well managers make decisions.

Planning and Control Planning and Control ProcessProcess

Planning and Control Planning and Control ProcessProcess

A Comparison of Managerial A Comparison of Managerial and Financial Accountingand Financial Accounting

A Comparison of Managerial A Comparison of Managerial and Financial Accountingand Financial Accounting

Internal versus External Users

Need to Use GAAP

Detail of Information

A Comparison of Managerial A Comparison of Managerial and Financial Accountingand Financial Accounting

A Comparison of Managerial A Comparison of Managerial and Financial Accountingand Financial Accounting

Emphasis on Nonmonetary Information

Emphasis on the Future

Cost TerminologyCost TerminologyCost TerminologyCost Terminology

Variable Costs Change in proportion to changes in

volume or activity

Fixed Costs Do not change in response to

changes in volume or activity

Cost TerminologyCost TerminologyCost TerminologyCost Terminology

Sunk Costs Costs incurred in the past that are

not relevant to present decisions

Opportunity Costs Values of benefits foregone when

selecting on alternative over another

Cost TerminologyCost TerminologyCost TerminologyCost Terminology

Direct Costs Directly traceable to a product,

activity, or department

Indirect Costs Cannot be directly traced to a

product, activity, or department

Direct and Indirect CostDirect and Indirect CostDirect and Indirect CostDirect and Indirect Cost

Cost TerminologyCost TerminologyCost TerminologyCost Terminology

Controllable Costs Can be influenced by management

Noncontrollable Cost Cannot be influenced by

management

Study Break #1Study Break #1Study Break #1Study Break #1

Which of the following is most likely to be a variable cost?a. Depreciationb. Cost of materialsc. Rentd. Advertising

Answer:b. Cost of materials

Study Break #2Study Break #2Study Break #2Study Break #2

Which of the following is most likely to be a fixed cost?a. Cost of materialsb. Rentc. Assembly labor costd. Commissions

Answer:b. Rent

Study Break #3Study Break #3Study Break #3Study Break #3

Costs incurred in the past are:a. Opportunity costsb. Direct costsc. Sunk costsd. Variable costs

Answer:c. Sunk costs

Two Key Ideas in Managerial Two Key Ideas in Managerial AccountingAccounting

Two Key Ideas in Managerial Two Key Ideas in Managerial AccountingAccounting

Key Idea #1:

Decision making relies on incremental analysis Incremental Revenue Incremental Cost

You Get What you Measure!You Get What you Measure!You Get What you Measure!You Get What you Measure!

Key Idea #2:You get what you measure!

Information Age and Information Age and Managerial AccountingManagerial AccountingInformation Age and Information Age and

Managerial AccountingManagerial Accounting Value Chain

Software Systems Enterprise Resource Planning

Systems (ERP) Supply Chain Management Systems

(SCM) Customer Relationship

Management Systems (CRM)

Value Chain for Milano Value Chain for Milano ClothiersClothiers

Value Chain for Milano Value Chain for Milano ClothiersClothiers

Impact of SCMImpact of SCMImpact of SCMImpact of SCM

Ethical ConsiderationsEthical ConsiderationsEthical ConsiderationsEthical Considerations

Ethical and Unethical Behavior Sarbanes-Oxley Act

A Framework for Ethical Decision Making

IMA Statement of Ethical Professional Practice

Seven Question FrameworkSeven Question FrameworkSeven Question FrameworkSeven Question Framework

Managerial Accounting Managerial Accounting PositionsPositions

Managerial Accounting Managerial Accounting PositionsPositions

Controller

Treasurer

Chief Information Officer (CIO)

Chief Financial Officer (CFO)

Organizational ChartOrganizational ChartOrganizational ChartOrganizational Chart

Example Exercise #1Example Exercise #1Example Exercise #1Example Exercise #1 In the past year, Williams Mold & Machine

had sales of $8,000,000 and total production costs of $6,000,000. In the coming year, the company believes that sales ad production can be increased by 30%, but this will require adding a second production shift to work from 4:00 PM to 1:00 AM.

1. Indicate three production costs that are likely to increase because of adding a second production shift.

2. What production cost most likely will not increase when the second shift is added?

Example Exercise #1 Example Exercise #1 SolutionSolution

Example Exercise #1 Example Exercise #1 SolutionSolution

Three production costs Material costs, workers’ salaries,

and benefits are all likely to increase

Which production cost most likely will not increase? Depreciation of the building will not

increase

CFO in JapanCFO in JapanCFO in JapanCFO in Japan

Making Business DecisionsMaking Business DecisionsMaking Business DecisionsMaking Business Decisions

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