Chapter 1 Flashcards
Management Accounting
A profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy.
- focused on internal users
- assists management to make decisions
- more participated function
Key to success
having decision-relevant information
Cost Management Information
Information managers need to manage effectively
-serves all management functions
- Financial & non-financial
- financial alone shows ST focus - Developed under the direction of the controller for the CFO of the organization
Four functions of management
- Strategic Management
- Planning and decision-making
- Management and operational control
- Preparation of financial statements
Strategic Management
-most important management function
(deciding where you’re goina go, and what to do to get there)
-Involves identifying and implementing goals and action plans to maintain a competitive advantage
-Monitoring of Critical Success Factors (CSFs) is necessary (items essential to the firms success)
-Critical to a firm’s success due to global competition and rapidly changing markets
Planning and decision making
- information is needed to support recurring decisions such as scheduling production and pricing
- information is needed for short run planning (budgeting) and profit planning (Cost-Volume-Profit analysis)
Management and operational control
-information is needed to identify inefficient operations and reward effective management practices
Preparation of financial statements
Information is needed to guarantee compliance with regulatory reporting requirements
Types of Organizations
Manufacturers
Merchandisers (Wholesalers & Retailers)
Service firms
Governmental & Not-for-profit
Changes in the Contemporary Business Environment
- Shift to a global business environment
- Lean Manufacturing
- Importance of information technology
- Focus on the customer
- Shifts in management organization
- Social, political, and cultural considerations
Shift to a global business environment
economic interdependence and increased competition
Lean Manufacturing
Just-in-Time (JIT) inventory methods, inventory reduction and quality control
Emphasis on speed-to-market (i.e., time-based competition)
Flexible manufacturing systems
Importance of Information Technology
Increased use of the internet has reduced processing time and facilitated information exchange
Focus on the customer
Consumers expect functionality, quality and customization.
Shorter product life-cycles have intensified competition. (w/out short plc demand goes down and employment decreases)
Shifts in management organization
The focus has shifted from financial measures and hierarchal command-and-control organizations to non financial measures and flexible organizational structures
Social, political, and cultural considerations
Changes include a more diverse workforce, a renewed sense of ethical responsibility, and increased deregulation of business
Kaplans Phases for Developing Cost Management Systems
Stage 1 - Cost management systems are basic transaction reporting systems (measurement & recording)
Stage 2 - Cost management systems focus on external reporting-decision-usefulness of cost management data is limited.
Stage 3 - Cost management systems track key operating data and relevant cost information for decision making (operational control)
Stage 4 - Strategically relevant cost-management information is an integral part of the system. (implement strategy)
The management accountants role
- Provide strategically relevant cost management information to help the organization keep up with the ever-changing environment
- Thirteen Contemporary Management Techniques developed and employed by the management accountant
Contemporary Management Techniques
- The Balanced Scorecard and Strategy Map
- The Value Chain
- Activity Based Costing and Management
- Business Intelligence
- Target Costing
- Life Cycle Costing
(1-6 Focus on Strategy implementation) - Benchmarking
- Business Process Improvement
- Total Quality Management
- Lean Accounting
- The Theory of Constraints
- Enterprise Sustainability
- Enterprise Risk Management
(7-13 help to achieve strategy implementation through a focus on process improvement)
The Balanced Scorecard
An accounting report that addresses a firm’s performance in four areas: Financial, Customer, Internal business processes, and Innovation and Learning
The Strategy Map
A method, based on the balance scorecard, which links the four perspectives in a cause-and-effect diagram
The Value Chain
An analysis tool used to identify the specific steps required to provide a competitive product
Helps identify steps that can be eliminated or outsourced
Activity-Based Costing and Management
Activity-Based Costing (ABC) improves the tracing of costs to individual products and customers
Activity-Based Management (ABM) improves operational and management control
Business Intelligence
An approach to strategy implementation in which the management accountant uses data to understand and analyze business performance.
Target Costing
Target Cost = Market determined price - desired profit
A method that has resulted from intensely competitive markets
Life-Cycle Costing
Costs should be monitored throughout a product’s life cycle - from research and development to sales and service
Benchmarking
Process by which a firm identifies its CSFs, studies the best practices of other firms in achieving these CSFs, and institutes change based on the assessment results
(fo in & evaluate competitors)
