Embed Size (px)
Citation preview
Chapter 1
Accounting Information and Managerial Decisions
Beginning Topics for Today
Accounting Information
The Users of Accounting Information
The Decision-Making Roles of Managers
The Role of Managerial Accounting
Accounting Information
OBJECTIVES:
Describe a Traditional Accounting Information System
Discuss an Enterprise Resource Planning System
Accounting Information Contents
Key Concept
Accounting information includes both financial (quantitative) and non-financial
(qualitative) information used by decision-makers.
The Users of Accounting Information
OBJECTIVES:
Describe the users of accounting information
Discuss their possible uses of accounting information
Users of Accounting Information
External
Stockholders
Potential Investors
Creditors
Government Agencies
Suppliers
Customers
Internal
Employees
Employee Teams
Departments
Regions
Top Management
The Decision-Making Role of Managers
OBJECTIVES:
Discuss the decision-making role of managers
Describe the planning, operating, and controlling activities involved in the process
Decision-Making Role
Planning
Short-term / operational
Long-term / strategic
Identify resources needed to achieve goals
http://www.benjerry.com
Decision-Making Role
Operating Activities Determining
Day-to-day operations
What to produce
The selling price
Who does what
What to advertise
Decision-Making Role
Controlling
Are we attaining the organization’s goals?
Are we motivating employees?
Are we comparing actual outcomes to planned outcomes?
Decision-Making Role
Pause and Reflect
Identify some potential strategic planning decisions that would be made by a nonprofit organization whose mission is to provide medical services to the poor.
The Role of the Managerial Accountant
Key Concept
Managerial accountants facilitate management decision making.
Today’s Management Accountants
…Instead of preparing financial statements, they interpret the financial information and explain the business implications to managers. They are doing more financial planning and more financial modeling. They work with managers to make informed business decisions.
(Siegal and Kuleza, 1996, IMA)
The Role of the Managerial Accountant
Marketing Managers
Operations/Production Managers
Finance Managers
Human Resource Managers
The Role of the Managerial Accountant
Key Concept
Accounting information systems are constantly evolving to meet the changing
demands of its users.
Accounting Information Needed by Internal vs. External Accountants
More flexible
Geared to specific company
Doesn’t have to meet requirements of SEC, GAAP, IRS
Accounting Information Needed by Internal vs. External Accountants
Forward-looking, emphasizing the future rather than the past
More timely, may sacrifice accuracy
Emphasizes segments of an organization rather than the company as a whole
What have we discussed today?
Accounting Information
The Users of Accounting Information
The Decision-Making Roles of Managers
The Role of the Managerial Accountant
A Decision-Making Discussion
An Introduction
A Decision-Making Model
Relevant Factors and Decision Making
Risk and Decision Making
Ethics and Decision Making
How Did You Decide?
What college to attend?
Which big $$ item to purchase?
Whether to accept a summer job?
Whether to join a particular group?
Decision Making
The process of identifying different courses of action and selecting one decision appropriate to a given situation.
Requires using judgment.
Decision Making
Pause and Reflect
Outline as best you can the process you went through in selecting the last major item you purchased.
Decision Making
OBJECTIVES:
Recall and discuss a basic four-step decision-making model
Explain the role of relevant factors and decision making
Discuss the role of risk and decision making
Discuss the role of ethics and decision making
The Decision-Making Model
Step 1
Define the Problem
The Decision-Making Model
Pause and Reflect
In retrospect, should you have considered other options and variables when making your most recent big purchase?
The Decision-Making Model
Step 2
Identify Objectives
The Decision-Making Model
Step 3
Identify and analyze available options
The Decision-Making Model
Step 4
Select the best option
The Decision-Making Model
Pause and Reflect
What were the risks in your decision to purchase a particular product?
The Decision-Making Model
Implement the decision and evaluate the results.
If the decision turns out to be less than optimal, go back to step one and repeat the process.
The Decision-Making Model
Key Concept
Never make decisions with just the numbers!
Always consider non-numerical (qualitative) information.
The Decision-Making Model
Pause and Reflect
Evaluate your decision to purchase a product. Was your decision a good one?
Relevant Factors and Decision Making
OBJECTIVE:
Explain the role of relevant factors and decision making.
Relevant Factors and Decision Making
Sunk Costs
Costs that have already been incurred.
Sunk costs are not relevant.
Relevant Factors and Decision Making
Pause and Reflect
Assume you are the manager of a consumer electronics manufacturing company that makes televisions and VCRs. What quantitative costs would be relevant in making the decision to stop producing VCRs?
Relevant Factors and Decision Making
Key Concept
Future costs that do not differ between alternatives are not relevant.
Relevant Factors and Decision Making
Opportunity Costs
The benefits foregone by choosing one alternative over another.
Opportunity costs are relevant.
Relevant Factors and Decision Making
Pause and Reflect
In making the decision to stop producing VCRs, what opportunity costs might be involved? Consider, for example, alternative uses of the facilities and other products that might be manufactured instead of VCRs
Risk and Decision Making
Is the decision maker a Risk Seeker or Risk Adverse?
Ethics and Decision Making
Concept Question
What ethical responsibilities does a company have to its shareholders, employees, customers, and the communities in which it is located?
Ethics and Decision Making
Pause and Reflect
The impact of changing prices on the number of units sold is usually not known with certainty. How might you has a manager take this risk into account in determining the selling price of your products?
Ben and Jerry’s Mission Statement
Three Interrelated Parts
Product: make, distribute and sell finest quality all-natural ice cream
Economic: operate company on sound financial basis of profitable growth
Social: initiating innovative ways to improve the quality of life of a broad community
Pause and Reflect
Is adhering to laws and regulations sufficient to ensure ethical behavior in organizations?
Ethics and Decision Making
Ethics and Company Objectives
Step 3 of Decision Model
Principles: integrity, honesty, respect
Laws: IRC, Foreign Corrupt Practices Act
Values: quality and safety of products, earn profit or protect one’s job
Ethics and Company Objectives
Pause and Reflect
A supplier offers to sell you aluminum used in the manufacture of aluminum baseball bats at a sizable discount. After inspecting the aluminum, you find that while it meets your technical qualifications, in some cases it shatters under extreme use. What objectives might you consider to explicitly take into account your company’s ethical responsibilities? What relevant factors should be considered?
Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management
Standards of Ethical Conduct
Competence
Confidentiality
Integrity
Objectivity
Resolution of Ethical ConflictInstitute of Management Accountants
Resolution of Ethical Conflict
Discuss problems with immediate superior except when superior is involved
Clarify relevant ethical issues
Consult your own attorney
If the ethical conflict still exists after exhausting all levels of internal review, you may have to resign
Our Discussion of Decision Making
An Introduction
A Decision-Making Model
Relevant Factors and Decision Making
Risk and Decision Making
Ethics and Decision Making
End of Chapter 1
What decision will you make today?
