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Chapter 1 The Changing Business Environment: A Manager's Perspective

Managerial Accounting, Chapter 1 by Crosson, Needles

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Chapter 1The Changing Business Environment: A Manager's Perspective

The Role of Management AccountingObjective 1 Distinguish management accounting from financial accounting and explain how management accounting supports the management process.

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The Role of Management AccountingManagement accounting should provide an information system that enables persons throughout an organization to: Make informed decisions Be more effective at their jobs Improve the organizations performance

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The Role of Management Accounting (contd)Managers need accurate and timely information to: Plan and control an organizations operations Measure its performance Make decisions about products or services

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Which Organizations Need Management Accounting?All types and sizes of organizations: Manufacturing Retail Service GovernmentalThe precise type of information needed depends on an organizations goals and the nature of its operations

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Management AccountingThe process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control within the organization and to assure appropriate use of and accountability for its resources*

*As defined by the Institute of Management Accountants (IMA) in 1982

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Management Accounting and Financial Accounting: A ComparisonManagement Accounting Financial Accounting

Assist decision makers by identifying, measuring, and processing relevant information (communicate this information through reports) Provide managers with key measures of a companys performance Provide managers with cost information for valuing inventories on the balance sheetCopyright Houghton Mifflin Company. All rights reserved. 1|7

Table 1. Comparison of Management and Financial Accounting

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Primary UsersManagement Accounting Financial Accounting

Managers and employees People inside the organization

Owners or stockholders Lenders Customers Governmental agencies Parties outside the firm1|9

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Financial AccountingTakes the actual results of management decisions about operating, investing, and financing activities and prepares financial statements for parties outside the organizationManagers also rely on financial statements for evaluating an organizations performance

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Report Format and Purpose of ReportsManagement Accounting Financial Accounting

Format is flexible depending Must follow standards on users needs and procedures specified by generally Provide information for accepted accounting planning, control, principles (GAAP) performance measurement, Focus on past and decision making performance Information may be either historical or future-oriented No formal guidelines or restrictionsCopyright Houghton Mifflin Company. All rights reserved. 1 | 11

Nature of Information for Management Accounting May be objective and verifiable Expressed in monetary terms or in physical measures of time or objects

If needed for planning purposes, may be subjective Based on estimates

Prepared as often as needed

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Nature of Information for Financial Accounting Must be based on objective and verifiable information Generally historical Measured in monetary terms

Prepared and distributed periodically Usually quarterly and annually

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Managers and Management Process Managers are expected to: Use resources wisely Operate profitably Pay debts Abide by laws and regulations

To fulfill these expectations, managers Establish the goals, objectives, and strategic plans of the organization Guide and control operating, investing, and financing activities accordingly

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Management Process1. 2. 3. 4. Planning Performing Evaluating Communicating

Management accounting supports each stage of the process

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Planning The overriding goal or vision of a business is to increase the value of the stakeholders interest in the businessMission A statement of the fundamental way in which a company will achieve its goal of increasing the stakeholders value

Strategic Objectives

Tactical Objectives

Operating Objectives

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Planning: Strategic Objectives Broad, long-term goals Determine the fundamental nature and direction of the business Serve as a guide for decision making Established by top management Involve what the companys main products or services will be, who its customers will be, where it will operate, etc.Copyright Houghton Mifflin Company. All rights reserved. 1 | 17

Planning: Tactical Objectives Mid-term goals Position the firm to meet its long-term strategies

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Planning: Operating Objectives Short-term goals Outline expectations for performance of day-to-day operations Link to performance targets and specify how success will be measured

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Business PlanThe development of strategic and operating objectives requires managers to formulate a business plan A comprehensive statement of how the company will achieve its objectives Usually expressed in financial terms in the form of budgets Often includes performance goals for individuals, teams, products, or services

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Role of Management Accounting and Planning at Good Foods StoreAnna Wang is about to open her own retail grocery store called Good Foods Store.

Goals Obtain an income from the business To increase the value of her investment

Mission To attract customers and retain them by selling high-quality foods in a boutique atmosphere

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Role of Management Accounting and Planning at Good Foods Store (contd) Strategic objectives Purchase of high-quality fresh foods and the resale of these items to consumers

Tactical objectives Implementation of a stable supply chain of high quality suppliers and a customer database to track customer preferences

Operating objectives Courtesy and efficiency in serving customers Track number and type of customer complaints

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Role of Management Accounting and Planning at Good Foods Store (contd)To apply for a start-up loan, Wang must have a business plan: A full description of the business Complete operating budget for the first two years of operations The budget must include Forecasted income statement Forecasted statement of cash flows Forecasted balance sheet

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Role of Management Accounting and Planning at Good Foods Store (contd) To provide relevant information for the plan, Wang will have to determine: The types of products to sell Anticipated sales volume Selling price for each product Monthly costs of Leasing or purchasing facilities Maintaining the facilities Employing personnel Number of display counters, storage units, and cash registers neededCopyright Houghton Mifflin Company. All rights reserved. 1 | 24

Performing Planning alone does not guarantee satisfactory operating results Management must implement the business plan in ways that make optimal use of available resources

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Performing (contd) Smooth operations require one or more of the following Hiring and training personnel Matching human and technical resources to the work that must be done Purchasing or leasing facilities Maintaining an inventory of products for sale Identifying operating activities, or tasks, that minimize waste and improve the quality of the products or servicesCopyright Houghton Mifflin Company. All rights reserved. 1 | 26

Performing (contd)Performance is carried out by overseeing the daily operations of the organizationSmall Organizations Managers supervise and interact with employees to help them learn a task or improve performance Large Organizations May monitor performance by measuring activity times or frequency of completion of activities performance

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The Role of Management Accounting and Performance in Good Foods StoreAnna Wang has obtained a bank loan and Good Foods Store is now open for business. The budget prepared for the stores first two years of operation provides the link between the business plan and the performance plan Items that relate to the business plan appear in the budget and become authorizations for expenditures Examples: Spending on store fixtures Hiring employees Developing advertising campaigns Pricing items for special sales

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The Supply ChainThe path that leads from the suppliers of the materials from which the product is made to the final consumer Also called the supply network Is critical to managing any retail business

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The Supply Chain (contd)

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The Role of Management Accounting and Performance in Good Foods Store (contd) In the supply chain for grocery stores, produce and other items flow from growers and suppliers to manufacturers or distributors to retailers to consumers Wang must coordinate deliveries from local growers and international distributors to meet the demands of her customers without Too much inventory tying up cash Too little inventory leading to lost salesManagement accounting information about deliveries and sales will help Wang manage the supply chainCopyright Houghton Mifflin Company. All rights reserved. 1 | 31

EvaluatingManagers compare actual performance with the performance levels established in the planning phase Significant variations are earmarked for further analysis to correct problems May revise original objectives

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The Role of Management Accounting and Evaluation for Good Foods CompanyAnna Wang should monitor the following: Financial performanceCompare the amounts estimated in the budget with information about actual results If differences occur, they should be analyzed

Customer serviceThe number and type of customer complaints Review of these records may help develop new and better business strategies

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CommunicatingEssential that both internal and external accounting reports Provide accurate information Clearly communicate this information to the reader

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Communicating (contd)Internal reports Inaccurate or unclear information can have a negative impact on a companys operations and profitability

External reports GAAP require full disclosure and transparency in financial statements Violations of this principle can result in stiff penalties

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Communicating (contd) Congress passed legislation on financial reporting following reporting violations by Enron, WorldCom, and other companies Requires top management of publicly owned corporations to certify that statements are accurate Penalties for issuing false statements can include loss of compensation, fines, and jail timeCopyright Houghton Mifflin Company. All rights reserved. 1 | 36

Communicating (contd)The four Ws1. 2. 3. 4. Why? Who? What? When?These four questions are the key to producing management accounting reports that communicate accurate and useful information in such a way that the meaning is transparent to the reader

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Why? Know the purpose of the report Focus on it as you write or prepare reports

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Who? Identify the audience for your report Communicate at your audience's level of understanding of the issue and their familiarity with accounting information Manager as the audience A detailed, informal report may be appropriate President or board of directors as the audience A concise summary may be more appropriateCopyright Houghton Mifflin Company. All rights reserved. 1 | 39

What? What information is needed? Select relevant information from reliable sources

What method of presentation is best? Information should be easy to read and understand May include visual aids, such as bar charts or graphs

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When? Know the due date for the report Strive to prepare an accurate report on a timely basis If the report is needed urgently, some level of accuracy may have to be sacrificed

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The Role of Management Accounting and Communication for Good Foods StoreAnna Wang has hired Sal Chavez to be her companys accountant and prepare the companys financial statements.

Why? To report on the financial health of the company

Who? Wang, her bank and other creditors, and potential investors are the audience for the reportCopyright Houghton Mifflin Company. All rights reserved. 1 | 42

The Role of Management Accounting and Communication for Good Foods Store (contd) What? The report will include disclosures about assets, liabilities, product costs, and sales

When? The required reporting deadline for the accounting period

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The Role of Management Accounting and Communication for Good Foods Store (contd)Wang will also want periodic internal reports on various aspects of operations Monthly report: Summarizes the costs of ordering products from distributors and growers with related shipping charges If costs appear too high, Wang may ask Sal Chavez to conduct a special study The results of the study might result in a memorandum reportCopyright Houghton Mifflin Company. All rights reserved. 1 | 44

A Management Accounting Report

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Management Accounting Can provide a constant stream of relevant information in all stages of the management process Developing a business plan Communicating the business plan to other parties, such as creditors and employees Evaluating the performance of employees Reporting the results of operations

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Stop & ReviewA. Must management accounting information always be objective? A. No, information needed for planning purposes may be subjective because it is based on estimates. But, management accounting information should always be verifiable.

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Value Chain AnalysisObjective 2 Describe the value chain and its usefulness in analyzing a business.

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Value ChainIncludes all functions and related activities in the development path of a product or service that contribute to its value and marketabilityEach step in the manufacture of a product or delivery of a service can be thought of as a link in a chain that adds value to the product or service

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Value Chain Analysis Primary processes Steps that add value to a product or service Range from research and development to customer service

Support services Include legal services and management accounting Facilitate the primary processes but do not add value to the final product or service Their roles are critical in making the primary processes as efficient and effective as possible

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Primary Processes and Support Services Anna Wang wants to determine if it is feasible to produce and sell her own brand of candy Identify the primary processes and support services that will add value Primary Processes Support Processes Research and Development Human Resources Design Legal Services Supply Information Systems Production Management Accounting Marketing Distribution Customer ServiceCopyright Houghton Mifflin Company. All rights reserved. 1 | 51

Advantages of Value Chain Analysis Allows a company to focus on its core competencies What a company does best What gives a company an advantage over its competitorsWal-Marts core competency is having the lowest prices on many products.

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Advantages of Value Chain Analysis (contd) Outsourcing The engagement of other companies to perform a process or service in the value chain that is not among a companys core competenciesWal-Mart outsources its inventory management to its vendors who monitor and track Wal-Mart stores and warehouses.

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Managers and Value Chain AnalysisAnalysis of the value chain is critical to most companys survival in todays competitive business environment Managers must provide the highest value to customers at the lowest cost Low cost equates to the speed at which the primary processes of the value chain are executed Referred to as time to market

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Managers and Value Chain Analysis (contd)Managers must also make the services that support the primary processes as efficient as possible Support services are essential and cannot be eliminated Because they do not add value to a product, they must be implemented as economically as possible

Advances in technology have helped reduce the cost of the accounting function in many companies from 6 percent to 2 percent of total revenue

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Managers and Value Chain Analysis (contd) As a support service, management accounting must be efficient and provide value to managers Information must be developed that is useful in decision making

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Management Accounting and Value Chain Analysis Illustrated Anna Wang will need accurate information about the cost of the candy to determine whether manufacturing and selling her own brand of candy will be profitable To remain competitive, Wang knows she cannot sell her candy for more than $10/lb. She also has an idea of how much candy she can sell in the first year

Sal Chavez analyzes the value chain and projects the initial costs per pound

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Value Chain Analysis

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Management Accounting and Value Chain Analysis Illustrated (contd)Wang is concerned about the initial cost of $8 per pound (this leaves only $2 per pound ($10 - $8) to cover all support services and leave a profit) This margin is equal to 20 percent of revenue ($2 $10)Selling Price - Costs Margin = Selling Price

Wang believes the margin should be at least 35 percent for the enterprise to be successful Since the selling price is constrained by the competition, costs must be reducedCopyright Houghton Mifflin Company. All rights reserved. 1 | 59

Management Accounting and Value Chain Analysis Illustrated (contd) Chavez points out that the highest costs in the food stores value chain are for supply and production He looks for ways to reduce the cost per pound:1. Sell a higher volume of candy Not realistic for the new product

2. Use a single supplier (Wang had planned on ordering from a number of suppliers) Her orders would not be large enough to qualify for quantity discounts Cost savings equal $0.50 per pound

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Management Accounting and Value Chain Analysis Illustrated (contd)3. Outsource production A candy manufacturer with a high volume of products can produce the candy at a much lower cost than could be done at Good Foods Store Production costs from outsourcing would be $3.50 per pound versus $4.50 per pound if produced by Good Foods Store Cost savings equal $1.00 per pound ($4.50 $3.50)

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Management Accounting and Value Chain Analysis Illustrated (contd) These cost savings would allow Wang to sell her candy at a competitive price of $10/pound and make the targeted margin of 35 percent

Margin =

($10.00 - $6.50) = 0.35, or 35 percent $10.00

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Management Accounting and Value Chain Analysis Illustrated (contd)Two important points illustrated by this value chain analysis:1. Good Foods Stores mission is as a retailer The company has no manufacturing experience To manufacture candy, the company would need to change its mission and make major changes in the way it does business

2. It is often the best policy to outsource portions of the value chain that are not part of a companys core competency Because Good Foods Stores do not have a core competency in candy manufacturing, it would not be competitive in this field

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Management Accounting and Value Chain Analysis Illustrated (contd) Wang would be better off having an experienced candy manufacturer produce the candy according to her specifications She could then sell the candy under her stores label

As business grows, increased volume may allow Wang to reconsider undertaking candy manufacturingCopyright Houghton Mifflin Company. All rights reserved. 1 | 64

Stop & ReviewA. Is customer service considered a primary process or support service in value chain analysis? A. Customer service is a primary process because it adds value to a product or service

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Continuous ImprovementObjective 3 Identify the management tools used for continuous improvement.

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Continuous Improvement (contd)The management concept that one should never be satisfied with the way things are. One should always seek a better method, product, process, or resource In response to this concept, several important management tools have emerged These tools help companies remain competitive

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Management Tools for Continuous Improvement Just-in-time (JIT) operating philosophy Total quality management (TQM) Activity-based management (ABM) Theory of constraints (TOC)

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Just-in-Time (JIT) Operating PhilosophyRequires that all resources (materials, personnel, and facilities) be acquired and used only as neededObjectives: Improve productivity Eliminate waste

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The JIT Environment Production processes are consolidated Workers are trained to be multiskilled Can operate several different machines

Materials and supplies are scheduled for delivery just at the time they are needed in the production process Significantly reduces inventories of materials

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The JIT Environment (contd) Goods are produced continuously Work in process inventories are very small

Goods are put into production only when an order is received and are shipped when completed Reduces finished goods inventory

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JIT Operating Philosophy Adopting the JIT philosophy Reduces production time and costs Reduces investment in materials inventory Reduces materials waste Results in higher quality goods

Funds no longer invested in inventory can be redirected according to the goals of the business plan

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Total Quality Management (TQM)Requires that all parts of a business work together to build quality into the businesss product or serviceGoal: Improved quality of both the product or service and the work environmentWorkers act as team members and are empowered to make operating decisions that improve quality in these two areasCopyright Houghton Mifflin Company. All rights reserved. 1 | 73

TQM (contd) Focus Improving product or service quality by identifying and reducing or eliminating the causes of waste

Emphasis Examining current operations to spot possible causes of poor quality Using resources efficiently and effectively to Improve quality Reduce time needed to complete a task or provide a service

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TQM (contd) Has many characteristics of the JIT operating philosophy Both result in: Reduced waste of materials Higher-quality goods Lower production costs in manufacturing environments

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TQM: Costs of QualityUsed to determine the impact of poor quality on profits Costs of achieving quality Such as training costs and inspection costs

Costs of poor quality Such as the costs of rework and of handling customer complaints

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Activity-Based Management (ABM)ABM is a way of managing a business that 2) Identifies all of its major operating activities 3) Determines what resources are used in each activity 4) Identifies what causes use of these resources for each activity 5) Categorizes the activities as either adding value to a product or service or being nonvalue-addingABM includes a management accounting practice called activity-based costingCopyright Houghton Mifflin Company. All rights reserved. 1 | 77

Activity-Based Costing1) A way of assigning costs that 2) Identifies all of a companys major operating activities (both production and nonproduction) 3) Traces costs to those activities or cost pools 4) Assigns costs to the products or services that use the resources supplied by those activitiesCopyright Houghton Mifflin Company. All rights reserved. 1 | 78

Value- and Nonvalue-Adding Activities Value-adding activities Activities that add value to a product or service, as perceived by the customer

Nonvalue-adding activities Activities that add cost to product or service but do not increase its market value

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Nonvalue-Adding Activities Nonvalue-adding activities that do not support the organization Are eliminated under ABM

Nonvalue-adding activities that do support the organization Are focal points for cost reduction

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ABM Results Reduced costs Reduced waste of resources Increased efficiency Increased customer satisfaction ABC produces more accurate costs than traditional cost allocation methods Leads to improved decision making

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Theory of Constraints (TOC)Maintains that limiting Helps managers set factors, or bottlenecks, priorities for occur during production spending their time of any product or service and resources and once Constraints are identified, identified through attention information and resources can be management focused on the accounting bottlenecks to achieve provides significant improvementsCopyright Houghton Mifflin Company. All rights reserved. 1 | 82

TOC Approach IllustratedAnna Wang wants to increase sales of store-roasted coffees. After reviewing management accounting reports, she concludes that potential sales are limited by production capacity of her coffee bean roasting equipment.

It is determined that the problem lies in the roaster Can roast only 100 pounds of coffee beans per hour

She can rent or purchase a second roaster to overcome the constraint The increase in production will enable sales to increaseTOC compliments JIT, TQM, and ABM by focusing resources on efforts that will yield the most effective improvements.Copyright Houghton Mifflin Company. All rights reserved. 1 | 83

Achieving Continuous ImprovementGoal: Perfection by means of continuous improvement JIT approach Strives to eliminate wasted time, resources, and space

TQM approach Focuses on improving the quality of the product or service and the work environment

ABM approach Emphasizes the ongoing reduction or elimination of nonvalue-adding activities

TOC approach Focuses resources on efforts that will produce the most effective improvements

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Achieving Continuous Improvement JIT, TQM, ABM, and TOC are management tools for continuous improvement Each can be used individually Parts of them can be combined to create a new operating environment Are applicable to service, manufacturing, and retail businesses All contribute the same results in any organization Reduction in product or service costs and delivery time Improvement in the quality of the product or service Increase in customer satisfaction

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The Continuous Improvement Environment

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Stop & ReviewA. What is the common goal of JIT, TQM, ABM, and TOC? A. Continuous improvement

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Performance Measures: A Key to Achieving Organizational ObjectivesObjective 4 Explain the balanced scorecard and its relationship to performance measures.

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Performance MeasuresQuantitative tools that gauge an organizations performance in relation to a specific goal or expected outcomeMay be financial or nonfinancial

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Financial Performance Measures Return on investment Net income as a percentage of sales Costs of poor quality as a percentage of sales

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Financial Performance Measures (contd)Use monetary information to gauge the performance of a profit-generating organization or its segments Divisions Product lines Sales Territories Operating activities1 | 91

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Nonfinancial Performance MeasuresTypes: Number of times an activity occurs Time taken to perform a task

Number of customer complaints Number of orders shipped the same day Time taken to fill an orderNonfinancial performance measures are useful in reducing or eliminating waste and inefficiencies in operating activities.Copyright Houghton Mifflin Company. All rights reserved. 1 | 92

Using Performance Measures in the Management Process Planning stage Establish performance measures that will support the organization's mission and objectives of its business plan Reducing costs and increasing quality, efficiency, timeliness, and customer satisfaction

Performing stage Performance measures guide and motivate the performance of employees and assist with assigning costs to products, departments, or operating activities

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Using Performance Measures in the Management Process (contd) Evaluating stage Managers use the information that performance measures provide to Analyze significant differences between actual and planned performance Identify ways of improving performance

Communicating stage Performance measurement information is useful in communicating performance evaluations and developing new budgets

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The Balanced ScorecardTo achieve its mission and objectives an organization must

Identify the areas in which it needs to excel Establish measures of performance in these critical areas Use financial and nonfinancial measures

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The Balanced Scorecard (contd)A framework that links the perspectives of an organizations four stakeholder groups to the organizations mission, objectives, resources, and performance measures

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The Balanced Scorecard (contd)

More than one group may be interested in the same performance objective

Stakeholders of internal processes and customer perspectives are both interested in performance that results in high-quality products1 | 97

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The Balanced Scorecard for Good Foods Store*

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BenchmarkingTo ensure its success, a company must also compare its performance with that of similar companies in the same industry

BenchmarkingCopyright Houghton Mifflin Company. All rights reserved. 1 | 99

Benchmarking (contd)Technique for determining a company's competitive advantage by comparing its performance with that of its closest competitors

Benchmarks are measures of the best practices in an industry

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Stop & ReviewA. Are nonfinancial performance measures ever expressed in monetary terms? A. No, only financial performance measures use monetary information to gauge performance. Nonfinancial performance measures use information that is not the result of monetary transactions, such as the number of times an activity occurs and the time taken to perform a task.

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Analysis of Nonfinancial Data in a Retail OrganizationObjective 5 Prepare an analysis of nonfinancial data.

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Analysis of Nonfinancial Data in a Retail Organization (contd)Lucy Bass supervises checkout procedures at Good Foods Store. The store has three registers to record customer sales. In the past, each register served an average of 30 customers per hour. On November 1, 20x9, Bass implemented a new scanning procedure that reduced the number of customers served per hour.

Data was collected on the number of customers served for the three-month period ending December 31, 20x9.

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Analysis of Nonfinancial Data (contd)

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Analysis of Nonfinancial Data in a Retail Organization (contd) The service rate decreased in November Decembers average is higher than Novembers This means the register clerks, as a group, are becoming more accustomed to the new procedure

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Stop & ReviewA. What nonfinancial data might be used to measure performance for a parcel delivery service? A. The number of packages delivered per hour or the number of miles driven per day.

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Standards of Ethical ConductObjective 6 Identify the standards of ethical conduct for management accountants.

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Managements ResponsibilityResponsible to external parties for the proper use of organizational resources and the financial reporting of their actions

Conflicts of interest between external parties can create ethical dilemmas for management and for accountants

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Standards of Ethical Conduct IllustratedA company purchases a device to extract pollutants from the production process Conflicting Objectives? To protect the community (external parties) To maximize profits for stockholdersExamine Options

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Standards of Ethical Conduct (contd)OPTIONS Purchase more expensive device Purchase less expensive device Achieve higher profits for owners, but will not protect community as well Benefits to owners > Benefits to community

Greater protection for the community but profits will decline Benefits to community > Benefits to owners

Ethical dilemma exists for managers over which device to purchasethe more expensive device or the less expensive deviceCopyright Houghton Mifflin Company. All rights reserved. 1 | 111

Standards of Ethical Conduct (contd) Managers must adhere to the highest standards of performance in order to be viewed credibly by the various parties that rely on the information they provide Institute of Management Accountants (IMA) has issued standards of ethical conduct For practitioners of management accounting and financial management Purpose is to provide guidanceCopyright Houghton Mifflin Company. All rights reserved.

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Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management Practitioners of management accounting and financial management have an obligation to The public, their profession, the organization they serve, and to themselves Maintain the highest standards of ethical conduct

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IMA Standards of Ethical Conduct Competence Ongoing development of knowledge and skills Follow relevant laws, regulations, and technical standards Analyze and report relevant and reliable information

Confidentiality Only disclose confidential information when authorized or required by law Inform subordinates of confidentiality and monitor their activities to ensure confidentiality

Objectivity Communicate information fairly and objectively Disclose all relevant information

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IMA Standards of Ethical Conduct (contd) Integrity Avoid conflicts of interest Avoid activities that might prejudice the ability to carry out duties ethically Refuse gifts, favors, or hospitality that would influence or appear to influence actions Avoid activities that would undermine attaining legitimate and ethical objectives of the organization Recognize and communicate professional limitations Communicate favorable and unfavorable information and present professional judgments or opinions Do not discredit the profession

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Stop & ReviewA. What are the four standards for ethical conduct of practitioners of management accounting and financial management? A. Competence Confidentiality Integrity Objectivity

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Chapter Review1. Distinguish management accounting from financial accounting and explain how management accounting supports the management process. 2. Describe the value chain and its usefulness in analyzing a business. 3. Identify the management tools used for continuous improvement.Copyright Houghton Mifflin Company. All rights reserved. 1 | 117

Chapter Review (contd)1. Explain the balanced scorecard and its relationship to performance measures. 2. Prepare an analysis of nonfinancial data. 3. Identify the standards of ethical conduct for management accountants.

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