Chapter 1
The Changing Business Environment: A
Manager's Perspective
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The Role of Management Accounting
Objective 1– Distinguish management accounting from
financial accounting and explain how management accounting supports the management process.
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The Role of Management Accounting
• Make informed decisions
• Be more effective at their jobs
• Improve the organization’s performance
Management accounting should provide an information system that enables persons throughout an organization to:
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The Role of Management Accounting (cont’d)
• Plan and control an organization’s operations
• Measure its performance
• Make decisions about products or services
Managers need accurate and timely information to:
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Which Organizations Need Management Accounting?
All types and sizes of organizations:
• Manufacturing
• Retail
• Service
• Governmental
The precise type of information needed depends on an organization’s goals and the nature of its operations
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Management Accounting
The 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 Comparison
• Assist decision makers by identifying, measuring, and processing relevant information (communicate this information through reports)
• Provide managers with key measures of a company’s performance
• Provide managers with cost information for valuing inventories on the balance sheet
Management Accounting Financial Accounting
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Table 1. Comparison of Management and Financial Accounting
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Primary Users
Management Accounting Financial Accounting
• Managers and employees
• People inside the organization
• Owners or stockholders
• Lenders • Customers • Governmental
agencies• Parties outside the
firm
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Financial Accounting
Takes the actual results of management decisions about operating, investing, and financing activities and prepares financial
statements for parties outside the organization
Managers also rely on financial statements for evaluating an organization’s performance
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Report Format andPurpose of Reports
• Format is flexible depending on user’s needs
• Provide information for planning, control, performance measurement, and decision making
• Information may be either historical or future-oriented
• No formal guidelines or restrictions
Management Accounting Financial Accounting
• Must follow standards and procedures specified by generally accepted accounting principles (GAAP)
• Focus on past performance
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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 Process
1. Planning
2. Performing
3. Evaluating
4. 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 business
Mission 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 company’s main products
or services will be, who its customers will be, where it will operate, etc.
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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 Plan
The 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 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
Anna Wang is about to open her own retail grocery store called Good Foods Store.
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• 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
Role of Management Accounting and Planning at Good Foods Store (cont’d)
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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
Role of Management Accounting and Planning at Good Foods Store (cont’d)
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• 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 needed
Role of Management Accounting and Planning at Good Foods Store (cont’d)
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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 (cont’d)
• 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 services
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Performing (cont’d)
Performance is carried out by overseeing the daily operations of the organization
Small OrganizationsManagers supervise and interact with employees to help them learn a task or improve performance
Large OrganizationsMay 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 Store
– 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
Anna Wang has obtained a bank loan and Good Foods Store is now open for business.
The budget prepared for the store’s first two years of operation provides the link between the business plan and the
performance plan
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The Supply Chain
• Also called the supply network• Is critical to managing any retail business
The path that leads from the suppliers of the materials from which the product is made to
the final consumer
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The Supply Chain (cont’d)
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• 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 sales
Management accounting information about deliveries and sales will help Wang manage the supply chain
The Role of Management Accounting and Performance in Good Foods Store (cont’d)
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Evaluating
Managers 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 Company
• 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
Anna Wang should monitor the following:
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Communicating
• Provide accurate information
• Clearly communicate this information to the reader
Essential that both internal and external accounting reports
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Communicating (cont’d)
• Inaccurate or unclear information can have a negative impact on a company’s operations and profitability
Internal reports 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 (cont’d)
– 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 time
• Congress passed legislation on financial reporting following reporting violations by Enron, WorldCom, and other companies
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Communicating (cont’d)
The four W’s1. Why?
2. Who?
3. What?
4. 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
appropriate
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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 Store
• 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 report
Anna Wang has hired Sal Chavez to be her company’s accountant and prepare the company’s financial statements.
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• What?– The report will include disclosures about
assets, liabilities, product costs, and sales
• When?– The required reporting deadline for the
accounting period
The Role of Management Accounting and
Communication for Good Foods Store (cont’d)
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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 report
The Role of Management Accounting and
Communication for Good Foods Store (cont’d)
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A Management Accounting Report
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Management Accounting
– 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
• Can provide a constant stream of relevant information in all stages of the management process
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Stop & Review
Q. 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 Analysis
Objective 2– Describe the value chain and its usefulness
in analyzing a business.
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Value Chain
Includes all functions and related activitiesin the development path of a product or service that contribute to its value and
marketability
Each 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
• Support servicesInclude 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
• Primary processesSteps that add value to a product or service– Range from
research and development to customer service
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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 valuePrimary Processes• Research and Development• Design• Supply• Production • Marketing • Distribution
• Customer Service
Support Processes• Human Resources • Legal Services • Information Systems• Management Accounting
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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
competitors
Wal-Mart’s core competency is having the lowest prices on many products.
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Advantages of Value Chain Analysis (cont’d)
• Outsourcing– The engagement of other companies to perform
a process or service in the value chain that is not among a company’s core competencies
Wal-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 Analysis
• 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
Analysis of the value chain is critical to most company’s survival in today’s competitive business environment
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Managers and Value Chain Analysis (cont’d)
– 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
Managers must also make the services that support the primary processes as efficient as possible
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Managers and Value Chain Analysis (cont’d)
• 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 (cont’d)
• 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 reduced
Price Selling
Costs - Price Selling Margin
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)
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Management Accounting and Value Chain Analysis Illustrated (cont’d)
• Chavez points out that the highest costs in the food store’s 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 (cont’d)
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 (cont’d)
• 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
percent 35or 0.35, $10.00
$6.50) - ($10.00 Margin
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Management Accounting and Value Chain Analysis Illustrated (cont’d)
Two important points illustrated by this value chain analysis:
1. Good Foods Store’s 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 business2. It is often the best policy to outsource portions of the value
chain that are not part of a company’s 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 (cont’d)
• 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 store’s label
• As business grows, increased volume may allow Wang to reconsider undertaking candy manufacturing
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Stop & Review
Q. 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 Improvement
Objective 3– Identify the management tools used for
continuous improvement.
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Continuous Improvement (cont’d)
• In response to this concept, several important management tools have emerged– These tools help companies remain competitive
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
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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 Philosophy
Objectives:– Improve productivity
– Eliminate waste
Requires that all resources (materials, personnel, and facilities) be acquired and used only as needed
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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 (cont’d)
• 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)
Goal: Improved quality of both the product or service and the work environment
Workers act as team members and are empowered to make operating decisions that improve quality in
these two areas
Requires that all parts of a business work together to build quality into the
business’s product or service
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• 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
TQM (cont’d)
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TQM (cont’d)
• 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 Quality
• 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
Used to determine the impact of poor quality on profits
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Activity-Based Management (ABM)
ABM is a way of managing a business that
1) Identifies all of its major operating activities
2) Determines what resources are used in each activity
3) Identifies what causes use of these resources for each activity
4) Categorizes the activities as either adding value to a product or service or being nonvalue-adding
ABM includes a management accounting practice called activity-based costing
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Activity-Based Costing
1) A way of assigning costs that
2) Identifies all of a company’s 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 activities
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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
ABC produces more accurate costs than traditional cost allocation methods
– Leads to improved decision making
• Reduced costs
• Reduced waste of resources
• Increased efficiency
• Increased customer satisfaction
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Theory of Constraints (TOC)
• Helps managers setpriorities for spending their time and resources
• Constraints are identified through information management accounting provides
Maintains that limiting factors, or bottlenecks, occur during production of any product or service and once identified, attention and resources can be focused on the bottlenecks to achieve significant improvements
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TOC Approach Illustrated
Anna 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 increase
TOC compliments JIT, TQM, and ABM by focusing resources on efforts that will yield the most effective improvements.
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Achieving Continuous Improvement
Goal: 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 & Review
Q. 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 Objectives
Objective 4– Explain the balanced scorecard and its
relationship to performance measures.
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Quantitative tools that gauge an organization’s performance in relation to a specific goal or
expected outcome
Performance Measures
May be financial or nonfinancial
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• Return on investment• Net income as a percentage of sales• Costs of poor quality as a percentage of
sales
Financial Performance Measures
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Financial Performance Measures (cont’d)
• Divisions
• Product lines
• Sales Territories
• Operating activities
Use monetary information to gauge theperformance of a profit-generating
organization or its segments
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Nonfinancial Performance Measures
• Number of customer complaints• Number of orders shipped the same day• Time taken to fill an order
Nonfinancial performance measures are useful in reducing or eliminating waste and inefficiencies in operating activities.
Types: Number of times an activity occurs
Time taken to perform a task
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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 (cont’d)
• 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 Scorecard
– Identify the areas in which it needs to excel
– Establish measures of performance in these critical areas
– Use financial and nonfinancial measures
To achieve its mission and objectives an organization
must…
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The Balanced Scorecard (cont’d)
A framework that links the perspectives of anorganization’s four stakeholder groups to theorganization’s mission, objectives, resources,
and performance measures
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The Balanced Scorecard (cont’d)
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 products
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The Balanced Scorecard for Good Foods Store*
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Benchmarking
To ensure its success, a company must also
compare its performance with that of similar
companies in the same industry
Benchmarking
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Benchmarking (cont’d)
Benchmarks are measures of the
best practices in an industry
Technique for determining a company's competitive advantage by comparing its
performance with that of its closest competitors
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Stop & Review
Q. 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 Organization
Objective 5– Prepare an analysis of nonfinancial data.
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Analysis of Nonfinancial Data in a Retail Organization (cont’d)
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 (cont’d)
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Analysis of Nonfinancial Data in a Retail Organization (cont’d)
• The service rate decreased in November
• December’s average is higher than November’s
• This means the register clerks, as a group, are becoming more accustomed to the new procedure
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Stop & Review
Q. 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 Conduct
Objective 6– Identify the standards of ethical conduct
for management accountants.
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Management’s Responsibility
Responsible 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 Illustrated
A company purchases a device to extract pollutants from the production process
Conflicting Objectives? To protect the community (external parties)To maximize profits for stockholders
Examine Options
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Standards of Ethical Conduct (cont’d)
Ethical dilemma exists for managers over which device to purchase―the more expensive device or the less expensive device
Purchase less expensive device– Achieve higher profits
for owners, but will not protect community as well
– Benefits to owners > Benefits to community
OPTIONS
Purchase more expensive device– Greater protection for the
community but profits will decline
– Benefits to community > Benefits to owners
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Standards of Ethical Conduct (cont’d)
• Institute of Management Accountants (IMA) has issued standards of ethical conduct– For practitioners of management accounting and
financial management
– Purpose is to provide guidance
• 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
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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 (cont’d)
• 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 & Review
Q. What are the four standards for ethical conduct of practitioners of management accounting and financial management?
A. CompetenceConfidentialityIntegrityObjectivity
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Chapter Review
1. 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.
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Chapter Review (cont’d)
4. Explain the balanced scorecard and its relationship to performance measures.
5. Prepare an analysis of nonfinancial data.
6. Identify the standards of ethical conduct for management accountants.