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Louderback
Holmen

Managerial
Accounting
Tenth Edition

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Task Force Clip Art

included in this electronic
presentation is used with
the permission of New
Vision Technology of
Nepean Ontario, Canada.

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Introduction
Prepared
Preparedby
by

Douglas
DouglasCloud
Cloud

Pepperdine
PepperdineUniversity
University

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Objectives
Objectives
Describe four management functions and their
reading
relationships toAfter
accounting.
After
reading this
this
chapter,
you
Describe the value
chain
andshould
explain how it relates
chapter,
you
should
be
to competitive strategies.
be able
able to:
to:
Distinguish between financial accounting and
managerial accounting.
Describe some of the problems that arise in
conventional manufacturing and how advanced
manufacturing techniques overcome them.

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Objectives
Objectives
Describe the activities of managerial
accountants.
Describe the code of ethics that managerial
accountants follow.
Describe some factors influencing the
development of managerial accounting.

Management Functions
and Account
Accoun ing
Planning is setting goals and developing
strategies and tactics to achieve them.
Control is determining whether goals are being
met, and if not, what can be done.

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Planning
Planning
A
value
chain
is
the
A
value
chain
is
the
Managerial
Managerial
entire
set
of
processes
entire
set
of
processes
accountants
prepare
accountants prepare
that
transforms
raw
Much
of
the
that
transforms
raw
Much
of
the
budgeted
financial
budgeted financial
materials
into
finished
information
provided
materials
into
finished
information
provided
statements,
often
called
statements,
often
called
Long-term
planning,
products.
Long-term
planning,
by
managerial
products.
by
managerial
pro
forma
statements.
pro forma
statements.
often
often called
called strategic
strategic
accountants
accountants isis used
used in
in
planning,
planning, isis critical
critical to
to
decision
decision making.
making.
organizations.
organizations.

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Control
Control
Performance
evaluation
Control reports

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Managerial Accounting and

Financial Accounting
Both managerial and financial accounting deal with
economic events.
Both require quantifying the results of economic
activity.
Both are concerned with revenues and expenses,
assets, liabilities, and cash flows.
Both involve financial statements.
Both suffer from the difficulties of capturing, in
quantitative terms, the many aspects of an economic
event.
Continued
Continued

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Managerial Accounting and

Financial Accounting
Managerial accounting reports are specifically
designed for a particular user or a particular
decision.
Financial accounting is primarily historical.
Managerial accounting is concerned more with the
future.
Managerial accounting has no external restrictions,
such as generally accepted accounting principles.
Financial accounting serves persons outside the
firm, while managerial accounting serves persons
inside the firm.

Background
Background of
of Conventional
Conventional
Manufacturing
Manufacturing
American companies were the unchallenged world
leaders in manufacturing following World War II.
American companies had strong advantages in
product quality, capacity, and distribution
facilities.
American firms could sell nearly anything they
made.
Production was the critical activity and the
philosophy was to get it out the door.
Continued
Continued

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Background
Background of
of Conventional
Conventional
Manufacturing
Manufacturing
American manufacturers adopted practices that
reflected a just-in-case philosophy which led to
large amounts of inventory, along with waste,
scrap, and the reworking of defective units.
Lead time or cycle times extended well beyond the
time needed for the manufacturing process alone.
A product that could be manufactured in one or
two days took one or two months.

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Just-in-Time
Just-in-Time (JIT)
(JIT)
Just-in-time (JIT) manufacturing is a
philosophy that focuses on timing,
efficiency, and quality in meeting
commitments.
Companies that employ JIT strive for continual
improvement and relentlessly search out and
eliminate waste of materials, time, and space.

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Just-in-Time
Just-in-Time (JIT)
(JIT)
Under ideal conditions, purchased materials and
components arrive just in time to be used.
Partly assembled units arrive at work stations just
in time for the next step in production.
Finished units emerge from production just in time
to meet the shipping date requested by the
customer.
Setup times are reduced by a flexible
manufacturing system.

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Just-in-Time
Just-in-Time (JIT)
(JIT)
Computer-integrated
manufacturing (CIM)
provides that a factory is
virtually all automated
and controlled by
computer.

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Conventional
Conventional Manufacturing
Manufacturing

Departments working on all products

Single-skilled workers
Large batches, erratic flows
Some defects seen as inevitable
Long production cycle
Large inventories held as buffers
Large deliveries at irregular intervals
Achieve acceptable performance
Design and manufacturing separate

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JIT
JIT Manufacturing
Manufacturing

Manufacturing cells concentrating on one product

Multiskilled workers
Small batches, smooth flows
Total quality control
Short production cycle
Zero or trivial inventories
Daily delivery of materials/components
Relentless search to improve, eliminate all waste
Integrate design and manufacturing

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Line
Line Versus
Versus Staff
Staff Functions
Functions
Managers of line functions are concerned with
the primary operating activities of the
organization-manufacturing (or buying) and
selling a physical product or performing a
service.
A staff manager manages a department that
serves other departments.

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Managerial
Managerial Accountants
Accountants in
in
Businesses
Businesses Include:
Include:
Controllers
office
Budget analysts
Cost analysts
Financial
analysts

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The
The Specific
Specific Duties
Duties of
of
Managerial
Managerial Accountants
Accountants Include:
Include:
assisting in the design of the
organizations information system.
ensuring that the system performs
adequately.
periodically reporting information to
interested managers.
undertaking special analyses.

Standards
Standards of
of Ethical
Ethical Conduct
Conduct for
for
Management
Management Accountants
Accountants
COMPETENCE
Management accountants have a responsibility to:
Maintain an appropriate level of professional competence
by ongoing development of their knowledge and skills.
Perform their professional duties in accordance with
relevant laws, regulations, and technical standards.
Prepare complete and clear reports and recommendations
after appropriate analyses of relevant and reliable
information.

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Standards
Standards of
of Ethical
Ethical Conduct
Conduct for
for
Management
Management Accountants
Accountants

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CONFIDENTIALITY
Management accountants have a responsibility to:
Refrain from disclosing confidential information
acquired in the course of their work except when
authorized unless legally obligated to do so.
Inform subordinates as appropriate regarding the
confidentiality of information acquired in the course of
their work and monitor their activities to assure the
maintenance of that confidentiality.
Continued
Continued

Standards
Standards of
of Ethical
Ethical Conduct
Conduct for
for
Management
Management Accountants
Accountants
CONFIDENTIALITY
Management accountants have a responsibility to:
Refrain from using or appearing to use confidential
information acquired in the course of their work for
unethical or illegal advantage either personally or
through third parties.

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Standards
Standards of
of Ethical
Ethical Conduct
Conduct for
for
Management
Management Accountants
Accountants
INTEGRITY
Management accountants have a responsibility to:
Avoid actual or apparent conflicts of interest and
advise all appropriate parties of any potential
conflict.
Refrain from engaging in any activity that would
prejudice their ability to carry out their duties
ethically.
Refuse any gift, favor, or hospitality that would
influence or would appear to influence their actions.
Continued
Continued

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Standards
Standards of
of Ethical
Ethical Conduct
Conduct for
for
Management
Management Accountants
Accountants
INTEGRITY
Management accountants have a responsibility to:
Refrain from either actively or passively subverting
the attainment of the organizations legitimate and
ethical objectives.
Recognize and communicate professional
limitations or other constraints that would preclude
responsible judgment or successful performance of
an activity.
Continued
Continued

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Standards
Standards of
of Ethical
Ethical Conduct
Conduct for
for
Management
Management Accountants
Accountants
INTEGRITY
Management accountants have a responsibility to:
Communicate unfavorable as well as favorable
information and professional judgments or opinions.
Refrain from engaging in or supporting any activity
that would discredit the profession.

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Standards
Standards of
of Ethical
Ethical Conduct
Conduct for
for
Management
Management Accountants
Accountants
OBJECTIVITY
Management accountants have a responsibility to:
Communicate information fairly and objectively.
Disclose fully all relevant information that could
reasonably be expected to influence an intended
users understanding of the reports, comments, and
recommendations presented.

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Resolving Ethical Conflict

Courses of Actions:
Discuss problems with immediate supervisor except
when it appears the superior is involved.
If the immediate superior is the chief executive
officer, or equivalent, the acceptable reviewing
authority may be the audit committee, board of
trustees, or owners.
Clarify relevant concepts by confidential discussion
with an objective advisor to obtain an understanding
of possible courses of action.

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Resolving Ethical Conflict

Courses of Actions:
If the ethical conflict still exists after exhausting
all levels of internal review, the management
accountant may have no other recourse but resign.
Except where legally prescribed, communication
of such problems with external parties is not
appropriate.

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International
International Aspects
Aspects of
of
Managerial
Managerial Accounting
Accounting
Should capital be raised in the U.S. or
elsewhere?
Where should the company manufacture the
products it sells to customers in and outside
of the U.S.?
What products should the company make
and in which countries?

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International
International Aspects
Aspects of
of
Managerial
Managerial Accounting
Accounting
Should the company make some parts for
its production in one country and complete
the manufacturing process in others?
Would it be profitable to change some
products to accommodate differences
among countries in tastes and culture?

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Deregulation
Deregulation
Deregulation is increasingly
important to many companies and
is among the factors that are
influencing management
accounting. In some regulated
environments, companies are
guaranteed a stipulated rate of
profit. Such companies do not
need to control costs because they
can pass them along to consumers.

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Chapter 1
The
The End
End

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