1 – Overview of Managerial Accounting
The role and functions of managerial
Management Accounting and
Current Focus of Managerial Accounting
Impact on Organizational Structure
Focus on Customer
Computer Integrated Manufacturing
Product life cycles and Diversity
Time Based Competition
Information and Communication Technology Management
Cost Management System
2. Financial Statement Analysis
Understanding External Financial Statements
Analysis and Interpretation of Financial
3. Cost Terms and Concepts
Nature and classification of costs
Basics of Cost Behavior
Cost Classifications on Financial Statements
4. Design of Cost and management accounting systems
- Job Order costing
- Process Costing
- Activity Base Costing
5. Managerial Accounting Techniques for Planning and
Cost Behavior and CVP Analysis
Application of Quantitative Techniques
6. Using Accounting Information in Decision Making, Relevant
Costs and Benefits
6.1 - The Decision Making Process
6.2 - Identifying Relevant Costs
6.3 - Approaches in Analyzing Alternatives
6.4 - Types of Decisions
- Make or Buy
- Adding or Dropping products/segment
- Sell Now or Process Further
- Special Sales Pricing
- Utilization of Scarce Resources
- Shutdown or Continue Operations
- Pricing Products or Services
- Operational and Financial Budgeting
- Capital Budgeting/Capital Investment Decision
- Definition, Characteristics, Categories,
- Net Initial Investment or Project Cost
- Net Cash Returns
- Lowest Acceptable Rate of Return/Cost of
- Screening Capital Investment Proposals
- Ranking of Investment Projects
8. Control and Performance Evaluation
- Responsibility Accounting
- Divisional Performance Measurement
- Control and Evaluation of Cost Centers
- Segment Reporting and Decentralization
OVERVIEW OF MANAGERIAL
Management Accounting (Managerial Accounting) - a discipline that includes
almost all manipulations of financial information for use by managers in
performing their organizational functions and in assuring the proper use and
handling of an entity’s resources; it includes the discipline of cost accounting.
The Role of Managerial Accounting:
to provide information to help meet the needs of management inside an
Activities of Managerial Accountants:
Assisting in the design of the organization’s information system.
Ensuring that a system performs adequately
Periodically reports information to interested managers.
Undertaking special analysis
Differences between managerial
and financial accounting:
Management Functions and
Managerial accounting parallels the shift in today’s business
world, focusing not just on the numbers but on the function of
management; planning, decision making, controlling and
- Planning Function
reparation of budgeted financial statements
managerial accountants help management in setting goals and
developing strategies and tactics to achieve them.
Long-term planning (strategic planning) focusing on value chain
and supply chain. Understanding the value-chain enables the
company to evaluate how it competes using lowest cost strategy or
differentiation strategy, and allows company to understand the
behavior of its costs.
Role of Accountant in Decision Making:
Selection of relevant data
Present the data to management
Explains the analysis to managers using analytical techniques to help
managers understand the implications of the decisions.
Control and Performance Evaluation
Control is determining whether goals are being met, and if not, what
can be done.
Managerial accountant use analytical tools to help managers
understand the reasons for achieving goals.
Performance evaluation – implicit in control
Accounting reports partially substitute for managers’ personal
supervision of activities.
Ethics for Management Accountant
Maintain an appropriate level of professional
competence by ongoing development of their knowledge
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
data and reliable information.
- Refrain from disclosing confidential information
acquired in the course of their work except when
authorized, unless legally obliged 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.
- 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
- 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.
- Recognize and communicate professional limitations or other
constraints that would preclude responsible judgment or successful
performance of an activity.
- 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.
- 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
Current Focus of Managerial
The world is becoming increasingly complex…
The advent of the knowledge economy
Unprecedented access to
New Trends in Organizational
Structure: (Corporate Reforms)
2.) Lean Management
3.) Open-Source Business
Hourglass organization = has only three layers where
the top management is responsible for formulating a
vision/mission for the organization and making sure it
becomes a reality. It is the middle management that
coordinates the diverse activities in the lower echelon
through computer networking. The people in the
middle management are more of generalist than
specialist. At the bottom of the hourglass is a broad
layer of technical specialists acting as supervisors
much of the time.
Cluster organization = teams are the primary
structural units where multiskilled people moving
from one team to another as projects need their
Network organization (virtual corporation)= has as its
main or only function administrative oversight, it does
not produce or sell. Production-related and marketing
functions are done by independent companies under
contract with the network organization. (Subcontracting)
Open Source Business
Its about networking and partnerships with those
outside and inside the organization who can help
the business provide better products and services
to customers. The Open source model
(transparency of operations, collaboration with
customers and others to manage the business and
set priorities, and giving commodities away free)
can allow leading-edge businesses to make the
transition to tomorrow’s economy effect. (ex.
Supply Chain Management- SCM)
Open Source Business
Its about teaming with a Virtual Assist. A Virtual Assistant
(VA), is an independent contractor providing
administrative, technical, or sometimes creative assistance
to businesses- usually to other independent entrepreneurs
and solo small business practices, such as that of a lawyer,
realtor, accountant, or business coach. Virtual assistants
work from their own office, thus making overhead nonexistent. With a virtual assistant you are able to take
administrative tasks off of your extremely full tasks, like
customer contact, marketing, accounting jobs, without
sacrificing your profits.
Key Success Factors
Cost, time, quality, &
It is the first priority of any business.
Referring to Customer Value - the difference between
what the customer receives and what he gives up.
(Hansen & Mowen)
The Product Life Cycle
The product life cycle concept suggests
that a product passes through four stages of
evolution. Introduction, growth, maturity
and decline. As a product evolves and passes
through these four stages profit is affected,
and different strategies have to be employed
to ensure that the product is a success within