Folk/Garrison/Noreen

Introduction to
Managerial Accounting
First Edition
Irwin/McGraw-Hill 1 © The McGraw-Hill Companies, Inc., 2002
 Prologue

Managerial Accounting
and the Business
Environment
 The Changing Business
Environment

A more competitive
environment emphasizing:
 Higher quality products
 Lower prices and costs
 Global competition Business environment
changes in the past
 Meeting and anticipating
customer needs twenty years

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 The Changing Business
Environment

New tools for

managers!

Just-In-Time
Total Quality
Management
Process Reengineering
Theory of Constraints

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 Just-in-Time (JIT) Systems
Receive
customer Complete products
orders. just in time to
ship customers.

Schedule
production.

Receive materials Complete parts

just in time for just in time for
production. assembly into products.

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 Benefits of a JIT System

Reduced
inventory Greater
costs customer
satisfaction

Higher quality
products
More rapid
response to
Less warehouse customer orders
space needed

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 Total Quality Management
Where are we?
Benchmarking
Where do we want to go?
Plan

Do we need How do
to change Act Do we start?
the plan? is

Check Continuous
Improvement
How are we doing?
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 Process Reengineering
A business process
is diagrammed
in detail.

Every step in The process is

the business redesigned to include
process must only those steps that make
be justified. our product more valuable.

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 Process Reengineering
A business process Anticipated results:
is diagrammed  Process is simplified.
in detail.  Process is completed
in less time.
 Costs are reduced.
 Opportunities for
errors are reduced.

Every step in The process is

the business redesigned to include
process must only those steps that make
be justified. our product more valuable.

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 Theory of Constraints

A sequential process of identifying and

removing constraints in a system.

Restrictions or barriers that impede

progress toward an objective

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 International Competition

Meeting world-class competition demands

a world-class management accounting
system.

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 Organizational Structure
An organization is a group of people
united for a common purpose.

Corporate Organization Chart

Board of Directors

President

Purchasing Personnel Vice President Chief Financial

Operations Officer

Treasurer Controller
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 Decentralization
Decentralization is the delegation of decision-
making authority throughout an organization.

Corporate Organization Chart

Board of Directors

President

Purchasing Personnel Vice President Chief Financial

Operations Officer

Treasurer Controller
Irwin/McGraw-Hill 13 © The McGraw-Hill Companies, Inc., 2002
 Line and Staff Relationships

Line position are Staff positions support

directly related to and assist line
achievement of the positions.
basic objectives of an  Example: Cost
organization. accountants in the
 Example: Production manufacturing plant.
supervisors in a
manufacturing plant.

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 The Controller

The chief accountant in an organization

with responsibility for:
Financial planning and analysis.
Cost control.
Financial reporting.
Accounting information systems.

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 Importance of Ethics
in Business
 Ethical practices in business build trust and
promote productive relationships. They are
necessary for the functioning of a market
economy.
 Many companies and professional
organizations, such as the Institute
of Management Accountants (IMA),
have written codes of ethics which
serve as guides for employees.

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 IMA Code of Ethics for
Management Accountants

Competence

Confidentiality

Integrity

Objectivity

Resolution of Ethical Conflict

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 IMA Code of Ethics for
Management Accountants
Follow applicable laws,
regulations and
standards.

Maintain
professional Competence
competence.

Prepare complete and clear

reports after appropriate
analysis.
Irwin/McGraw-Hill 18 © The McGraw-Hill Companies, Inc., 2002
 IMA Code of Ethics for
Management Accountants
Do not disclose confidential
information unless legally
obligated to do so.
Do not use
confidential
information for Confidentiality
personal
advantage.
Ensure that subordinates do
not disclose confidential
information.
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 IMA Code of Ethics for
Management Accountants
Avoid conflicts of interest
and advise others of
potential conflicts.

Do not subvert
organization’s
legitimate
Integrity
objectives.

Recognize and
communicate personal and
professional limitations.
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 IMA Code of Ethics for
Management Accountants
Avoid activities that could
affect your ability to
perform duties.

Refrain from Refuse gifts

activities or favors
that could Integrity that might
discredit the influence
profession. behavior.
Communicate
unfavorable as well as
favorable information.
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 IMA Code of Ethics for
Management Accountants
Communicate information
fairly and objectively.

Objectivity

Disclose all information

that might be useful to
management.

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 IMA Code of Ethics for
Management Accountants
Resolution of Ethical Conflict
Follow established policies.
For unresolved ethical conflicts:
 Discuss the conflict with immediate superior.
 If immediate superior is the CEO, consider the
board of directors or the audit committee.
 Except where legally prescribed, maintain
confidentiality.

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 IMA Code of Ethics for
Management Accountants
Resolution of Ethical Conflict
Clarify issues in a confidential discussion with
an objective advisor.
Consult an attorney as to legal obligations.
The last resort is to resign.

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 End of Prologue

Irwin/McGraw-Hill 25 © The McGraw-Hill Companies, Inc., 2002