MANAGERIAL ACCOUNTING AND
BUSINESS ENVIRONMENT
CHAPTER ONE
DIFFERENCE BETWEEN FINANCIAL AND
MANAGERIAL ACCOUNTING

Financial





Reports for Users
Past Activities
Comparison
Accuracy
Entire Organization

BS, IN, CF, SE
YES GAAP
 External Reports

Managerial
Reports for Decision Mks
Future Activities
Relevance
Fast Information
Segments
Dept, Cust, Vend, Empl, Pro
NO GAAP
Reports when needed
TRADITIONALLY
“Idleness
Waste Money” or
if manpower and machine
are not running you are
losing money

PUSH THROUGH PRODUCTION---OLD
PUSH through Production –old way
 Three inventories: Raw Materials (RM), Work in
Process(WIP), Finished Goods (FG)


RM
 Company

| WIP 
Queque
FG
Results in Large
Inventory waiting to be sold
THREE APPROACHES
FOR IMPROVEMENT
Lean
Production
Theory of Constraints
Six Sigma
LEAN PRODUCTION
Lean means Less Costs
 Advantages:

Lower Inventory required
 Fewer Defects
 Less Wasted Effort
 Quicker Customer Response

LEAN PRODUCTION CON’T
Summaries
 Value
all theories into 1
Added
 Flow Chart of Activities
 Manufacturing Cell
 Just in Time (JIT)
 Supply Chain Management
and Continuous Improvement
VALUE ADDED
Value Chain pg 12
 Activities that add value per customer
 Chip Box vs Dove Box

FLOW CHART
List Processes or Activities
 How It Is Made

TRADITIONAL PRODUCTION

Several large Machines with only one job each
Mixing Machine
 Cutting Machine
 Wrapping Machine

MANUFACTURING WORK CELL
One Machine performing several jobs
 Several Multi-job Machines


Each Machine Mixes-Cuts-Wraps
JUST IN TIME (JIT)

Pull Through Production--- Customer initiates
RM  WIP   FG (Customer order)
 Shipped immediately to customer
 No queing of inventory

SUPPLY CHAIN MANAGEMENT AND
CONTINUOUS IMPROVEMENT
Suppliers responsible for Quality of Incoming
Parts and Materials
 Production Workers responsible for Quality
during WIP

THEORY OF CONSTRAINTS




Control of Bottlenecks
Increase capacity to remove bottleneck where
process has smallest capacity
Freeway system --- Norwalk on Interstate 5
Throughput time--- Cycle time to manufacture a
product
SIX SIGMA OR ZERO DEFECTS
Non Value Added
 Identify process that do not add value or those
customer is not willing to pay for
 Eliminate Non Value Activities
 Activities that use resources but do not add value
