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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 by
Douglas Cloud
Pepperdine University
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Objectives
 Describe four management functions and
After reading
this
their relationships
to accounting.
chapter, you should
 Describe the value chain and explain how it
be able to:
relates to competitive strategies.
 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
 Describe the activities of managerial
accountants.
 Describe the code of ethics that managerial
accountants follow.
 Describe some factors influencing the
development of managerial accounting.
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Management Functions
and Accounting
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
A
value
chain
is
the
Managerial
entire
set
of
processes
accountants prepare
that
transforms
raw
Much
of the
budgeted financial
materials
into
finished
information
provided
statements, often called
Long-term planning,
products.
by managerial
pro forma statements.
often called strategic
accountants is used in
planning, is critical to
decision making.
organizations.
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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
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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.
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Background of Conventional
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
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Background of Conventional
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 (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 (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 (JIT)
Computer-integrated
manufacturing (CIM)
provides that a factory is
virtually all automated
and controlled by
computer.
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Conventional 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 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 Versus Staff 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 Accountants in
Businesses Include:
• Controller’s
office
• Budget analysts
• Cost analysts
• Financial
analysts
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The Specific Duties of
Managerial Accountants Include:
 assisting in the design of the
organization’s information system.
 ensuring that the system performs
adequately.
 periodically reporting information to
interested managers.
 undertaking special analyses.
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Standards of Ethical Conduct for
Management 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 of Ethical Conduct for
Management Accountants
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
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Standards of Ethical Conduct for
Management 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 of Ethical Conduct for
Management 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
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Standards of Ethical Conduct for
Management Accountants
INTEGRITY
Management accountants have a responsibility to:
 Refrain from either actively or passively subverting
the attainment of the organization’s legitimate and
ethical objectives.
 Recognize and communicate professional
limitations or other constraints that would preclude
responsible judgment or successful performance of
an activity.
Continued
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Standards of Ethical Conduct for
Management 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 of Ethical Conduct for
Management 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
user’s 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 Aspects of
Managerial 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 Aspects of
Managerial 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 is increasingly
important, 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 End
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