Welcome to ACF 231 Management Accounting Lecturer: Cynthia Fortin, CPA, CMA Email: cynth_fortin@yahoo.ca Wechat: cynthia20131001 Repository for all documents: www.uwcentre.ac.cn/haut

Prologue ACF 231 Management Accounting Introduction to Managerial Accounting, Brewer, Garrison,Noreen Power Points from website - adapted by Cynthia Fortin, CPA, CMA http://highered.mheducation.com/sites/0078025419/student_view0/prologue/index.html

Learn techniques MANAGERS use to produce timely and relevant information to make sound business decisions.

What does Management Accounting do? Measures and reports information to help managers make decisions Internal reporting Future oriented Examples of financial information – Name the statements Examples of non-financial information – Cost of operating a plant, offering a service What kind of decisions – Commissions to be paid to sales people, schedule production, purchasing decisions, Examples of goals Who are the internal users and type of reports: sales rep, production supervisors, senior managers

Managers use Managerial Accounting Choose Communicate Implement 1-2

Financial Accounting Measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP) and/or IFRS Focuses on external parties Reports on what happened in the past – Historical based Managers are responsible for the financial statements issued to investors, government regulators, and other parties outside the organization Name external parties: investors, government regulators, banks, unions, suppliers, customers, etc. 1-3

Users Time Frequency On demand Source Financial Accounting Managerial Accounting Users External Internal Time Past Future Frequency Month/Q/Yr On demand Source Objective Relevant

Quality Precise Timely Purpose Communicate Make decisions Required Financial Accounting Managerial Accounting Quality Precise Timely Purpose Communicate Make decisions Required Mandatory - Rules GAAP/IFRS

Measurement Skills Planning The primary purpose of this course is to lecture measurement skills that managers use to support Controlling The primary purpose of this course is to teach you measurement skills that managers use every day to support their planning, controlling, and decision-making activities. Decision Making

Plan Control What do managers do? Make sound Decisions Managerial accounting helps managers carry out three main activities – planning, controlling, and decision making. Make sound Decisions

How will goals be achieved? Action plan Planning Establish goals. How will goals be achieved? Action plan Planning involves establishing goals and specifying how to achieve them. Plans are often accompanied by a budget. A budget is a detailed plan for the future that is usually expressed in formal quantitative terms. Five examples of planning activities include (1) estimating the advertising revenues for a future period, (2) estimating the total expenses for a future period, including the salaries of all actors, news reporters, and sportscasters, (3) planning how many new television shows to introduce to the market, (4) planning each television show’s designated broadcast time slot, and (5) planning the network’s advertising activities and expenditures. Five examples of planning activities include (1) estimating the advertising revenues for a future period, (2) estimating the total expenses for a future period, including the salaries of all actors, news reporters, and sportscasters, (3) planning how many new television shows to introduce to the market, (4) planning each television show’s designated broadcast time slot, and (5) planning the network’s advertising activities and expenditures. Develop Budgets.

Gathers actual results Controlling Gathers actual results to compare to the plans Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Part of the control process includes preparing performance reports. A performance report compares budgeted to actual results to improve future performance. Five examples of controlling activities include (1) comparing the actual number of viewers for each show to its viewership projections, (2) comparing the actual costs of producing a made-for-television movie to its budget, (3) comparing the revenues earned from broadcasting a sporting event to the costs incurred to broadcast that event, (4) comparing the actual costs of running a production studio to the budget, and (5) comparing the actual cost of providing global, on-location news coverage to the budget.

Choose between alternatives Decision Making Choose between alternatives Decision making involves selecting a course of action from competing alternatives. Many managerial decisions revolve around answering three questions: a. What should we be selling? b. Who should we be serving? c. How should we execute?

Going about creating value Value Chain Product Service Process Design Research and Development Customer Service Production Marketing Distribution 1-10

Going about creating value Value Chain Product Service Process Design Research and Development Customer Service Production Marketing Distribution 1-10

Traditional Manufacturing Store Inventory Produce Goods in Anticipation of Sales Traditional manufacturing methods organize work departmentally and encourage those departments to maximize their output even if it exceeds customer demand and bloats inventories. Make Sales from Finished Goods Inventory

Lean Production Customer places an order Create Production Order Generate component requirements Lean Production is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders. Lean Production is often called Just-in-Time (JIT) production because products are only made in response to customer orders and they are completed just-in-time to be shipped to customers. Because lean thinking only allows production in response to customer orders, the number of units produced tends to equal the number of units sold. The lean approach also results in fewer defects, less wasted effort, and quicker customer response times than traditional production methods. Production begins as parts arrive Goods delivered when needed Components are ordered

Understand the problem to know what data to analyze and measure data-driven analysis The question you are trying to answer defines what you’ll measure and how you analyze it. Consider the following examples.

Measurement Skills What net income should my company report to its stockholders? If the question you wish to answer is what net income should my company report to its stockholders, then you’ll be measuring and reporting historical financial data that complies with applicable rules. If you are trying to determine how your company is serving its customers, then you’ll be measuring and analyzing mostly nonfinancial, process-oriented data. If you want to predict whether your company will need to borrow money, then your measurement efforts will focus on estimating future cash flows. Report historical data that complies with GAAP/IFRS

How will my company serve its customers? Measurement Skills How will my company serve its customers? If the question you wish to answer is what net income should my company report to its stockholders, then you’ll be measuring and reporting historical financial data that complies with applicable rules. If you are trying to determine how your company is serving its customers, then you’ll be measuring and analyzing mostly nonfinancial, process-oriented data. If you want to predict whether your company will need to borrow money, then your measurement efforts will focus on estimating future cash flows. Measure and analyze mostly nonfinancial, process-oriented data.

Will my company need to borrow money? Measurement Skills Will my company need to borrow money? If the question you wish to answer is what net income should my company report to its stockholders, then you’ll be measuring and reporting historical financial data that complies with applicable rules. If you are trying to determine how your company is serving its customers, then you’ll be measuring and analyzing mostly nonfinancial, process-oriented data. If you want to predict whether your company will need to borrow money, then your measurement efforts will focus on estimating future cash flows. Measure and analyze estimated future cash flows.