1. © Chapter 1 1 The Role of Accounting Information in Management Decision Making Key Topics: Cost Versus Financial Accounting Management Decision Making Decision Quality Steps for Better Thinking Relevant Information Ethical Decision Making Chapter 1

2. © Chapter 1 2 Let’s Begin With a Story… Motorola’s Iridium Project Key Issues: Uncertainty Bias

3. © Chapter 1 3 What is Accounting? An information system that: Measures and records transactions Aggregates information Communicates information to users through reports

4. © Chapter 1 4 Cost, Financial, and Managerial Accounting Cost accounting information is used for both managerial and financial accounting reports Management accounting provides information for internal decision makers Managers Other employees Financial accounting provides information for external decision makers Investors (stockholders and creditors) and potential investors Regulators Other external decision makers

5. © Chapter 1 5 EXHIBIT 1.1 Overview of Management Decision Making Managerial Decision Making

6. © Chapter 1 6 Higher Quality Decisions EXHIBIT 1.9 Path to Higher-Quality Management Decisions

7. © Chapter 1 7 Relevant Information Information is relevant if it: –Differs across the alternatives, and –Is about expected future costs or revenues Relevant information can include: –Quantitative data such as revenues and costs –Qualitative (non-numerical) factors

8. © Chapter 1 8 Exercise: Relevant Information

9. © Chapter 1 9 EXHIBIT 1.10 Steps for Better Thinking: A Decision-Making Process

10. © Chapter 1 10 Ethical decision making EXHIBIT 1.11 Steps in Ethical Decision Making

11. © Chapter 1 11 Exercise: Ethics and Relevant Information

12. © Chapter 1 12 Codes Used in Textbook Problems Steps for Better Thinking –Step 1, Step 2, Step 3, Step 4 –Tied to competencies called for by AICPA, IMA, and others Content Knowledge (Foundation) –3 levels (see below)