1. MANAGERIAL ACCOUNTING OVERVIEW & BASIC CONCEPTS
CHAPTER 1
MANAGERIAL ACCOUNTING
10TH EDITION BY
MAHER, STICKNEY & WEIL
PowerPoint Presentation by
Gail B. Wright Professor Emeritus of Accounting Bryant University
© Copyright 2008 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star Logo, and South-Western are trademarks used herein under license.
OVERVIEW & BASIC CONCEPTS

2. MANAGERIAL APPLICATION
LO 1
MANAGERIAL APPLICATION
How did cost information help Domino’s Pizza survive?
Domino’s dropped its 6-inch pizza when they discovered it was losing money.

3. FINANCIAL ACCOUNTING: Definition
LO 1
FINANCIAL ACCOUNTING: Definition
Reports to users (shareholders, creditors, financial analysts, etc.) outside the organization.

4. FINANCIAL ACCOUNTING: Definition
LO 1
FINANCIAL ACCOUNTING: Definition
Reports results of activities to users (shareholders, creditors, financial analysts, etc.) outside the organization.
Click the button to skip Exercise 6

5. MANAGERIAL ACCOUNTING: Definition
LO 1
MANAGERIAL ACCOUNTING: Definition
Reports results of activities to insiders (managers, etc.).
Click the button to skip Exercise 6

6. EXERCISE 6 d) All of the above
Managerial accounting is used for
Decision making
Planning
Control
All of the above
d) All of the above
Press “Enter” or click left mouse button for answer.

7. LO 2
When a product is a “commodity” how do you compete to achieve/maintain profitability?
Compete by differentiating yourself from competition. Focus on order fulfillment, cutting costs, etc.

8. QUESTIONS Press “Enter” or click left mouse button for answer.
LO 2
QUESTIONS
Which questions are relevant to managerial accounting?
What can I sell this old computer for?
What did the old computer cost?
How much will I get for the old computer if I trade it & pay cash for a new one?
What value does this old computer have as a backup if I buy a new one?
What is the computer’s book value?
What is the computer’s cost basis for tax purposes?
Press “Enter” or click left mouse button for answer.

9. QUESTIONS Press “Enter” or click left mouse button for answer.
LO 2
QUESTIONS
Which questions are relevant to financial or tax accounting?
What can I sell this old computer for?
What did the old computer cost?
How much will I get for the old computer if I trade it & pay cash for a new one?
What value does this old computer have as a backup if I buy a new one?
What is the computer’s book value?
What is the computer’s cost basis for tax purposes?
Press “Enter” or click left mouse button for answer.

10. Who are the key financial players in the corporation?
LO 3
Who are the key financial players in the corporation?
Key financial players are Financial Vice President, Controller, Treasurer, Cost Accountants/Managers, & Internal Audit.

11. LO 3
The financial areas of the corporation report to the President through the Financial VP.
EXHIBIT 1.1

12. FINANCIAL PROFESSIONALS
LO 3
FINANCIAL PROFESSIONALS
Financial VP: in charge of all accounting & finance
Controller: manages cost & managerial accounting
Treasurer: manages cash flows; raises cash
Cost accountants/managers: analyze, manage costs
Internal audit: provides auditing, consulting services
Click the button to skip Exercise 7

13. E!!!
LO 4
WHITE COLLAR CRIME
Many managers have spent time in jail for activities (e.g., price fixing, sharing information) to benefit their companies, not themselves.

14. PREVENTING WHITE COLLAR CRIME
LO 4
PREVENTING WHITE COLLAR CRIME
Sarbanes-Oxley Act
Passed in the aftermath of the Enron scandal
Includes
Making CEOs and CFOs sign and accept responsibility for financial statements
Making CEOs and CFOs responsible for the company’s system of internal controls
Making BOD take more active role in firm’s financial, operational activities
Creating the Public Company Accounting Oversight Board to oversee public auditors

15. What should the accounting professional do in cases of conflict?
LO 4
What should the accounting professional do in cases of conflict?
Follow company procedures.
Document sources of conflict
If not resolved, discuss with superiors
In extreme cases, resign.

16. Is a sacrifice of resources.
LO 5
COST: Definition
Is a sacrifice of resources.

17. Click the button to skip Exercise 8
LO 5
TYPES OF COSTS
Opportunity costs
Is the forgone income from using an asset in its best alternative
Direct costs
Relate directly to the cost object for which cost is to be measured
Indirect costs
Indirectly related to the cost of a cost object
Variable costs
Change in total as the level of activity changes
Fixed costs
Do not change in total with changes in the level of activity
Click the button to skip Exercise 8

18. LO 5
EXERCISE 8
Zappa, a mechanic, left his $25,000-a-year job at Joe’s Garage to start his own body shop. Zappa now draws an annual salary of $15,000. Identify his opportunity costs?
$25,000
Press “Enter” or click left mouse button for answer.

19. How do costs & expenses differ?
LO 5
How do costs & expenses differ?
While a cost is the sacrifice of resources, an expense is a “gone” asset.

20. How do financial and managerial income statements differ?
LO 6
How do financial and managerial income statements differ?
Managerial income statements present variable and fixed costs separately while financial income statements do not make this distinction.

21. LO 6
Variable & fixed costs are presented separately for managerial purposes.
EXHIBIT 1.2
EXHIBIT 1.3

22. LO 7
MANAGING COSTS
Effective cost control requires managers to understand how producing a product requires activities that generate costs.

23. ACTIVITY BASED MANAGEMENT (ABM): Definition
LO 7
ACTIVITY BASED MANAGEMENT (ABM): Definition
Examines activities and their associated costs as a means of developing efficiencies and reducing non-value-added costs.

24. What are “non-value-added” activities?
LO 7
What are “non-value-added” activities?
Non-value-added activities are activities that can be eliminated without reducing a product’s service potential to the customer.

25. What are “value-added” activities?
LO 7
What are “value-added” activities?
Value-added activities are activities that increase a product’s service to the customer.

26. LO 7
Functions of the value chain help management identify value-added activities.
EXHIBIT 1.4

27. How do strategic and tactical cost management decisions differ?
LO 7
How do strategic and tactical cost management decisions differ?
Strategic decisions choose between production alternatives. Tactical decisions make a particular production alternative more cost efficient.

28. KEY DEVELOPMENTS IN MANAGERIAL ACCOUNTING
Integrated information systems
Tie managerial accounting, financial reporting, customer databases, supply chain management & other databases together
Examples: ERPS, SAP
Web hosting
Allows companies to focus on core competencies while outsourcing portions of information systems
Just-in-Time (JIT) & lean production
Eliminate inventory between production departments & focus on quality & efficiency
Continued

29. KEY DEVELOPMENTS IN MANAGERIAL ACCOUNTING (cont.)
Total quality management (TQM)
Measures product reliability & service delivery as well as profitability while attempting excelling in all dimensions
Theory of constraints (TOC)
Identifies the weakest part of the process chain (constraint) and attempts to improve it
Benchmarking & continuous improvement
Benchmarking: continuous process of measuring products, services, activities against best performance levels, engaging in continuous improvement
Fads

30. LO 9
INFORMATION
Information is not free. Management must consider costs & benefits of information when designing an optimal accounting system.

31. CHAPTER 1
THE END