Acc 350

1
WELCOME!

• Acc 350
• Internal Reporting
• Fall 1998

2
Todays Agenda

• Introductions
• Syllabus and Other Administrative Activities
• Brief Overview of Chapter 1
• More Detailed Look at Chapter 2

3
Chapter 1 Management Accounting Objective

• To provide useful information to managers to help
  them make informed decisions as they attempt to
  guide and control the organization toward its
  strategic objectives.
• What are strategic objectives?
• What types of decisions do managers make?
• What types of information do they need?
• What makes information useful?

4
Managerial versus Financial Accounting

• End users (only real difference)
• Nature of the information
• Unit of analysis
• External forces
• regulation versus competition
• Interdisciplinary flavor
• Overlap--Cost Accounting

5
Dual role of cost information

• Needed for asset valuation and income measurement
  (GAAP)
• To make decisions about
• Pricing
• Product mix
• Insourcing or outsourcing

6
Recent Trends and Concepts

• Increased competition and globalization
• How do we compete?
• Low-cost provider?
• Product differentiation?
• Increased emphasis on quality
• Customer orientation

7
More important concepts

• Continuous improvement
• Employee empowerment
• Value-chain analysis
• Benchmarking

8
Changes in manufacturing

• JIT
• Cellular manufacturing
• Flexible manufacturing systems (robotics)

9
Other things to consider

• Ethical issues
• Management control system may create ethical
  issues
• How would you respond?
• Behavioral effects of accounting information
• People run the organization
• How will they respond to new information and
  control systems?

10
TRUE STORY

• A manager wanted to find and fix software bugs
  more quickly. He offered an incentive plan 20
  for each bug the Quality Assurance people found
  and 20 for each bug the programmers fixed.
  (These are the same programmers who create the
  bugs.)
• Result was ?
• Called Incentive Incompatibility happens
  frequently in real world

11
Cost Benefit Principle

• Information is costly
• Are better decisions made as a result of new
  information?
• Ex. ABC versus ABM

12
Activity Based Costing (ABC)

• View the firms outputs as a collection of
  business processes
• Each process is a collection of activities
• Determine the cost of a process by adding the
  costs of its component activities

13
Activity Based Management

• Manage cost by managing the process
• Identify and eliminate non-value adding
  activities
• Simplify the process
• Reduce variability in the process
• The objective is to
• Increase quality
• Decrease cycle time
• Decrease cost