Managerial Accounting and the Business Environment

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Managerial Accounting and the Business Environment

• Chapter One

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Comparison of Financial and Managerial Accounting
Exh. 1-2
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Planning and Control Cycle
Exh. 1-1
Formulating long-and short-term plans (Planning)
Begin
Comparing actualto planned performance
(Controlling)
Implementing plans (Directing and Motivating)
DecisionMaking
Measuringperformance (Controlling)
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Organizational Structure
Decentralization is the delegation of
decision-making authority throughout an
organization.
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Line and Staff Relationships

• Line positions are directly related to
  achievement of the basic objectives of an
  organization.
• Example Production supervisors in a
  manufacturing plant.

• Staff positions support and assist line
  positions.
• Example Cost accountants in the manufacturing
  plant.

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The Changing Business Environment

• Just-in-time production
• Total quality management
• Process reengineering
• Theory of constraints
• International competition
• E-commerce

Business environment changes in the past twenty
years
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Just-in-Time (JIT) Systems
Receivecustomerorders.
Complete productsjust in time toship customers.
Scheduleproduction.
Complete partsjust in time forassembly into
products.
Receive materialsjust in time forproduction.
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JIT Consequences
Zero productiondefects
Improvedplant layout
Flexibleworkforce
Reducedsetup time
JIT purchasing Fewer, but more ultrareliable
suppliers. Frequent JIT deliveries in small
lots. Defect-free supplier deliveries.
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Total Quality Management (TQM)
TQM improves productivity by encouraging the use
of fact and analysis for decision making and if
properly implemented, avoids counter-productive
organizational infighting.
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Process Reengineering

• Anticipated results
• Process is simplified.
• Process is completed in less time.
• Costs are reduced.
• Opportunities for errors are reduced.

A business processis diagrammedin detail.
The process is redesignedto eliminate
allnon-value-added activities
Every step inthe businessprocess mustbe
justified.
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Process Reengineering versus TQM

• Process Reengineering
• Radically overhauls existing processes.
• Likely to be imposed from above and to use
  outside consultants.

• Total Quality Management
• Tweaks existing processes to realize gradual
  improvements.
• Uses a team approach involving people who work
  directly in the process.

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Theory of Constraints
2. Allow the weakest link to set the tempo.
Only actions that strengthen the weakest link in
the chain improve the process.
3. Focus on improving the weakest link.
1. Identify the weakest link.
4. Recognize that the weakest linkis no longer
so.
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International Competition
Competition has become worldwide in most
industries.
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Certified Management Accountant
A management accountantwho has the necessary
qualifications and who passes a rigorous
professional exam earnsthe right to be known as
a Certified Management Accountant (CMA).
Information about becoming a CMA and the
CMAprogram can be accessed on the IMAs website
at www.imanet.org or by calling 1-800-638-4427.