1
Introduction to
Managerial Accounting
© 2007 Pearson Education Canada
Slide 1-1
Management Accounting for Managers
• Management accounting exists because
managers require information to make decisions
• Primary focus of management accounting is
towards users within an organization
• Management accounting does not exist to
generate data, but it exists because managers
require information for decisions
Framework for Management Accounting
Strategic Planning
Focus on organization’s objectives
Management Control
Effectiveness and efficiency of resource use
Operational Control
Effectiveness and efficiency of tasks
© 2007 Pearson Education Canada
Slide 1-2
Frameworks for Management Accounting
OPERATIONAL
CONTROL
Structured
SemiStructured
MANAGEMENT
CONTROL
STRATEGIC
PLANNING
Accounts receivable
Budget analysis
Tanker fleet mix
Order entry
Short-term
forecasting
Warehouse and
factory location
Inventory reordering
Inventory control
Engineered costs
Variance analysis
Mergers and acquisitions
Production scheduling
Bond trading
Cash management
Overall budget
Budget preparation
Capital acquisition analysis
New product planning
Sales and production
R and D planning
Unstructured PERT COST systems
© 2007 Pearson Education Canada
Slide 1-3
Management Decision Process
1. Identify the problem.
2. Perform the necessary quantitative and
qualitative analyses.
3. Identify alternative solutions to the problem.
4. Evaluate the alternative solutions.
5. Recommend one of the alternative solutions.
6. Implement the recommendation.
© 2007 Pearson Education Canada
Slide 1-4
Management
Major Means:
Accounting Information
Major Ends:
Helping Decisions
1. Problem-solving
information
1. Managers for long-range
planning and special decisions
2. Attention-directing
information
2. Managers for planning and
controlling routine operations
3. Scorekeeping
information
3. Outsiders for investors, tax
collectors, regulators & others
© 2007 Pearson Education Canada
Slide 1-5
Planning and Controlling
Planning
Evaluation
Action
• Planning involves setting objectives and the
means to their attainment
• What is desired?
• When and how is it to be accomplished?
• How is success to be evaluated?
• Controlling involves the implementation of plans
and the use of feedback to monitor achievements
© 2007 Pearson Education Canada
Slide 1-6
Product Life Cycle
• The various stages through which a product passes,
from conception and development through
introduction into the market through maturation and,
finally, withdrawal from the market
Sales
over
Typical
Product
Life
Cycle
Product
Development
© 2007 Pearson Education Canada
Introduction
to Market
Mature
Market
Phase-Out
of Product
Slide 1-7
The Value Chain
• Value chain is the set of business functions that add value
to the products or services of an organization
Research
and
Development
Product
& Service
Process
Design
Customer
Service
CUSTOMER
FOCUS
Distribution
Production
Marketing
© 2007 Pearson Education Canada
Slide 1-8
Distinctions Between Management
Accounting and Financial Accounting
Management
Accounting
Financial
Accounting
Organization managers
External parties
Costs versus benefits
G.A.A.P.
Behavioural
Implications
Influence on managerial
behaviour
Measurement of
economic activity
Time Focus
Future orientation
Past orientation
Time Span
Flexible
Less flexible
Reports
Detailed
Summary reports
Less sharply defined
More sharply defined
Primary Users
Choices
Activities
© 2007 Pearson Education Canada
Slide 1-9