Cost Accounting, Chapter 1 11ch01
The Accountant’s Role
in the Organization
Chapter 1
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
1-1
Learning Objective 1
Describe how cost
accounting supports
management accounting
and financial accounting.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-2
Management Accounting
It measures and reports financial and
nonfinancial information that helps
managers make decisions to fulfill the
goals of an organization.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-3
Financial Accounting
Its focus is on reporting to external parties.
It measures and records business transactions.
It provides financial statements based on
generally accepted accounting principles.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-4
Cost Accounting
It provides information for both management
accounting and financial accounting.
It measures and reports financial
and nonfinancial data.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-5
Cost Management
It describes the activities of managers in
planning and control of costs.
It includes the continuous reduction of costs.
It is a key part of general management
strategies and their implementation.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-6
Learning Objective 2
Understand how management
accountants affect
strategic decisions.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-7
Strategic Cost Management
Developing strategy
Building resources and capabilities
Implementing strategy
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-8
Strategic Cost Management
Building resources and capabilities
Current
Assets
Long-Term
Productive
Assets
Intangible
Assets
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-9
Learning Objective 3
Distinguish between the
planning and control
decisions of managers.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 10
Planning and Controlling
Management Accounting System
Planning
Budgets
Control
Accounting
System
Performance
Evaluation
Performance
Reports
Feedback
Management Decision
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 11
Planning and Controlling
What is planning?
Setting
goals
Predicting
results
Deciding how
to attain goals
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 12
Planning and Controlling
What is control?
Deciding
and
taking
actions
Deciding on
performance
evaluation
and feedback
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 13
Planning and Controlling
What are budgets?
They are
quantitative
expressions
of a proposed
plan of action.
They aid in the
coordination
and
implementation
of the plan.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 14
Planning and Controlling
What are performance reports?
These are reports that
compare actual results
with budgeted amounts.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 15
Performance Report Example
Boone Shop, July 2003
Budget
Revenues
$59,000
Cost of goods sold 42,000
Wages
6,700
General
1,300
Fixed costs
5,000
Operating income $ 4,000
Actual
$60,000
43,400
7,000
900
5,000
$ 3,700
Variance
$1,000 F
1,400 U
300 U
400 F
0
$ 300 U
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 16
Performance Report Example
Actual cost of goods sold were
72% of revenues instead of the budgeted 71%.
Budget
% Actual
%
Revenues
$59,000 100 $60,000 100
Cost of goods sold 42,000
71 43,400
72
Gross margin
$17,000
29 $16,600
28
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 17
Feedback
This involves managers examining past performance
and systematically exploring alternative ways to
make better informed decisions in the future.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 18
Learning Objective 4
Distinguish among the problemsolving, scorekeeping, and
attention-directing roles of
management accountants.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 19
Problem Solving
This involves comparative analysis
for decision making.
This role asks: Of the several alternatives
available, which is the best?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 20
Scorekeeping
This involves accumulating data and
reporting reliable results to
all levels of management.
This role asks: How is the business doing?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 21
Attention Directing
This involves helping managers
properly focus their attention.
This role asks: Which opportunities and
problems should be emphasized first.
Attention directing should focus on all
opportunities to add value to an organization,
not just cost-reduction opportunities.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 22
Learning Objective 5
Identify four themes managers
need to consider for
attaining success.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 23
Key Themes in Management
Decision Making
Customer Focus
Value Chain
and
Supply Chain
Analysis
Key Success Factors:
Cost and Efficiency,
Time, Quality,
Innovation
Continuous
Improvement
and
Benchmarking
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 24
Customer Focus
The
The challenge
challenge facing
facing managers
managers isis to
to continue
continue
investing
investing sufficient
sufficient (but
(but not
not excessive)
excessive)
resources
resources in
in customer
customer satisfaction
satisfaction
such
such that
that profitable
profitable customers
customers
are
are attracted
attracted and
and retained.
retained.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 25
Value Chain and
Supply Chain Analysis
This theme has two related aspects:
1.
1. Treat
Treat each
each of
of the
the business
business functions
functions in
in the
the value
value
chain
chain as
as an
an essential
essential and
and valued
valued contributor.
contributor.
2.
2. Integrate
Integrate and
and coordinate
coordinate the
the efforts
efforts of
of all
all business
business
functions
functions in
in addition
addition to
to developing
developing the
the capabilities
capabilities
of
of each
each individual
individual business
business function.
function.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 26
Value Chain and
Supply Chain Analysis
Supply
Supply chain
chain –– describes
describes the
the flow
flow of
of goods,
goods,
services,
services, and
and information
information from
from cradle
cradle to
to grave,
grave,
regardless
regardless of
of whether
whether those
those activities
activities occur
occur in
in
the
the same
same organization
organization or
or other
other organizations.
organizations.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 27
Key Success Factors
These are operational factors that directly affect
the economic viability of the organization.
Cost
Quality
Cost –– organizations
organizations
Quality –– customers
customers
are
are
are under
under continuous
continuous
are expecting
expecting higher
higher
pressure
levels
pressure to
to reduce
reduce costs.
costs.
levels of
of quality.
quality.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 28
Key Success Factors
Time
Time –– organizations
organizations are
are under
under pressure
pressure to
to
complete
complete activities
activities faster
faster and
and to
to meet
meet
promised
promised delivery
delivery dates
dates more
more reliably.
reliably.
Innovation
Innovation –– there
there isis now
now heightened
heightened recognition
recognition
that
that aa continuing
continuing flow
flow of
of innovative
innovative products
products
or
or services
services isis aa prerequisite
prerequisite to
to the
the ongoing
ongoing
success
success of
of most
most organizations.
organizations.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 29
Continuous Improvement
and Benchmarking
Continuous
Continuous improvement
improvement by
by competitors
competitors creates
creates
aa never-ending
never-ending search
search for
for higher
higher levels
levels of
of
performance
performance within
within many
many organizations.
organizations.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 30
Learning Objective 6
Describe the set of business
functions in the value chain.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 31
Value Chain
The term “value chain” refers to the sequence of
business functions in which usefulness is added
to the products or services of an organization.
The term “value” is used because as the usefulness
of the product or service is increased, so is its value
to the customer.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 32
Value Chain
Management accountants provide
decision support for managers in the
following six business functions:
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 33
Value Chain
R&D
Design
Production
Management Accounting
Marketing
Distribution
Service
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 34
Value Chain Functions
Research and Development
It is the process that is conducted to generate
and experiment with ideas related to new
products, services, or processes.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 35
Value Chain Functions
Design
It is the detailed planning and engineering
of products, services, or processes.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 36
Value Chain Functions
Production
It is the acquisition, coordination, and
assembly of resources to produce
a product or deliver a service.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 37
Value Chain Functions
Marketing
It is the manner by which companies
promote and sell their products
or services to customers
or prospective customers.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 38
Value Chain Functions
Distribution
It is the delivery of products or
services to the customer.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 39
Value Chain Functions
Service
It is the after-sale support activities
provided to customers.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 40
Learning Objective 7
Describe three ways
management accountants
support managers.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 41
Key Guidelines
1. Cost-benefit approach
2. Full recognition of behavioral as well as
technical considerations
3. Using different costs for different purposes
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 42
Cost-Benefit Approach
A cost-benefit approach should be used in order
to spend resources if they promote decision
making that better attains organization goals
in relation to the costs of those resources.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 43
Behavioral and Technical
Considerations
A management accounting system should have two
simultaneous missions for providing information:
1. To help managers make wise economic decisions
2. To help managers and other employees to aim and
strive for goals of the organization
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 44
Different Costs for
Different Purposes
A cost concept used for the external reporting
purpose need not be the appropriate concept
for the purpose of internal routine reporting
to managers.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 45
Learning Objective 8
Understand how cost management
accounting fits into an
organization’s structure.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 46
Line and Staff Relationships
Line management is directly responsible for
attaining the objectives of the organization.
Staff management exists to provide advice
and assistance to line management.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 47
Line and Staff Relationships
B o a r d o f D ir e c to r s
C h a ir m a n
C h ie f E x e c u tiv e O ffic e r (C E O )
P r e s id e n t
C h ie f O p e r a tin g O ffic e r (C O O )
C h ie f F in a n c ia l O ffic e r (C F O )
C o n tr o lle r
A u d it
Tax
T reasu ry
R is k
M an agem en t
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
In v e sto r
R e la tio n s
- 48
Line and Staff Relationships
C o n tr o lle r
E x a m p le s o f F u n c tio n s :
*
*
*
*
G lo b a l F in a n c ia l P la n n in g /B u d g e tin g
O p e r a tio n s A d m in is tr a tio n
P r o fita b ility R e p o r tin g
In v e n to r y
*
*
*
*
R o y a ltie s
G en eral L ed ger
A c c o u n ts P a y a b le a n d R e c e iv a b le
S u b s id ia r y a n d L ia is o n A c c o u n tin g
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 49
Learning Objective 9
Understand what
professional ethics mean
to management accountants.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 50
Professional Ethics
Competence
Integrity
Confidentiality
Objectivity
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 51
Ethical Guidelines
The Institute of Management Accountants (IMA)
is the largest association of management
accountants in the United States.
The IMA has issued a Standards of Ethical
Conduct for Management Accountant.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 52
End of Chapter 1
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
1 - 53
in the Organization
Chapter 1
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
1-1
Learning Objective 1
Describe how cost
accounting supports
management accounting
and financial accounting.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-2
Management Accounting
It measures and reports financial and
nonfinancial information that helps
managers make decisions to fulfill the
goals of an organization.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-3
Financial Accounting
Its focus is on reporting to external parties.
It measures and records business transactions.
It provides financial statements based on
generally accepted accounting principles.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-4
Cost Accounting
It provides information for both management
accounting and financial accounting.
It measures and reports financial
and nonfinancial data.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-5
Cost Management
It describes the activities of managers in
planning and control of costs.
It includes the continuous reduction of costs.
It is a key part of general management
strategies and their implementation.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-6
Learning Objective 2
Understand how management
accountants affect
strategic decisions.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-7
Strategic Cost Management
Developing strategy
Building resources and capabilities
Implementing strategy
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-8
Strategic Cost Management
Building resources and capabilities
Current
Assets
Long-Term
Productive
Assets
Intangible
Assets
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
-9
Learning Objective 3
Distinguish between the
planning and control
decisions of managers.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 10
Planning and Controlling
Management Accounting System
Planning
Budgets
Control
Accounting
System
Performance
Evaluation
Performance
Reports
Feedback
Management Decision
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 11
Planning and Controlling
What is planning?
Setting
goals
Predicting
results
Deciding how
to attain goals
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 12
Planning and Controlling
What is control?
Deciding
and
taking
actions
Deciding on
performance
evaluation
and feedback
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 13
Planning and Controlling
What are budgets?
They are
quantitative
expressions
of a proposed
plan of action.
They aid in the
coordination
and
implementation
of the plan.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 14
Planning and Controlling
What are performance reports?
These are reports that
compare actual results
with budgeted amounts.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 15
Performance Report Example
Boone Shop, July 2003
Budget
Revenues
$59,000
Cost of goods sold 42,000
Wages
6,700
General
1,300
Fixed costs
5,000
Operating income $ 4,000
Actual
$60,000
43,400
7,000
900
5,000
$ 3,700
Variance
$1,000 F
1,400 U
300 U
400 F
0
$ 300 U
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 16
Performance Report Example
Actual cost of goods sold were
72% of revenues instead of the budgeted 71%.
Budget
% Actual
%
Revenues
$59,000 100 $60,000 100
Cost of goods sold 42,000
71 43,400
72
Gross margin
$17,000
29 $16,600
28
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 17
Feedback
This involves managers examining past performance
and systematically exploring alternative ways to
make better informed decisions in the future.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 18
Learning Objective 4
Distinguish among the problemsolving, scorekeeping, and
attention-directing roles of
management accountants.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 19
Problem Solving
This involves comparative analysis
for decision making.
This role asks: Of the several alternatives
available, which is the best?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 20
Scorekeeping
This involves accumulating data and
reporting reliable results to
all levels of management.
This role asks: How is the business doing?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 21
Attention Directing
This involves helping managers
properly focus their attention.
This role asks: Which opportunities and
problems should be emphasized first.
Attention directing should focus on all
opportunities to add value to an organization,
not just cost-reduction opportunities.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 22
Learning Objective 5
Identify four themes managers
need to consider for
attaining success.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 23
Key Themes in Management
Decision Making
Customer Focus
Value Chain
and
Supply Chain
Analysis
Key Success Factors:
Cost and Efficiency,
Time, Quality,
Innovation
Continuous
Improvement
and
Benchmarking
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 24
Customer Focus
The
The challenge
challenge facing
facing managers
managers isis to
to continue
continue
investing
investing sufficient
sufficient (but
(but not
not excessive)
excessive)
resources
resources in
in customer
customer satisfaction
satisfaction
such
such that
that profitable
profitable customers
customers
are
are attracted
attracted and
and retained.
retained.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 25
Value Chain and
Supply Chain Analysis
This theme has two related aspects:
1.
1. Treat
Treat each
each of
of the
the business
business functions
functions in
in the
the value
value
chain
chain as
as an
an essential
essential and
and valued
valued contributor.
contributor.
2.
2. Integrate
Integrate and
and coordinate
coordinate the
the efforts
efforts of
of all
all business
business
functions
functions in
in addition
addition to
to developing
developing the
the capabilities
capabilities
of
of each
each individual
individual business
business function.
function.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 26
Value Chain and
Supply Chain Analysis
Supply
Supply chain
chain –– describes
describes the
the flow
flow of
of goods,
goods,
services,
services, and
and information
information from
from cradle
cradle to
to grave,
grave,
regardless
regardless of
of whether
whether those
those activities
activities occur
occur in
in
the
the same
same organization
organization or
or other
other organizations.
organizations.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 27
Key Success Factors
These are operational factors that directly affect
the economic viability of the organization.
Cost
Quality
Cost –– organizations
organizations
Quality –– customers
customers
are
are
are under
under continuous
continuous
are expecting
expecting higher
higher
pressure
levels
pressure to
to reduce
reduce costs.
costs.
levels of
of quality.
quality.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 28
Key Success Factors
Time
Time –– organizations
organizations are
are under
under pressure
pressure to
to
complete
complete activities
activities faster
faster and
and to
to meet
meet
promised
promised delivery
delivery dates
dates more
more reliably.
reliably.
Innovation
Innovation –– there
there isis now
now heightened
heightened recognition
recognition
that
that aa continuing
continuing flow
flow of
of innovative
innovative products
products
or
or services
services isis aa prerequisite
prerequisite to
to the
the ongoing
ongoing
success
success of
of most
most organizations.
organizations.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 29
Continuous Improvement
and Benchmarking
Continuous
Continuous improvement
improvement by
by competitors
competitors creates
creates
aa never-ending
never-ending search
search for
for higher
higher levels
levels of
of
performance
performance within
within many
many organizations.
organizations.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 30
Learning Objective 6
Describe the set of business
functions in the value chain.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 31
Value Chain
The term “value chain” refers to the sequence of
business functions in which usefulness is added
to the products or services of an organization.
The term “value” is used because as the usefulness
of the product or service is increased, so is its value
to the customer.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 32
Value Chain
Management accountants provide
decision support for managers in the
following six business functions:
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 33
Value Chain
R&D
Design
Production
Management Accounting
Marketing
Distribution
Service
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 34
Value Chain Functions
Research and Development
It is the process that is conducted to generate
and experiment with ideas related to new
products, services, or processes.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 35
Value Chain Functions
Design
It is the detailed planning and engineering
of products, services, or processes.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 36
Value Chain Functions
Production
It is the acquisition, coordination, and
assembly of resources to produce
a product or deliver a service.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 1
- 37
Value Chain Functions
Marketing
It is the manner by which companies
promote and sell their products
or services to customers
or prospective customers.
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Value Chain Functions
Distribution
It is the delivery of products or
services to the customer.
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Value Chain Functions
Service
It is the after-sale support activities
provided to customers.
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Learning Objective 7
Describe three ways
management accountants
support managers.
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Key Guidelines
1. Cost-benefit approach
2. Full recognition of behavioral as well as
technical considerations
3. Using different costs for different purposes
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Cost-Benefit Approach
A cost-benefit approach should be used in order
to spend resources if they promote decision
making that better attains organization goals
in relation to the costs of those resources.
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Behavioral and Technical
Considerations
A management accounting system should have two
simultaneous missions for providing information:
1. To help managers make wise economic decisions
2. To help managers and other employees to aim and
strive for goals of the organization
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Different Costs for
Different Purposes
A cost concept used for the external reporting
purpose need not be the appropriate concept
for the purpose of internal routine reporting
to managers.
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Learning Objective 8
Understand how cost management
accounting fits into an
organization’s structure.
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Line and Staff Relationships
Line management is directly responsible for
attaining the objectives of the organization.
Staff management exists to provide advice
and assistance to line management.
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Line and Staff Relationships
B o a r d o f D ir e c to r s
C h a ir m a n
C h ie f E x e c u tiv e O ffic e r (C E O )
P r e s id e n t
C h ie f O p e r a tin g O ffic e r (C O O )
C h ie f F in a n c ia l O ffic e r (C F O )
C o n tr o lle r
A u d it
Tax
T reasu ry
R is k
M an agem en t
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R e la tio n s
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Line and Staff Relationships
C o n tr o lle r
E x a m p le s o f F u n c tio n s :
*
*
*
*
G lo b a l F in a n c ia l P la n n in g /B u d g e tin g
O p e r a tio n s A d m in is tr a tio n
P r o fita b ility R e p o r tin g
In v e n to r y
*
*
*
*
R o y a ltie s
G en eral L ed ger
A c c o u n ts P a y a b le a n d R e c e iv a b le
S u b s id ia r y a n d L ia is o n A c c o u n tin g
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Learning Objective 9
Understand what
professional ethics mean
to management accountants.
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Professional Ethics
Competence
Integrity
Confidentiality
Objectivity
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Ethical Guidelines
The Institute of Management Accountants (IMA)
is the largest association of management
accountants in the United States.
The IMA has issued a Standards of Ethical
Conduct for Management Accountant.
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End of Chapter 1
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