2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-1Introduction to Cost AccountingMaryanne M. MowenMowen and Don R. and Don R. HansenHansen 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-2 Introduction to Cost Management1 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-3Financial Accounting Versus Financial Accounting Versus Management Accounting: A Management Accounting: A Systems FrameworkSystems FrameworkAccounting information systemsFinancial accountingProduces outputs for external users. Follows rules and conventions such as those set by the SEC and FASB. Creates outputs such as financial statements. Cost management accountingProduces outputs for internal users. Designed to cost services, products and other objects. Is used in planning and control and decision making. Criteria and formats set internally. Outputs include reports, schedules and analyses.1 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-4Cost management accounting information systemTwo major subsystemsCost accounting information systemAssigns costs to individual products and services. Assists external financial reporting by valuing inventories and determining cost of sales. These assignments must conform to external rules. Operational control information systemProvides accurate and timely feedback concerning performance. Improve profit by increasing customer value.1 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Factors Affecting Cost ManagementGlobal CompetitionThe new competitive environment has increased the demand not only for more cost information but also for more accurate information.Vastly imported transportation and communication has led to a global market for many manufacturing and service firms.1-52 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-6Factors Affecting Cost ManagementGrowth of the Service Industry2As the traditional industries has declined in importance, the service sector of the economy has increased in importance.Deregulation of many services has increased competition in the service industry. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-7Factors Affecting Cost ManagementAdvances in Information Technology2Computers are used to monitor and control operations. The result is an operational system that is fully integrated with marketing and accounting data.Increased ability to accurately cost products because of advances in tools.Emergence of e-commerceInternet tradingElectronic data interchangeBar coding 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-8Factors Affecting Cost ManagementAdvances in Management Environment2The theory of constraints is a method used to continuously improve manufacturing activities and nonmanufacturing activities.Just-in-time manufacturing is a demand-pull system that strives to produce a product only when it is needed and only in the quantities demanded by customers.Computer-integrated manufacturing is the automation of the manufacturing environment. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-9Factors Affecting Cost ManagementCustomer Orientation2Firms are competing not only in terms of technology and manufacturing, but in the speed of delivery and response to deliver value to the customer.Companies must also satisfy the needs of internal customers, such as staff functions exist to support line functions.New Product DevelopmentManagement recognizes that a high proportion of production costs are committed during the development and design stage of a new product.The requirement to control cost encourages the use of target costing and activity-based management. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-10Factors Affecting Cost ManagementTotal Quality Management2Continual improvement and elimination of waste are the two foundation principles that govern a state of manufacturing excellence.A philosophy of total quality management, in which managers strive to create an environment that will enable organizations to manufacture perfect products, has replaced the acceptable quality attitudes of the past. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-11Factors Affecting Cost ManagementTime as a Competitive Element2Time is the crucial element in all phases of the value chain.Decreasing non-value-added time appears to go hand-in-hand with increasing quality.EfficiencyWhile quality and time are important, improving these dimensions without corresponding improvements in financial performance may be futile, if not fatal. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-12The Role of the Management Accountant3Line positions are positions that have direct responsibility for the basic objectives of an organization.Staff positions are positions that are supportive in nature and have only indirect responsibility for an organizations basic objectives. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-13The Role of Todays Cost and Management Accountant3Partial Organizational Chart: Manufacturing Company 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Role of Todays Cost and Management AccountantThe ControllerFinancial reportsSEC reportingTax planning and reportingPerformance reportingInternal auditingBudgeting Accounting systems and internal controlsThe TreasurerCollection of cashMonitoring of cash paymentsMonitors cash availabilityShort-term investmentsShort and long-term borrowingIssuing of capital stock1-143 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-15Information for Planning, Controlling, Continuous Improvement, and Decision Making3Planning is the detailed formulation of future actions to achieve a particular end. Planning requires setting objectives and identifying methods to achieve those objectives.Controlling is the managerial activity of monitoring a plans implementation and taking corrective action as needed.Feedback is information that can be used to evaluate or correct the steps being taken to implement a plan. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-16Information for Planning, Controlling, Continuous Improvement, and Decision Making3Continuous improvement is required in a dynamic environment if a firm is to remain competitive or to establish a competitive advantage.Decision making is the process of choosing among competing alternatives 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-17Accounting and Ethical Conduct4Benefits of Ethical BehaviorCan create customer and employee loyaltyAvoid litigation costs 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-18Accounting and Ethical Conduct4Standards of Ethical Conduct for Management AccountantsCompetenceConfidentialityIntegrityCredibility 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-19Certification5CMA: One of the main purposes of the CMA was to establish management accounting as a recognized, professional discipline, separate from the profession of public accounting.CPA: The responsibility of a CPA is to provide assurance concerning the reliability of financial statements.CIA: The focus of the CIA is to recognize competency in internal auditing rather than external auditing as with the CPA. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-20Certification51)Business analysis2)Management accounting and reporting3)Strategic management4)Business applicationsFour areas emphasized on the CMA exam: 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-21 End of Chapter 1