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Chapter 1

ACC406 - Chapter 1.docx

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Department
Accounting
Course Code
ACC 406
Professor
All Accounting410

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CHAPTER 1 - INTRODUCTION TO M ANAGERIAL ACCOUNTING What is Managerial Accounting? Managerial accounting for internal users (managers, executives and workers)  Not bound by any formal system such as GAAP or IFRS  Financial + nonfinancial information; subjective  Emphasis on the future  Deals with specific decisions, departments, products and jobs Financial accounting is for external users (investors, creditors and suppliers)  Information is historical  Follows externally imposed rules  Focuses on overall performance, aggregated viewpoint Three objectives: 1. To provide information for planning the organization’s actions 2. To provide information for controlling the organization’s actions 3. To provide information for making effective decisions Planning requires setting objectives and identifying methods to achieve those objectives Controlling refers to a plans implementation and monitoring by managers to ensure that it is being carried out as intended. Based on feedback managers may decide to take corrective action and do midstream replanning. Decision Making is the process of managers choosing among competing alternatives. Activity-based costing (ABC)  More detailed approach to determining the cost of goods and services  Emphasizing cost of activities / task that must be done to produce a product or offer a service  Focus on the way companies create value for customers, find ways to perform necessary activities more efficiently to eliminate things which do not create value Customer Orientation Customer Value = What Customer Receives – What Customer Gives Up Customer value deals with both tangible and intangible benefits that a customer receives and what they have to give up (time, money, opportunity cost, etc.) Strategic Positioning 1. Cost leadership provide the same or better value to customers at a lower cost 2. Superior products through differentiation strives to increase customer value by providing something to customers not provided by competitors The Product Life Cycles 1. Conception 2. Introduction into the market 3. Growth 4. Maturity 5. Decline 6. Withdrawal from the market The Value Chain refers to the set of business functions that add value to an organization’s product or service Design > Develop > Produce > Market > Deliver  Inbound Logistics Raw material and goods are received from the company’s suppliers  Operations Goods are manufactured or assembled  Outbound Logistics Sending finished goods to wholesaler, retailer to final customer  Marketing and Sales developing a marketing communications and promotions mix to meet the needs of targeted customers  Service providing customers with installation, after-sale service, complai
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