Chapter 1 Overview

The four standards of ethical conduct for management accountants as advanced by the Institute of Management Accountants (IMA) are:

1. Competence 2. Confidentiality 3. Integrity 4. Credibility

Key Success Factors

1. Cost and efficiency 2. Quality 3. Time 4. Innovation 5. Sustainability ------------------------------------------------------- Note: Two important elements of time: - New-Product Development Time - Customer-Response Time

Customer Relationship Management (CRM)

A strategy that integrates people and technology in all business functions to deepen relationships with customers, partners, and distributors. ------------------------------------------------------- Note: This strategy has initiatives that use technology to coordinate all customer-facing activities and design and production activities necessary to et products to customers.

Production

Acquiring, coordinating, and assembling resources to produce a product or deliver a service

Total Quality Management (TQM)

An integrative philosophy of management for continuously improving the quality of products and processes.

Cost-Benefit Approach

Approach to decision-making and resource allocation based on a comparison of the expected benefits from attaining company goals and the expected costs.

Distribution

Delivering products or services to customers

Strategic Cost Management

Describes cost management that specifically focuses on strategic issues.

Supply Chain

Describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations.

Increase sales commission rates by 4%.

Determine which of the following is a decision that would be made by a company as part of the five-step decision-making process. ------------------------------------------------------- The company will likely experience an increase in the cost of raw materials from suppliers. Sales revenues are 4.2% lower than budgeted. An increase of 4.5% of cost is expected. Increase sales commission rates by 4%.

Planning

Electing organization goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to attain them to the entire organization.

Chief Financial Officer (CFO or Finance Director)

Executive responsible for overseeing the financial operations of an organization. Also called finance director.

Research & Development (R&D)

Generating and experimenting with ideas related to new products, services, or processes.

It refers to how an organization creates value for its customers while distinguishing itself from competitors.

Identify the statement that best describes business strategy. --------------------------------------------------- It refers to generating and experimenting with ideas related to new products, services, or processes. It refers to how an organization creates value for its customers while distinguishing itself from competitors. It is the measure to analyze and report the financial and nonfinancial information related to the costs of acquiring or using resources in an organization. It refers to the usual order in which different business-function activities physically occur.

Learning

Involves managers examining past performance and systematically exploring alternative ways to make better-informed decisions and plans in the future.

Line Management

Managers who are directly responsible for attaining the goals of the organization. ------------------------------------------------- (for example, in production, marketing, or distribution)

Financial Accounting

Measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP). It focuses on reporting to external parties such as investors and banks.

Cost Accounting

Measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. It provides information for both management accounting and financial accounting.

Management Accounting

Measures, analyzes, and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. It focuses on internal reporting. --------------------------------------------------- Managers use management accounting information to: - Develop, communicate and implement strategies - Coordinate product design, production, and marketing decisions and evaluate a company's performance

Marketing

Promoting and selling products or services to customers or prospective customers

Customer Service

Providing after-sale support to customers

Budget

Quantitative expression of a proposed plan of action by management for a specified period and an aid to coordinating what needs to be done to implement that plan. Or is the qualitative expression of a proposed plan.

Strategy

Specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. There are two broad strategies: - Cost Leadership - Product Differentiation

Staff Management

Staff who provide advice and assistance to line management. ------------------------------------------------ (such as management accountants and human resources managers)

Control

Taking actions that implement the planning decisions, deciding how to evaluate performance, and providing feedback and learning that will help future decision making.

Cost Management

The approaches and activities of managers to use resources to increase value to customers and to achieve organizational goals.

Design of Products & Proceses

The detailed planning and engineering of products and processes.

Sustainability

The development and implementation of strategies to achieve long-term financial, social, and environmental goals.

Controller (A.k.A. Chief Accounting Officer)

The financial executive primarily responsible for management accounting and financial accounting. Also called chief accounting officer.

refrain from engaging in any conduct that would prejudice carrying out duties ethically

The integrity standard in the IMA Statement of Ethical Professional Practice specifies that each member of the IMA has a responsibility to __________. ------------------------------------------------------- provide decision support information and recommendations that are accurate, clear, concise, and timely communicate information fairly and objectively perform professional duties in accordance with relevant laws, regulations, and technical standards refrain from engaging in any conduct that would prejudice carrying out duties ethically

Value Chain

The sequence of business functions by which a product is made progressively more useful to customers. Value Chain Consist of: Research and Development Design of Products & Processes Production (Purchases) Marketing Distribution Customer Service

To help managers make decisions to fulfill an organization's goals

What is the purpose of management accounting? ------------------------------------------------------- To assist investors to implement investment strategies To help managers make decisions to fulfill an organization's goals To aid managers in communicating an organization's financial position to external parties To fulfill the financial reporting regulatory requirements

Procurement of raw materials

Which of the following activities belongs to the production function? ----------------------------------------------------- Shipping finished products to retail outlets Advertising in newspapers Processing of orders Procurement of raw materials

Using total quality management, companies design products or services to meet customer needs and wants, and to maximize inventories.

Which of the following is NOT a true statement? --------------------------------------------------- Total quality management includes making products with zero (or very few) defects and waste. Managers who implement total quality management believe that every person in the value chain is responsible for delivering products and services that exceed customers' expectations. Customer relationship management is a strategy that integrates people and technology in all business functions to deepen relationships with customers, partners, and distributors. Using total quality management, companies design products or services to meet customer needs and wants, and to maximize inventories.

Communicates financial results and position to external parties.

Which of the following is not a primary function of the management​ accountant? Aids in the decision making to help an organization meet its goals. Communicates financial results and position to external parties. Uses information to develop and implement business strategy. Provides input into an​ entity's production and marketing decisions.

Preparing financial statements

Which of the following is primarily the responsibility of the controller of a company? --------------------------------------------------- Managing exchange rate risk Planning income taxes, sales taxes, and international taxes Preparing financial statements Overseeing banking and short-term and long-term financing

Management accounting reports are prepared based on cost-benefit analysis.

Which of the following is true about the reporting of management accounting? ------------------------------------------------------- Management accounting reports must be prepared in accordance with GAAP. Management accounting must be communicated to all shareholders. Management accounting reports must be certified by external or independent auditors. Correct answer Management accounting reports are prepared based on cost-benefit analysis.

Distribution

Which of the following primary business functions includes processing orders? ------------------------------------------------------- Customer service Production Distribution Marketing

The controller

Which of the following reports directly to the chief financial officer of a company? -------------------------------------------------- The board of directors The controller The chief executive officer The external auditors

Budgets have a behavioral effect by motivating and rewarding employees for achieving an organization's goals.

Which of the following statements is true about key management accounting guidelines? ----------------------------------------------------- Costs such as the time spent by managers on the budgeting process may be more difficult to quantify, thus should be avoided when making decisions. Budgets have a behavioral effect by motivating and rewarding employees for achieving an organization's goals. No matter how different the situations are, managers should use a consistent way to compute costs in all decision-making situations. If all benefits and costs are not easy to quantify, a cost-benefit approach should not be used by managers when making decisions.

The Sarbanes-Oxley Act requires the company's chief executive officer and chief financial officer to certify that the financial statements fairly represent the results of the company's operations.

Which of the following statements is true about the Sarbanes-Oxley Act? ----------------------------------------------------- The Sarbanes-Oxley Act requires the company's chief executive officer and chief financial officer to certify that the financial statements fairly represent the results of the company's operations. The Sarbanes-Oxley Act authorizes the Public Company Accounting Oversight Board to oversee, review, and investigate the work of a company's chief executive officer. The Sarbanes-Oxley Act does not limit auditing firms from providing consulting, tax, and other advisory services to the companies they audit. The Sarbanes-Oxley Act empowers the chief executive officer to hire, compensate, and terminate the public accounting firm auditing the company.

Shorter product life cycles present a challenge to achieving sustainability for companies.

Which of the following statements is true? ----------------------------------------------------- The increasing pace of technological innovation has led to longer product life cycles. Sustainability is not generally included in the key success factors of companies. Shorter product life cycles present a challenge to achieving sustainability for companies. Customer and investor interest in the sustainability records of companies has generally been decreasing.

The chief financial officer

Which of the following usually oversees banking and short-term and long-term financing, investments, and cash management of a company? ------------------------------------------------------- The controller The chief financial officer The internal auditor The chief accounting officer

The Supply chain

__________ is the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers. ----------------------------------------------------- The value chain The supply chain Customer relationship management The administration function

Value

is the usefulness a customer gains from a company's product or service. The entire customer experience determines the value a customer derives from a product.