managerial accounting for managers epub

managerial accounting for managers epub

Strategic Managerial Accounting for Effective Decision Making

1. Introduction to Managerial Accounting

Managerial accounting information tends to be focused on operational performance and is not intended to be used by investors. As a result, a greater degree of managerial accounting information can consist of estimates and speculative information. Managerial accounting reports can take many forms. At some businesses, budgets or forecasts provide much of the managerial accounting information. At other businesses, detailed reports of per-unit cost of the products or services produced serve as focus for managerial accounting. At still other businesses, actual performance is compared to other companies in related industries, which is another possible source of information. Always, the information that comes from managerial accounting reports is tied closely to the specific needs of the managers in charge of creating and operating the detailed activities of the business.

1.1 Managerial Accounting Defined Managerial accounting (also called management accounting) is the branch of accounting that focuses on providing information for decision makers inside the organization. This area of accounting includes many facets, such as planning, budgeting, and cost control. Managerial accounting is not governed by generally accepted accounting principles (GAAP). Instead, the standards and practices of managerial accounting are developed by the individual business, and these practices vary from business to business. Whereas financial accounting follows GAAP, managerial accounting uses information as needed by the business. Financial accounting reports provide information to parties outside the organization. In many businesses, managerial accounting information is not distributed beyond the business.

Introduction Managerial accounting is essential for making sound business decisions. Understanding managerial accounting helps businesses prepare budgets, develop business plans, generate financial statements and reports, and monitor financial performance. Organizations can use managerial accounting to identify how well they are maintaining cost targets, performance, efficiency, and competitive standing. Helping managers improve planning and control activities can lead to substantial financial benefits.

2. Cost Concepts and Analysis for Decision Making

Even though decision rules are easy to apply once the concepts underlying strategic managerial accounting are understood, the focus of the course is to examine these concepts and enhance your problem-solving abilities. As you build your problem-solving capabilities, also focus your learning on the objective of using accounting information to improve management decisions. The primary emphasis is on economic decisions, such as pricing and product mix, maximizing the contribution margin from business unit operations.

A manager is a better decision maker if the cost in the decision-making process is understood. Strategic managerial accounting is the process of generating accounting information that is useful to both external parties and internal managers in making economic decisions regarding the value-creating activities of a business. The purpose of this course is to increase your knowledge of management accounting and to help you develop your capabilities to apply accounting in the decision-making process. The study of strategic managerial accounting contains many different terms and involves the presentation and discussion of many complex models. The benefits of learning strategic management accounting will be acquired only through experience and practice.

3. Budgeting and Performance Evaluation

Time-driven activity-based costing as a system of creating and managing value is a method used in healthcare units in the developed countries because it enables healthcare organization management to make customer-driven choices and create unique combinations of tailored healthcare services while seeking different cost solutions to reach guaranteed and high-level resource-level requirements. TDABC enables management to validate healthcare systems that are increasingly streamlined and sustainable regarding the economic and social outcomes. In Romania, the use of such a management accounting model in healthcare implies the opportunity to quantify, compare, validate, and control sustainable healthcare choices ahead regarding the triple-bottom line—economic, social, and ecological in any given period—and for each examined period.

Applying time-driven activity-based costing in a healthcare organization enables cost efficiency increases and cost controlling, two equally important processes, which are essential for achieving competitive advantages and increased economic outcomes for the hospital. When implementing TDABC, first, the healthcare organization should define its main value chain as well as the main logistical processes in the three lines of healthcare. In the TDABC method, start-up costs are among the key elements, and the spiral distribution of service costs is among the key elements of the distribution process which affect the total costs. Establishing a cost-efficient Case-Mix system is a major asset to optimized cost; thus, the process of costs per patient by estimating the average service margin. Keys for success in managing healthcare services are customer needs and expectations, time requirements, cost efficiency, and establishing guaranteed resource-levels using high technology innovation.

4. Strategic Planning and Control Systems

Planning starts with clear definitions of all factors causing influence on future occurrences. Their influence on achievements anticipated will be expressed in certain forecasts. Such forecasts represent the best intelligence to support correlated strategy options analyses. Each strategy does contain a package of possible decisions leading to the preferred corporate strategic identity. Control enables to eliminate the present corporate identity – structural and comparative deviations, and strategic implementation management provides the same opportunity in the future. The main difference between control and planning lies in the possibilities to affect results. Planning may be implemented easily by correction. Control may be implemented only in case of anticipation of deviation.

Q4: The strategic planning system should be organized so as to make it possible for the top management to concretize over a period the corporate objectives; to identify strategically critical factors in the environmental circumstances; to utilize certain means of interacting with these factors and to recognize other means used by competitors as well as means to oppose these competitors; to build a strategic plan, which is a set of synchronized decisions and actions of a different nature at various stages of fixating new objectives, introvision, providing the resources, and achieving the same. It should be noted that any long-term strategic directions tunnel the overall strategic plan.

5. Contemporary Issues in Managerial Accounting

Today’s managers are constantly being bombarded with ads for the latest in accounting techniques, including target costing, life-cycle costing, the theory of constraints, service department cost allocations, and other advanced accounting topics. Although they appear to be new, the concepts behind these accounting topics have their foundation in managerial accounting. No one knows for certain where or when managerial accounting began. Many authors consider the ideas of Frederick W. Taylor to be the birth of managerial accounting. Others attribute the beginning of managerial accounting to the DuPont Corporation’s establishment and use of the return on investment concept. Whatever their origins, many of the tools used by today’s strategic management accountant were up and running long before today’s managers were active in business. Late in the 1950s, “profound changes in the economics of the industrial world” began to transform strategic managerial accounting into a “vibrant and rapidly growing employment and intellectual opportunity.” In brief, changes in the business environment were driving the changes in managerial accounting theory and practice that led to the birth of strategic management accounting.

Contemporary issues in managerial accounting are discussed. Topics related to activity-based management, target costing, life-cycle costing, the theory of constraints, service department cost allocations, and other advanced accounting topics are presented. The concepts of reengineering, just-in-time, and the balanced scorecard are also included. Special consideration is given to how these management techniques are used by leading-edge companies to make strategic, tactical, and operational decisions to gain strategic advantage.