Managerial Accounting - Module 1 (Ch. 17) Sec. 2: Planning, Directing, And Controlling

Introduction

• Lecturer: Larry Walter
• Focus: Managerial accountants' role in planning, directing, and controlling.
• Importance: Good management requires vision, leadership, resource mobilization, and adaptability.

Management Functions

Planning

• Definition: Deciding on a course of action to achieve desired outcomes.

• Key Elements:

  • Strategy
  • Positioning
  • Financials (Budgets)

  Strategy

  • Establishing core values:
    • Ethics, employment, compensation, quality, customer service, environmental awareness, etc.
    • Core values prevent short-term profit-centric behavior.
    • Institute of Management Accountants emphasizes ethical principles.
  • Establishing the organization's mission: Definition of purpose and direction.

  Positioning

  • Data-intensive process.
  • Involves cost-volume-profit analysis, scalability evaluations, global trade, branding, pricing, and competitive forces.

  Financial (Budgets)

  • Types of Budgets:
    • Operating: Expected revenues and expenses.
    • Capital Expenditures: Long-term focus on assets like plants or equipment.
    • Financial: Expected cash needs.

Directing

• Key Elements:

  • Costing
  • Production
  • Analysis

  Costing

  • Collection, assignment, and interpretation of costs.
  • Types of costing methods:
    • Job order costing
    • Process costing
    • Activity-based costing
  • Concepts:
    • Absorption costing
    • Direct costing

  Production

  • Running a lean business: Minimize costs, maximize efficiency, and maintain high quality.
  • Involves inventory management and responsibility accounting.
  • Key topics: Just-in-time inventory, economic order quantities, service department cost allocation, quality components.

  Analysis

  • Supports decision-making through calculations and models.
  • Topics: Outsourcing decisions, contribution margin analysis, segment continuation, special order acceptance.

Controlling

• Key Elements:

  • Monitoring
  • Reliability of reporting
  • Balanced scorecard approach

  Monitoring

  • Standard cost variance analysis and flexible tools to monitor organizational activities.
  • Accountants' role in maintaining reliable reporting processes.

  Balanced Scorecard

  • Considers multiple dimensions besides financial measures.
  • Promotes continuous improvement.

Conclusion

• Insight into the broad scope of managerial accounting activities.
• Emphasizes the differences from financial accounting.