[Music] I'm Larry Walter and this is principles of accounting comm chapter 17 in this module we will consider the managerial accountants role in the tasks of planning directing and controlling it's very important to see that managing goes beyond simply dealing with problems at hand good management needs vision needs to provide leadership have the ability to procure and mobilize resources and a tolerance for change and challenges that arise if you consider this graphic notice that it's intended to indicate that management decisions drive business value but management decisions relate to planning the business activity directing the business activity and controlling the business all three of those dimensions are supported in fact define managerial accounting functions let's first focus on the planning dimension planning is simply deciding on a course of action to reach a desired outcome it's the blueprint it's the roadmap planning can occur at all levels if we look at the next graphic we'll see three major focuses one is setting strategy for the organization another is trying to position the business to be successful and the third is a financial component which I've called budgets let's first think about the strategy dimension strategy can take many forms but I want to focus on setting the core values and then setting the mission first of all I want you to think about core values and how important they are they involve the concepts of ethics employment and compensation quality customer service environmental awareness and many other dimensions a lack of understanding of these important dimensions often leads to short-term profit centric behavior the results of which can be disastrous to the long-term viability of the business the Institute of Management Accountants is a professional organization that supports the managerial accounting profession and so important is an understanding of core values that they've established ethical principles that they expect their members to here to another dimension the strategy is establishing an organization's mission that is definition of purpose and direction for the entity moving on to consideration of positioning the organization and how the managerial accountant might be involved in that recognize that this is often a data intensive process gathering and evaluating a host of information when one thinks about how the managerial account is involved in positioning the organization they'll often perform cost-volume-profit analysis and evaluations of business scalability they'll often look at global trade and transfer issues they'll often look at branding pricing issues and sensitivity to pricing and evaluation of competitive forces that exist each of these will be examined in subsequent chapters in the book the third dimension to planning involves budgeting or the financial component budgets can take many forms the operating budget reveals expected revenues and expenses capital expenditures take a longer-term focus for example the acquisition of new plants or equipment the financial budget looks at expected cash needs of the organization all three of these types of budgets will be considered in future chapters let's move on to the second major dimension of managing a business that is directing the operations here the accountant is heavily involved in three key dimensions costing activities production activities and analysis we're going to be looking at all this very closely throughout the course but for the moment let me give some definitions cost accounting is the collection assignment and interpretation of cost it's a component of the managerial accounting function the costing function is perhaps more involved than you would initially anticipate first of all there are a variety of costing methods job order costing or job costing process costing activity-based costing all three of these will be considered further in the book and there are two major concepts of costing absorption costing and direct costing both of which will be examined very closely another dimension to the directing activities of a business relates to production sometimes it can be said that one is trying to run a lean business where costs are minimized efficiency is maximized and we have Stan nice high quality output and customer satisfaction dimensions to achieve these goals production can involve inventory management issues and responsibility accounting we will look in the book at just-in-time inventory economic order quantities a service department cost allocation and other quality components the third component to directing a business relates to analysis where we provide calculations and models to support the decision making function again the managerial accountant is involved in tasks related to this you've heard of outsourcing we'll want to be able to examine the decision making process related to whether we produce internally or contract with someone else to deliver some component we'll want to look at contribution margin analysis to determine whether a particular segment should be continued or not and whether we accept a special order or not let's move on to the third dimension planning directing finally controlling controlling can take on a number of dimensions monitoring an organization we'll see in subsequent chapters how we use standard cost variance analysis and flexible tools to monitor what's going on within an organization we'll also consider the accountants role in certifying and determining or maintaining the reliability of the reporting process and finally we'll look at a scorecard approach or we look at many dimensions besides financial measures that we're going to consider a balanced scorecard approach as well as opportunities for continuous improvement to conclude hopefully this module has provided some insight into the vast range of activities that the managerial accounting function involves and its unique characteristics relative to financial accounting which you studied in the previous course