Title [NOTES] MAS.pdf ✅

BASIC CONSIDERATION IN MAS Basic Management Functions and Concepts Functions of the Managerial Accountant Remember: Consultant → Consultancy Services Controller → Works under the company TOP LEVEL PLANNING Covers at least 5 years (long-range objectives) Embodied by company vision and mission BUSINESS-LEVEL STRATEGY Focuses on how to attain and satisfy customers Focuses on increasing profits CORPORATE- LEVEL STRATEGY Make business decision that affects the whole comp. Short-term decisions to achieve long-term goals OBJECTIVES Specific Measurable Attainable Realistic Time-bound BASIC FUNCTIONS OF MANAGEMENT (POSDC) Planning Plan course of action to achieve goals Organizing Bringing together the resources (physical, financial, and human) Staffing Manning the organization structure Directing 1Supervision, 2Motivation, 3Leadership, and 4Communications Controlling Measurement of achievement against standards Financial, Management, and Cost Accounting Financial Accounting vs. Management Accounting FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING External Users Internal Users Summarize past transactions Strong emphasis on the future Data should be objective and verifiable Data should be relevant Focuses on precision Focuses on timeliness of information Reporting for company as a whole Focuses on segments of a company Must conform with reporting standards Does not conform with reporting standards Mandatory Not mandatory Financial Accounting vs. Cost Accounting FINANCIAL ACCOUNTING COST ACCOUNTING Assist external users with decision Has internal focus Management Accounting vs. Cost Accounting MANAGEMENT ACCOUNTING COST ACCOUNTING Concerned with how cost information is used for planning, controlling, and decision-making Attempts to satisfy costing objectives for both financial and management accounting Roles and Functions TREASURER CONTROLLER Financial Management Accounting-related function Involves collection/disb of cash Utilization of company resources ➢ Provision of capital ➢ Planning and control ➢ Investor Relation ➢ Reporting and interpreting ➢ Short-term financing ➢ Evaluating and consulting ➢ Banking and custody ➢ Tax administration ➢ Credit and Collection ➢ Government reporting ➢ Investments ➢ Protection of assets ➢ Insurance ➢ Economic approval LINE STAFF Vested with authority to decide Provides support services Downward authority Upward support Directly responsible in attaining corporate objectives Provides consultancy functions Front-line Back-end support Manufacturing, Marketing, Operating, Production, & Selling Finance and Accounting Functions Other Considerations STRATEGIC DECISIONS (5 Stages of the Process) Clarify your vision (VM statement) Gather and analyze information Formulate a strategy (look for competitive edge) Implement strategy Evaluate and control VM STATEMENT Mission Defines business, objectives, and approach to reach objectives Vision Desired future position MICHAEL PORTER’S 3 GENERIC STRATEGIES Cost Leadership Great quality and affordable Differentiation Innovative but less affordable Cost Focus Niche Market and affordable Differentiation Focus Niche market and innovative IDENTIFYING & BUILDING RESOURCES & CAPABILITIES Strategic Analysis Achieved by SWOT Analysis Balance Sheet info about the ff Current resources Long-term productive assets Intangible assets MICHAEL PORTER’S 5 COMPETITIVE FORCES Competition in the industry Potential of new entrants into an industry Power of suppliers Power of customers Threat of substitutes BCG GROWTH- SHARE MATRIX STARS | High Growth Potential - High Market Share ??? | High Growth Potential - Low Market Share CASH COWS | Low Growth Potential - High Market Share DOGS | Low Growth Potential - Low Market Share Roles of Management Accountant in Implementing Strategies A. Implementing Strategy B. Support Managers by Providing Information C. Enhances Value of Management Accounting Systems A. IMPLEMENTING STRATEGY Planning Thinking process Communicate goals and how to attain them Control Take actions to implement planning decisions Decide on performance evaluation Feedback Link planning and control to help future decision-making B. SUPPORT MANAGERS BY PROVIDING INFORMATION 3 Roles for success Problem Solving Emphasized by strategy and Scorekeeping planning Attention-directing Emphasized by control C. ENHANCE VALUE OF MGMT ACCOUNTING SYSTEMS Customer focus Value chain and Supply chain Analysis Add value through Research and development Design of products, service, and process Production Marketing Distribution Customer Service Managers are customers of management accounting info Key Success Factors Cost and Efficiency Quality Time Innovation Continuous Improvement and Benchmarking
Other concepts MAIN BODIES THAT OFFER CMA CERTIFICATION Institute of Management Accountants USA Institute of Certified Management Accountants Australia Certified Management Accountants of Canada Chartered Institute of Management Accountants of UK IMA’S OVERARCHING ETHICAL PRINCIPLES (violation is NOT ground for revocation of certificate) [HFOR] Honesty Fairness Objectivity Responsibility STANDARDS [CCIC] Competence Maintain appropriate level of professional expertise (CPD) Perform duties in accordance to laws, regulations, and standards Decision support info must be accurate, clean, concise, and timely Recognize limitations that would preclude responsible judgement Confidentiality Keep information confidential unless authorized or legally required Inform relevant parties regarding appropriate use of confidential info Monitor subordinates’ activities to ensure compliance Refrain from using for unethical or illegal advantage Integrity Mitigate actual conflicts of interest Refrain conduct that would prejudice carrying out duties ethically Abstain from activities that might discredit the profession Credibility Communicate information fairly and objective Disclose all relevant info that could influence users’ understanding Disclose delays or deficiencies in information Resolution of Ethical conflict 1 Discuss issue with immediate supervisor unless said supervisor is involved 2 Clarify ethical issues by initiating confidential discussion with an IMA ethics counselor or other impartional advisor 3 Consult own attorney as to legal obligations and rights 7 Global Trends in Management Accounting 1 The shift to predictive accounting 2 Business Analytics Embedded In Enterprise Perf. Mgmt. Methods Primary Method of Business Analysis Descriptive Predictive Prescriptive Benefits of Business Analytics More informed decision-making Greater revenue Improved operational efficiency 3 Managing information technology and shared services as business 4 Expansion from product to channel and customer profitability analysis 5 Co-Existing and Improved Management Accounting Methods Stage 1 (Prior to 1950) Cost determination and financial control Stage 2 (By 1965) Provision of information for management planning and control Stage 3 (By 1985) Reduction of waste in resources used in business processes Stage 4 (By 1995) Generation or creation of value 6 Mgmt Acco’s Expanding Role W/ The Enterprise Perf Mgmt Main themes of EPM Target setting Integrated business planning Performance Measurement and Reporting (PMR) Analytics 7 The need for better skills and competency with behavioral change management Roles of Managers and Supervisors in times of change Communicator about the change Advocate for the change Coach for employees Liaison for the project team Resistance manager
VARIABLE AND ABSORPTION COSTING INITIAL MEASUREMENT ABSORPRTION COSTING VARIABLE COSTING Conventional Format Contribution Margin Format Used for external reporting Useful for Management Accounting Segregates cost according to function Segregates cost according to behavior POINT OF DIFFERENCE ABSORPTION COSTING VARIABLE COSTING THROUGHPUT COSTING SUPER ABSORPTION COSTING DM Product Product Product Product DL Product Product Period Product VAR OH Product Product Period Product FIXED OH Product Period Period Product VAR SAE Period Period Period Production cost provided, value adding. FIXED SAE Period Period Period USED IN DECISION- MAKING External reporting Internal reporting Theory of Constraints Life Cycle costing REMINDERS > PRODUCT COST ➔ → Inventories ➔ → Charged against revenues at point of sale > PERIOD COST → Outright expense > Variable Costing = Direct Costing > Throughput Costing = Engineering Approach > Fixed Overhead → Only difference of Absorption & Variable Costing > If VSAE is given on per unit basis → multiply by UNITS SOLD > Only VAE is given on per unit basis → multiply by UNITS PRODUCED > Throughput Costing → Product Cost x Units Produced > Variable Costing → Always Understated (Rationale: FOH is exp outright) Relationship Between Net Income and Inventories PRODUCTION AND SALES NET INCOME INVENTORIES A P = S AC = VC EI = BI B P > S AC > VC EI > BI C P < S AC < VC EI < BI Costing CAPACITY LEVELS FOR ALLOCATION OF FOH Theoretical Capacity 100% efficiency on production Practical Capacity Allowance for downtime, rest, etc Normal Capacity Average for a period (e.g. 5 yrs) Master-Budget Capacity No. of units produced for the CY COST SYSTEMS Actual Cost System DM, DL, OH = APAQ Normal Cost System DM, DL = APAQ; OH = SPAQ Flexible Budget DM, DL, OH = SPAQ Standard / Static DM, DL, OH = SPSQ Reconciling Net Income Between Variable Costing and Absorption Costing Actual Costing Normal costing Net Income – VC XXX Net Income – AC XXX Fixed Cost in EI XXX Fixed Cost in EI XXX Fixed Cost in BI (XXX) Fixed Cost in BI (XXX) Net Income - AC XXX Net Income - VC XXX or or Net Income – VC XXX Net Income – VC XXX Phantom Profit XXX Fixed Cost in EI XXX Net Income – AC XXX Fixed Cost in Bi (XXX) Unsold Units Produced XXX Overapplied OH XXX Multiply by: FOH per unit XXX (XXX) Phantom Profit XXX Net Income - AC XXX Rationale: Actual Costing - Variable costing inventory, always understated by FO. Thus, NI is also understated. Reconciling Contribution Margin and Gross Profit Contribution Margin XXX Variable Selling and Administrative Expense (VSAE) XXX Fixed Overhead based on units sold (XXX) Gross Profit XXX S Computation of Inventory End Beginning Inventory (in units) XXX Production (in units) XXX Sales (in units) (XXX) Ending Inventory (in Units) XXX EI in Units x DM per Unit XXX EI in Units x DL per Unit XXX EI in Units x VOH per Unit XXX Ending Inventory – VC XXX EI in Units x FOH per Unit XXX Ending Inventory - AC XXX Insignificant Amt / Silent