Professional Documents
Culture Documents
Chapter 1 Introduction To Cost Accounting
Chapter 1 Introduction To Cost Accounting
Introduction to Cost
Accounting
Cost Accounting:
Foundations and Evolutions, 9e
Kinney ● Raiborn
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Learning Objectives
What are the relationships among financial, management, and cost
accounting?
What are the sources of authoritative pronouncements for the practice
of cost accounting?
What are the sources of ethical standards for cost accountants?
What is a mission statement, and why is it important to organizational
strategy?
What must accountants understand about an organization’s structure
and business environment in order to perform effectively in that
organization?
What is a value chain, and what are the major value chain functions?
How is a balanced scorecard used to implement an organization’s
strategy?
What are the sources of ethical standards for cost accountants?
Why is ethical behavior so important in organizations?
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website, in whole or in part.
Accountants
Financial accountants provide information to external
parties
Investors
Creditors
Regulators
Donors
Managerial accountants provide information to internal
users
Managers
Cost accountants provide information to both internal and
external users
Product cost information
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website, in whole or in part.
Types of Accounting
Financial Management
Meet external Meet internal
information needs information needs
Comply with GAAP Does not have to
comply with GAAP
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website, in whole or in part.
Financial versus Managerial
Financial Managerial
External focus Internal focus
Whole organization Segments or divisions
Historical Current/projected
Quantitative Quantitative/qualitative
Monetary Monetary and nonmonetary
Verifiable Timely/reasonable estimate
GAAP Benefits exceed costs
Formal recordkeeping Formal and informal
recordkeeping
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website, in whole or in part.
Product Cost Information
External parties—stockholders, creditors,
regulators, and donors
For investment and credit decisions
Complies with GAAP
Enterprise focus
Internal parties
Planning, controlling, and decision making
Evaluating performance
Includes upstream and downstream costs
Disaggregated
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Accounting Bodies
Financial Management
Public Company Institute of
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website, in whole or in part.
Organizational Strategy
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Organizational Strategy
1. Develop mission statement
2. Implement strategy
Develop,
Establish implement, and
appropriate monitor necessary
measures of information
accomplishment systems
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website, in whole or in part.
Five Factors in Organizational
Strategy
Core competencies
Organizational structure
Management style and organizational culture
Organizational constraints
Environmental constraints
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website, in whole or in part.
Organizational Strategies
Core competency—critical function or
activity providing a competitive advantage
Cost leadership strategy—undercut
competitor prices
Product differentiation strategy—superior
quality products or unique services sold at
a premium
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Strategy Questions
What are the most important factors Does your organization have the
in your organization’s operating appropriate resources (financial,
environment? personnel, and technological) to
Economy, population demographics, fulfill its vision?
competitors, suppliers, resource
availability, innovation, environment Have appropriate performance
What are your organization’s core measurements been established to
competencies? determine if progress is being made
Have you organization’s core towards your organization’s mission
competencies become competitive and vision?
advantages? Are operating conditions
What is your organizations current continuously monitored to detect
position relative to your competitors? changes so that your organization
What are your customers’ purchase can adapt with flexibility and
or selection criteria? sensitivity, especially to new trends
What is the organizational vision in technology?
identified by your management,
shareholders, and other internal and
external stakeholders?
Is the vision supported by identifiable goals
and objectives?
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Organizational Structure
Distribution of authority and responsibility in an
organization
Authority—right to use resources to accomplish a
achieve an objective
Line manager works directly toward attaining
organizational goals
Staff employees give assistance and advice to line
managers
Treasurer and Controller
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website, in whole or in part.
Organizational Constraints
Four common organizational constraints
Monetary capital
Intellectual capital
Technology
Environmental constraints
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website, in whole or in part.
Value Chain
A set of value-adding functions and
processes that converts inputs into
products or services
Research and Marketing
Development Distribution
Product Design Customer Service
Supply
Production
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website, in whole or in part.
Balanced Scorecard
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website, in whole or in part.
Balanced Scorecard Perspectives
Learning and Growth
Use the organization’s intellectual capital to adapt to changing
customer needs or to influence new customers’ needs and
expectations through product or service innovations
Internal Business
Things to do well to meet customer needs and expectations
Customer Value
How well the organization is doing relative to important
customer criteria
Financial
Address stockholders/stakeholders concerns about
profitability and organizational growth
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website, in whole or in part.
Balanced Scorecard Measures
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Professional Ethics
Earnings management—deliberate
accounting adjustments to “hit” profit targets
Often adjustments involve cost accounting
Product costs
Inventory valuations
Stretching legitimate accounting techniques
Outright fraud
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Potential Ethical Issues
Earnings management
Low cost production at any cost
Whistle-blower retaliation
Fixing prices
Bribery and other corruption
Hiding managerial acts
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website, in whole or in part.
Ethics and Legislation
Sarbanes-Oxley Act—CEOs and CFOs
personally accountable for the accuracy of
their organization’s financial reporting
False Claims Act—whistle-blower protection
and penalties for failure to blow the whistle
(disclose known financial frauds)
Dodd-Frank Act—encourages whistle-
blowing with awards from 10 to 30 percent of
amount recouped
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Ethics and Management Accounting
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Ethics in Multinationals
Foreign Corrupt Practices Act—prohibits
bribes to obtain/retain business
Organization of Economic Cooperation and
Development Convention—crime to offer,
promise, give bribes to obtain/retain internal
business deals
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website, in whole or in part.
Questions
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