Kế toán, kiểm toán - Chapter one: Introduction

IntroductionChapter OneCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinDecision Making - Product ManagementExamplesAdd new productTerminate an existing product lineAccept or reject special orderRelated TopicsOperations managementBudgeting - capital and operatingJust-in-time (JIT)1-2Decision Making - PricingExamplesSet selling price to achieve desired profitsSet selling price to achieve positive cash flowRelated Topics MarketingMicroeconomics - Price TheoryCorporate Finance1-3Decision Making - Cost ControlExamplesAdd new equipmentChange production processMake internally versus buy externally (outsource)Related TopicsProcess engineeringManagement information systemsActivity-based costing (ABC) 1-4Control - IncentivesAssumptionsIndividuals maximize their own self-interestOwners of firm want to maximize firm valueMaximizing firm profits maximizes firm valueIncentivesDesign performance incentives based on internal accounting measures to motivate employees to take actions that will maximize firm value1-5Control - Performance EvaluationExamplesPerformance bonuses depend on accounting resultsBenchmarking: comparisons to industry leadersRelated TopicsOrganizational behaviorHuman resources management1-6Design - Multiple Roles of AccountingStudy Figure 1-1.Main point: Accounting reports are used for multiple purposes.1-7Design - External ReportsUsers of external reportsShareholders, bondholders, banks, and analysts (SEC, FASB)Taxing authorities (IRS, states, etc.)Regulatory authorities (GASB, etc.)Board of directors Objectives in external reportingComparability between firmsHistorical accounting Auditors can verify reports1-8Design - Internal Reports Users of internal reportsManagers at all levelsObjectives of internal reportingUseful for decision making about future activitiesMeasure performance that is relevant to the firmFocus on projects or processes within a firm1-9Design - Conflicting Goals ControlIncentives to motivate behavior changesTendency to ignore information not specifically included in incentive systemReport “good” numbers to satisfy top managementDecision makingWant to avoid distorted informationEstimates useful to plan future activities1-10Design - EvolutionEconomic Darwinism: Over the long term systems survive in competitive markets when the benefits exceed or equal the costs of maintaining those systems.Survival does not imply optimality. Better systems may exist, but have not yet been discovered.1-11Design - Figure 1-2Study Figure 1-2.Main Point: In a typical corporation, the corporate controller is responsible for all internal and external accounting reports. There are also controllers in the operating divisions.1-12Design - Organizational StructureControllerReports to chief financial officer (CFO)Administers internal and external accountingBudget planningControls financial data collection and reportingGrowing role as internal consultants or business analysts to the point of being viewed as business partners Balance providing information to other managers for decision making against providing monitoring information used to control behavior of lower-level managers.1-13Evolution of Management Accounting:A Framework for ChangeBusiness EnvironmentBusiness StrategyOrganizational ArchitectureDecision-Right AssignmentPerformance EvaluationReward SystemIncentives and ActionsFirm Value1-14Example - Vortec Special OrderWith no overtime and congestion CurrentWith OrderIncrementalUnits produced and sold Total Revenue and Costs 100,000102,000 2,000Sales ($5.00 regular, $4.00 special)$ 500,000$508,000 8,000Cost of sales ($4.50, $4.47)450,000455.9408,000Administrative expenses- 27,500 27,500 0Net profit before taxes$ 22,500$ 24,560$ 2,060Incremental revenue (2,000 units x $4.00)$8,000Total cost @ 102,000 units (102,000 x $4.47)$455,940Total cost @ 100,000 units (100,000 x $4.50)450.000Incremental cost of 2,000 units-5,940Incremental profit of 2,000 units$2,0601-15Example - Vortec Special OrderWith overtime and congestion CurrentWith OrderIncrementalUnits produced and sold Total Revenue and Costs 100,000102,000 2,000Sales ($5.00 regular, $4.00 special)$ 500,000$508,000 8,000Cost of sales ($4.50, $4.08 on additional 2,000)450,000458,160-8,160Administrative expenses- 27,500 27,500 0Net profit before taxes$ 22,500$ 22,340$ -160Incremental revenue (2,000 units x $4.00)$8,000Total cost @ 102,000 units (102,000 x $4.50) plus (2,000 x $4.08)$458,160Total cost @ 100,000 units (100,000 x $4.50)450.000Incremental cost of 2,000 units-8,160Incremental profit of 2,000 units-1601-16Example - Beware of Average Costs Average cost per unit at current production volume is usually not an accurate estimate of the cost per unit at other levels of production.Average costs include:fixed costs that do not change with volumevariable costs per unit that can change with volume Cost per unit may increase when production volume is near or above normal operating capacity.1-17Example - Consider Opportunity CostsOpportunity costs measure what the firm forgoes when it chooses a specific actionConsider what a firm forgoes by accepting a special order1-18Example - Supplement Accounting DataSupplement historical cost accounting data with other knowledgeCould include:expected customer demandscompetitors’ plansfuture technologygovernment regulation1-19Example - Accounting Data for Evaluation When managers have incentives to maximize performance on one particular accounting measure, firm profits are not necessarily maximized.Reducing average manufacturing costs per unit does not always maximize profitMaximizing total revenue does not always maximize profit1-20