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CHAPTER 1 INTRODUCTION TO MANAGEMENT ACCOUNTING DISCUSSION QUESTIONS 1. Management accounting is the provision of information for internal users in a firm. 2. The three broad objectives of management accounting are planning, controlling, and de- cision making. 3. The users of management accounting in- formation are typically managers and other employees of a firm. Management account- ing information is typically not provided to outsiders but may be in selected cases. For example, a bank may require budgeting in- formation for the next few years before agreeing to grant a loan. 4. A management accounting information sys- tem typically provides both financial and nonfinancial information. For example, finan- cial information on cost of production is tracked. Other information, such as the num- ber of warranty returns, may also be tracked by the management information system. 5. Controlling is sometimes called performance evaluation. It involves comparing the expec- ted outcome with the actual outcome to see what differences, if any, exist. 6. Planning occurs first. It requires setting ob- jectives and identifying the means of achiev- ing those objectives. Then, the results of the plan are compared with the plan, which is called controlling. Clearly, it is also feed- back, in that any impediments or unexpec- ted occurrences are noted. This feedback is then used to develop the plan for the next period. 7. Management accounting is internally fo- cused, does not follow mandatory rules, keeps track of both financial and nonfinan- cial information, emphasizes the future, and relies on a broad range of disciplines. Finan- cial accounting, on the other hand, is extern- ally focused, follows externally imposed rules (such as GAAP), has a historical ori- entation, and provides information about the company as a whole. 8. Huge improvements in technology, trans- portation, and communication over the past 50 years have changed the world signific- antly. Management accountants have had to broaden their focus beyond simple financial reporting to include the gathering of informa- tion on all types of costs and of the value of the product or service to customers. These broader costs are used in planning and de- cision making. 9. Customer value is the difference between what a customer pays for a product or ser- vice and what she or he receives in return. The focus on customer value forces man- agement accounting to look at many types of costs, not simply manufacturing cost. These may include the price of the good or
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