201-Wk1-2-Intro, Cost Def-F'10

201-Wk1-2-Intro, Cost Def-F'10 - Mgmt. 201 - Managerial...

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Mgmt. 201 - Managerial Accounting – Weeks #1 & 2 Introduction to the course and basic cost terms Professor Thoman Fall 2010 2 Definition of accounting: Systematic processing and organizing of financial information—costs, revenues, cash flows, capital expenditures Formatting of the data should enable someone to do something better
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3 Who is using the information to do something better? Financial Accounting Managerial Accounting People “outside” the firm People “inside” the firm Investors CFO, CEO Banks Current shareholders Managers at all levels 4 What are users doing with the information? Financial Accounting Managerial Accounting Making better decisions How much to invest How much to loan; what interest rate to charge When to sell a stock What products to make What price to charge What technology to use When to outsource What to advertise Controlling employees and evaluating their performance Monitoring CEO Motivating CEO to act in the interests of shareholders Monitoring managers Motivating managers to act in the interests of shareholders
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5 Any restrictions on how the information is formatted? Financial Accounting Managerial Accounting In U.S. format for publicly traded firms is regulated—this is what you studied in Mgmt. 200 (U.S. GAAP). Format is not regulated.* Different companies use different approaches. Use cost-benefit analysis to decide what information to collect and how to process the information. *Computing COGS and Inventory account values is regulated. 6 How does accounting differ from other business disciplines? Using numbers to make choices sounds like what one does in a number of business classes—in finance use numbers to make capital choices; in marketing use numbers to set prices. How is this course different? Other courses take the accounting numbers as given when solving their problems; for example when setting prices, marketers take the cost of making the product as given. But numbers can be computed in many ways. In this class, we study the derivation of the numbers and their impact on choices—which numbers should be used when. Need to know the different ways one can compute a number (e.g., the cost of a product). Need to understand how the number will be used to select the “best” number.
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7 Two ideas we will see often Numbers are not unique. There is no such thing as “true” or “actual” numbers/costs. The same number can be computed in many different ways; hence, given a number, one needs to understand how it was derived. There are better and worse numbers. While there is no such thing as “true” or “actual” numbers/costs, there are better and worse numbers. What is a better or worse number will depend on the firm’s use of the number—what decision is being made; whose paycheck (and incentives) is affected. 8
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201-Wk1-2-Intro, Cost Def-F'10 - Mgmt. 201 - Managerial...

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