ACCT 8021 Exam 1- Notes of Review Sheet
ACCT 8021 Exam 1- Notes of Review Sheet ACCT 8021
Popular in Management Control Systems
Popular in Accounting
verified elite notetaker
This 12 page Study Guide was uploaded by Doris.Shaw on Friday September 9, 2016. The Study Guide belongs to ACCT 8021 at University of Cincinnati taught by Professor Mintchik in Fall 2016. Since its upload, it has received 48 views. For similar materials see Management Control Systems in Accounting at University of Cincinnati.
Reviews for ACCT 8021 Exam 1- Notes of Review Sheet
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 09/09/16
Management Control Systems Review Sheet for the 1st exam. Chapter 1. Cost Management and Strategy. Be capable ● To explain the differences between financial accounting and managerial accounting. Management accounting: is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy. → a Focus on Strategy: •Internal users; •Emphasis on usefulness and timeliness, key characteristics of decisionrelevant information. Financial accounting is the process of recording, summarizing and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that encapsulate the company's operating performance over a specified period. → Financial reporting: •External users; •Emphasis on accuracy and compliance. ● To explain the essence and the focus of the management control systems. The main focus of cost management information therefore must be usefulness and timeliness; ● To describe 4 stages of the historical development of the management control systems. Stage 1. Cost management systems are basic transaction reporting systems. Stage 2. As they develop into the second stage, cost management systems focus on external financial reporting. The objective is reliable financial reports; accordingly, the usefulness for cost management is limited. → focus on the management accountant’s measurement and reporting role Stage 3. Cost management systems track key operating data and develop more accurate and relevant cost information for decision making; cost management information is Developed. Management Control Systems Review Sheet for the 1st exam. → shifts to operational control Stage 4. Strategically relevant cost management information is an integral part of the System. → the ultimate goal, the management accountant is an integral part of management, not a reporter but a full business partner, working on management teams to implement the firm’s strategy. ● To name four functions of management from chapter 1 and explain how managerial accounting f acilitates execution of these functions. Cost management information is assembled to aid management in the following 4 functions: •Strategic management The principal focus of management control systems Is the development and implementation of a sustainable competitive position. Monitoring of Critical Success Factors (CSFs) is necessary Critical to a firm’s success due to global competition and rapidly changing markets •Planning and decisionmaking involve budgeting and profit planning, cash flow management, and other decisions related to operations. Information is needed to support recurring decisions such as scheduling production and pricing; and for shortrun planning (budgeting) and profit planning (CostVolumeProfit analysis) •Management and operational control Information is needed to identify inefficient operations and reward effective management practices. OC takes place when midlevel managers monitor the activities of operatinglevel managers and employees. MC is the evaluation of midlevel managers by upperlevel managers. •Preparation of financial statements requires management to comply with the financial reporting requirements of regulatory agencies. Information is needed to guarantee compliance with regulatory reporting requirements Management Control Systems Review Sheet for the 1st exam. ● to recall the term for the variety of contemporary management techniques (e.g., lean accounting, enterprise resource planning) when the definition of the technique is given. The first six methods focus directly on strategy implementation—the balanced scorecard/ strategy map, value chain, activitybased costing, business intelligence, target costing, and lifecycle costing. The next seven methods help to achieve strategy implementation through a focus on process improvement—benchmarking, business process improvement, total quality management, lean accounting, the theory of constraints, enterprise sustainability, and enterprise risk management. ● Balanced Scorecard An accounting report that addresses a firm's performance in four areas: financial, customer, internal business processes, and innovation and learning ● Strategy Map A method, based on the balanced scorecard, which links the four perspectives in a causeandeffect diagram ● ValueChain Analysis An analysis tool used to identify the specific steps required to provide a competitive product. This tool helps identify steps that can be eliminated or outsourced. ● ActivityBased Costing This dualstage costing method improves the tracing of costs to individual products and customers by allocating costs first to activities and then to specific products. ● Data intelligence/Business Analytics Management Control Systems Review Sheet for the 1st exam. An approach to strategy implementation in which the management accountant uses data to understand and analyze business performance. ● Target Costing This costing method determines the desired cost for a product on the basis of a given competitive price so that the product will earn a desired profit. ● LifeCycle Costing This costing method is a method used to identify and monitor the costs of a product throughout its life cycle. ● Benchmarking Process by which a firm identifies its CSFs, studies the best practices of other firms in achieving these CSFs, and institutes change based on the assessment results. ● Business Process Improvement This technique involves managers and workers committing to a program of continuous improvement in quality and other CSFs ● Total Quality Management A technique by which management develops policies and practices to ensure the firm's products and services exceed customer's expectations. This approach includes increased product functionality, reliability, durability, and serviceability. ● Lean Accounting This accounting technique has been developed to support lean manufacturing and uses value streams to measure the financial benefits of a firm's progress. ● Theory of Constraints This technique focuses on production and service speed, including improvement in cycle time. It helps firms to decrease production bottlenecks and to increase the speed at which raw materials can be converted to finished products and delivered to the customers. ● Sustainability Means the balancing of the company's short and long term goals in all three dimensions of performance social, environmental, and financial. ● Enterprise Risk Management Management Control Systems Review Sheet for the 1st exam. Companies use this framework to assess and manage variety of risks that could affect the company's performance ● To describe the essence, advantages and potential threats of two strategic positioning approaches introduced by Mark Porter: Cost leadership vs. Differentiation. •Cost Leadership—outperform competitors by producing at the lowest cost, consistent with quality demanded by the consumer Cost advantages usually result from productivity in the manufacturing process, in distribution, or in overall administration. A potential weakness of the cost leadership strategy is the tendency to cut costs in a way that undermines demand for the product or service, for example, by deleting key features. Firms known to be successful at cost leadership are typically very large manufacturers and retailers, such as WalMart, Texas Instruments, and Dell. •Differentiation—creating value for the customer through product innovation, product features, customer service, etc. that the customer is willing to pay for. The appeal of differentiation is especially strong for product lines for which the perception of quality and image is important. A weakness of the differentiation strategy is the firm’s tendency to undermine its strength by attempting to lower costs or by ignoring the necessity of having a continual and aggressive marketing plan to reinforce the differentiation.If the consumer begins to believe that the difference is not significant, lowercost rival products will appear more attractive. Tiffany, Bentley, Rolex, Maytag, and BMW are good examples of firms that have a differentiation strategy. Management Control Systems Review Sheet for the 1st exam. ● To recognize the pursued strategic positioning approach when the specific example is given and to evaluate the appropriateness of a choice (is such strategic positioning appropriate in the given circumstances). Skills :C ost leadership vs. Differentiation ● To name four main standards of ethical behavior from the IMA Statement of Ethical Professional Practice and to recognize the underlying principles behind each of these standards. I. Competence. 1.Maintain an appropriate level of professional expertise by continually developing knowledge & skills. 2.Perform professional duties in accordance with relevant laws, regulations, & technical standards. 3.Provide information & recommendations that are accurate, clear, concise, & timely. 4.Recognize & communicate professional limitations. II. Confidentiality. 1.Keep information confidential except when disclosure is authorized or legally required. 2.Inform all relevant parties regarding appropriate use of confidential information. Monitor subordinates’ activities to ensure compliance. 3.Refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through a third party. III. Integrity. 1. Mitigate actual conflicts of interest, regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any potential conflicts. 2. Refrain from engaging in any conduct that would prejudice carrying out duties ethically. 3. Abstain from engaging in or supporting any activity that might discredit the profession. IV. Credibility. 1. Communicate information fairly & objectively. 2. Disclose fully all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analysis, or recommendations. 3. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law. ● To name three steps recommended by IMA for resolution of the ethical conflict. 1. Discuss the situation with a superior not involved in the issue 2. Clarify the issue through discussion with an IMA Ethics Counselor or impartial advisor 3. Consult your own attorney as to your legal obligations and rights ● To identify the primary ethical principle which is at stake in certain situations. Skills ● To describe main principles of the enterprise risk management framework. Enterprise risk management is a framework and process that firms use to managing the risks that could negatively or positively affect the company’s competitiveness and success. Management Control Systems Review Sheet for the 1st exam. ERM supports value creation by enabling management to: • Deal effectively with potential future events that create uncertainty. • Respond in a manner that reduces the likelihood of downside outcomes and increases the upside. ● To name five steps of Strategic Decision Making. 1. Determine the strategic issues surrounding the problem. 2. Identify the alternative actions. 3. Obtain information and conduct analyses of the alternatives. 4. Based on strategy and analysis, choose and implement the desired alternative. 5. Provide an ongoing evaluation of the effectiveness of implementation in step 4. ● To identify the company in example as retailer, manufacturer, wholesaler, etc. Merchandisers that sell to other merchandisers are called wholesalers; those selling directly to consumers are called retailers. Examples of merchandising firms are the large retailers, such as WalMart, Target, and Amazon.com. Examples of manufacturers are Ford, General Electric, and Cisco Systems. Retailer: For these wealthy Americans, Home Depot, Target, and Costco are the three most popular retailers (Costco is another lowcost retailer, with fewer customers—and a different customer base). The retail giant, Target Manufacturer: SanDisk Corp, the Sunnyvale, California, firm, is the world’s largest manufacturer; auto manufacturer, BMW; Samsung, the large Korean manufacturer of electronics; Johnson Industrial Controls, Inc. (JIC), is a large manufacturer; ● Be familiar with the ideas from the articles and cases we discussed in class (see more specific guidance on this below). Skills Management Control Systems Review Sheet for the 1st exam. Chapter 2. Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map. Important ideas: SWOT is the tool of the formulation of a strategy. The balanced scorecard (and the related strategy map) is (are) the tool (s) to communicate, monitor and motivate the execution of the strategy. Be capable ● To describe the intent of the mission statement for the corporation. A firm succeeds by implementing a strategy, that is, a plan for using resources to achieve sustainable goals within a competitive environment. Finding a strategy begins with determining the purpose and longrange direction, and therefore the mission, of the company. The mission is developed into specific performance objectives, which are then implemented by specific corporate strategies, that is, specific actions to achieve the objectives that will fulfill the mission. A firm must define clearly what it means by success in its mission statement. Then it must develop a roadmap to accomplish that mission, which we call strategy. Briefly, strategy is a plan to achieve competitive success. ● To describe the underlying principles of SWOT analysis and the extent of its use (i.e., appropriate tasks and circumstances for the application). SWOT analysis is a systematic procedure for identifying a firm’s critical success factors: its internal strengths and weaknesses and its external opportunities and threats. SWOT analysis guides the strategic analysis by focusing attention on the strengths, weaknesses, opportunities, and threats critical to the company’s success A final step in the SWOT analysis is to identify quantitative measures for the critical success factors (CSFs). ● to prepare SWOT analysis of the hypothetical or actual company, given the set of circumstances. Skills ● to describe the main principles of the value chain analysis and the reasons why we perform it. •An analysis for better understanding the details of the organization’s competitive strategy •CSFs must be implemented in each and every phase of operations •Helps a firm better understand its competitive advantage by analyzing what processes add value (processes that do not add value can be deleted or outsourced) •Will include upstream (prior to manufacturing or operations) and downstream activities ● To recognize steps involved in value chain analysis and the extent of its use. Management Control Systems Review Sheet for the 1st exam. •Two steps: •Identify the valuechain activities at the smallest level possible •Develop a competitive advantage by reducing cost or adding value ● to describe the underlying principles of preparing the balanced scorecard and the extent of its use (i.e., appropriate tasks and circumstances for the application) key tools for the implementation of strategy. by providing a comprehensive performance measurement tool that reflects the measures critical for the success of the firm’s strategy and thereby provides a means for aligning the performance measurement in the firm to the firm’s strategy. the BSC enables the firm to employ a strategycentered performance measurement system, one that focuses managers’ attention on critical success factors, and rewards them for achieving these critical factors. This report groups a firm’s CSFs into four areas: •Financial perspective (financial measures) •Customer perspective (customer satisfaction) •Internal process perspective (e.g., productivity and speed) •Learning and growth (e.g., training and number of new patents or products) ● To prepare effectively the balanced scorecard based on business strategy and mission of the hypothetical company. You should be capable to identify at least two companyspecific goals for each dimension (also known as “critical success factors”) as well as the associated benchmarks to monitor the progress (also known as “quantitative measures of CSF” or “key performance indicators”) For example: Management Control Systems Review Sheet for the 1st exam. ● To identify the specific key performance indicators that might be used under certain perspectives. Skills ● to describe general principles of the strategy map tool. A strategy map is a causeand effect diagram of the relationships among the BSC perspectives. Managers use it to show how the achievement of goals in each perspective affect the achievement of goals in other perspectives, and finally the overall success of the firm. •Shows how the achievement of CSFs in one perspective should affect the achievement of goals in another perspective •The financial perspective is the target in the strategy map because financial performance is the ultimate goal for most profitseeking organizations •Success in the other perspectives leads directly to improved financial performance and shareholder value ● to describe why it might be necessary to introduce the fifth perspective – sustainability – in the traditional balanced scorecard and to identify potential CSF related to sustainability perspective. Expanding the Balanced Scorecard and Strategy Map: Sustainability Management Control Systems Review Sheet for the 1st exam. • The balancing of shortterm and longterm goals in all three dimensions of the company’s performance–financial, social, and environmental: Environmental reports use environmental performance indicators (EPIs) to measure sustainability •These indicators are in three areas: Operational measures (stresses to the environment/regulatory compliance issues) Management measures (efforts to reduce environmental effects) Environmental measures (environmental quality) • Sustainability reports also use social performance indicators (SPIs) to measure sustainability •These indicators are in three areas: Working conditions (worker safety and training) Community involvement (for example, employees participation in community activities such as Habitat for Humanity) Philanthropy (direct contributions) Important terms: strategy, cost leadership vs. differentiation, critical success factors, upstream vs. downstream value chain activities, balanced scorecard, key performance indicators, SWOT analysis, strategy map, sustainability, value chain analysis. Presentation of biases. ● Be capable to recognize characteristics of the sound judgment. ● Be aware of the existence and be capable to describe the essence of the following biases that affect decisionmaking (or identify in the example): rush to solve, availability bias, confirmation tendency, overconfidence, anchoring tendency. ● Important terms: rush to solve, availability bias, confirmation tendency, overconfidence, anchoring tendency. Assigned Readings: ● Be able to recognize the main features of the Enterprise Risk Management, advantages of the Enterprise Risk Management, and lessons learned during its implementation in UnitedHealthGroup. Management Control Systems Review Sheet for the 1st exam.
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'