This document provides an introduction to an advanced management accounting course, outlining key topics that will be covered such as incremental analysis, capital investment decisions, standard costing, and contemporary issues in management accounting like activity-based costing, benchmarking, re-engineering, target costing, and total quality management. The introduction defines managerial accounting and explains how advanced techniques provide detailed financial information for internal management decision making.

1. Advanced Management
Accounting
Chapter one
Introduction to Advanced Management Accounting

2. Course Outline
Introduction to Advanced Management Accounting
Incremental analysis
Capital investment decision
Standard costing

3. Overview
• Identify the features of managerial accounting and the
Advanced Managerial accounting provides
detailed financial information for managers and
other internal users

4. Planning
 Maximize short-term
profit and market
share.
 Commit to
environmental
protection and social
programs.
 Add value to the
business.
Directing Controlling
 Coordinate diverse
activities and human
resources.
 Implement planned
objectives.
 Provide incentives to
motivate employees.
 Hire and train
employees.
 Produce a smooth-
running operation.
 Keeping activities on
track.
 Determine whether
goals are met.
 Decide changes
needed to get back
on track.
 May use an informal
or formal system of
evaluations.
Management Functions
LO 1

5. Issues in Advanced Management Accounting
activity-based costing,
benchmarking,
re-engineering,
target costing,

6. Cont…
life-cycle costing,
economic value analysis,
total quality management
 value chain analysis for decision making.

7. Activity-based costing
• Activity-based costing (ABC) is a costing method that
assigns overhead to related products and services.
This accounting method of costing recognizes the relationship
between overhead costs, and manufactured products.

8. Benchmarking
Benchmarking is the search for the best practices within and across
industries. There are several reasons why organizations engage in
benchmarking:
For continuous improvement of internal operations
To become more externally competitive, or
For organizational survival.

9. Re-engineering
Business process reengineering (BPR) revises workflows to
optimize processes and eliminate non-value-added activities.
A comprehensive re-engineering project could result in the
complete replacement of an existing process, with a
substantial cost reduction. It is common for such a project to
fully integrate the use of the latest information technology, so
that automation can take the place of manual labor.

10. Target costing
• Target costing is a system under which a company plans in
advance for the price points, product costs, and margins that it
wants to achieve for a new product. If it cannot manufacture a
product at these planned levels, then it cancels the design
project entirely. With target costing, a management team has a
powerful tool for continually monitoring products from the
moment they enter the design phase and onward throughout
their product life cycles.

11. Life Cycle Costing
•Life cycle costing is the process of compiling all
costs that the owner or producer of an asset will
incur over its lifespan. These costs include the
initial investment, future additional investments,
and annually recurring costs, minus any salvage
value.

12. Total Quality Management
•Total quality management is a managerial
accounting concept where an organization strives
to produce higher quality products with few
defects being shipped to customers.

13. Value Chain Analysis
• A value chain is the full range of activities – including
design, production, marketing and distribution – that
businesses conduct to bring a product or service from
conception to delivery. For companies that produce
goods, the value chain starts with the raw materials to
make the products and consists of everything added
before the product is sold to consumers.

14. ANY QUESTION?
END

15. Cont…
•Value chain analysis finds any deficiencies in
these processes and improves them, saving
money, improving quality and expediting time
to market.