The Manager and Management Accounting

This study guide is based on Chapter 1 of Horngren's Cost Accounting

Imagine selling less of a product and making more money

Let's sit in Coca-Cola's shoes for a second. It's relatively close to the current year, consumers are becoming more health conscious, and people are actively deciding to drink less soda. As a soda company, this might at first seem to be a straight loss for Coca-Cola. Total sales in soda, at least by volume, are going to go down. However, because Coca-Cola was a leader in the sale of smaller sizes of soda, this change in the market place instead resulted in not just more revenue for the company, but higher profits as a whole.

This was achieved because of a variety of factors involved in marketing smaller can sizes. The smaller cans better fit consumers' health conscious tastes, and due to a menagerie of production and supply problems outside of the scope of this chapter, these smaller coke cans were able to charge a much higher price point per oz. than their liter sized comparisons. Furthermore, perhaps due to clever marketing strategies and consumer negligence, sales of soda have actually gone up. In other words, Coca-Cola was riding a wave; utilizing a strategy that let them generate more revenue and profit while selling less soda per unit.

Learning Objectives

1. Distinguish Financial Accounting from Management Accounting
2. Understand how management accountants help firms make strategic decisions
3. Describe the set of business functions in the value chain and identify the dimensions of performance that customers are expecting of companies
4. Explain the five-step decision-making process and its role in management accounting
5. Describe three guidelines management accountants follow in supporting managers
6. Understand how management accounting fits into an organization's structure
7. Understand what professional ethics mean to management accountants

Datar, Srikant M.. Horngren's Cost Accounting (ch. 1). Pearson Education. Kindle Edition