MANAGEMENT ADVISORY SERVICES

(BAINTE4X)
Introduction, Basic Concepts, and Recent Developments.

Prepared by:
Ms. Grace A. Padiernos, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

 PROF. GRACE A. PADIERNOS, CPA, CMA

WARNING
You may not copy, reproduce, distribute,
publish, display, perform, modify, create
derivative works, transmit, or in any way
exploit any such content, nor may you
distribute any part of this content, sell or
offer it for sale, or use such content.
PROF. GRACE A. PADIERNOS, CPA, CMA

Observe and
Respect the
Republic Act
No. 8293, An
Act Prescribing
the
Intellectual
Property Rights
Law (IPR).
 THIS MATERIAL IS INTENDED
FOR BAINTE4X ONLY:

Do not share this in any

Do not share this material to public or social media
anyone who is not enrolled sharing sites or study
in this class. resources websites (Example:
SlideShare, Course Hero etc.)

PROF. GRACE A. PADIERNOS, CPA, CMA

 Intellectual Property
Rights of Materials or Resources
Understand that these materials and resources are the
property of the National University - Laguna,
copyrighted to the respective authors of each material or
resource. Students shall use these materials and
resources (Example: PowerPoint or PDF files or recorded
videos of lesson, etc.) only for the intended purpose of
learning in this course. To ensure that these materials are
not reproduced, shared, or used outside of the University
and for purposes not consistent with the intent of the
course.
PROF. GRACE A. PADIERNOS, CPA, CMA
 INTRODUCTION AND
CONCEPTS TO MANAGEMENT
ACCOUNTING

PROF. GRACE A. PADIERNOS, CPA, CMA

Manage • It is the process of identifying, measuring,
ment analyzing, interpreting and communicating
Accounti information in pursuit of organization’s goals
(Hilton, 2010)
ng

PROF. GRACE A. PADIERNOS, CPA, CMA

The
activities • Decision making
or • Planning
function • Directing and motivating
of • Controlling
• Improving
manage
ment

PROF. GRACE A. PADIERNOS, CPA, CMA

The
activities
or function
of
manageme
nt

PROF. GRACE A. PADIERNOS, CPA, CMA

 • Decision making is the process of
making choices by identifying a
decision, gathering information,
1. Decision- and assessing alternative
resolutions.
making • It is involved in the all of the other three
functions of management.
• It entails choosing among alternatives
available to management.
• Not a separate function of management.
• Inherent in each of the preceding
management processes is decision
making.
• In managing a company, management
must continually decide among
alternative actions.
PROF. GRACE A. PADIERNOS, CPA, CMA
 • Setting of immediate, as well as long-
range goals for the organization.
2. • Predicting future conditions that are
Planning expected to prevail.
• Considering different means to achieve
goals.
• Deciding which means should be used
to achieve goals.
• Developing the company’s objectives
(goals) and translating these objectives
into courses of action.

PROF. GRACE A. PADIERNOS, CPA, CMA

 • It is the management function which
3. Directing pertains to the day-day activities in
running the business.
or
• The process by which managers run
Motivating day-to-day operations.

PROF. GRACE A. PADIERNOS, CPA, CMA

 • The organization operates in the
intended manner.
4. • Achieve its goals.
• Monitoring operating results and
Controllin comparing actual results with the
expected results is controlling.
g • This feedback allows management to
isolate areas for further investigation
and possible remedial action.
• It may also lead to revising future
plans.
• This philosophy of controlling by
comparing actual and expected results
is called management by exception.

PROF. GRACE A. PADIERNOS, CPA, CMA

Manageme
nt by
exception
• Management by
exception is the practice
of examining the
financial and
operational results of
a business, and only
bringing issues to the
attention of management
if results represent
substantial differences
from the budgeted or
expected amount.

PROF. GRACE A. PADIERNOS, CPA, CMA

Managemen
t by
exception
• A technique of
investigating only those
results that vary
significantly from
standards in line with the
management principle that
executive time should be
specific on items that are
not routine.

PROF. GRACE A. PADIERNOS, CPA, CMA

Manageme
nt by
objectives
• Management by Objectives
(MBO) is a strategic
approach to enhance
the performance of an
organization. It is a
process where the goals of
the organization are
defined and conveyed by
the management to the
members of the
organization.
Organizational structures
with the intention to
achieve each objective.

PROF. GRACE A. PADIERNOS, CPA, CMA

Manageme
nt by
objectives
• A procedure in which a
subordinate and a
supervisor agree on
goals and the methods
of achieving them and
develop a plan in
accordance with that
agreement. The
subordinate is then
evaluated with
reference to the agreed
plan at the end of the
period.
PROF. GRACE A. PADIERNOS, CPA, CMA
 • Feedback is also used by managers to
support continuous process
improvement.
5. • Continuous process improvement is
Improving the philosophy of continually
improving employees, business
processes, and products.

PROF. GRACE A. PADIERNOS, CPA, CMA

Other
activities • Resource management
• Information system development
of • Technological implementation
Manage • Verification
ment • Administration
Accounta
nts

PROF. GRACE A. PADIERNOS, CPA, CMA

 • Involves a system of reporting that is
aligned with organizational
responsibilities.
Resource • Will contribute to the effective use of
Manageme resources and measurement of
management performance.
nt

PROF. GRACE A. PADIERNOS, CPA, CMA

 • Design and development of the overall
management information system by:
Informatio
o Determining the output required by users.
o Specifying the data inputs needed to

n System obtain the required output.

o Developing the requirement for a

Developm processing system.

o Managing and securing the data bases.

ent

PROF. GRACE A. PADIERNOS, CPA, CMA

 • Management accountants should be
familiar with current technology
relative to information processing and
Technologic the accounting techniques appropriate
al to controlling and using the
information.
Implementa
tion

PROF. GRACE A. PADIERNOS, CPA, CMA

 • Management Accountants assure the
accuracy and reliability of information
derived from the accounting system or
Verification related sources that are throughout
the organization.

PROF. GRACE A. PADIERNOS, CPA, CMA

 • Includes the development and
maintenance of effective and efficient
management accounting organization.
Administrat
ion

PROF. GRACE A. PADIERNOS, CPA, CMA

STANDARDS OF ETHICAL CONDUCT
FOR MANAGEMENT ACCOUNTANTS
Competence

Confidentiality

Integrity

Objectivity

PROF. GRACE A. PADIERNOS, CPA, CMA

COMPENTENCE

• Maintain an appropriate level of professional competence by ongoing development of

their knowledge and skills.
• Perform their professional duties in accordance with relevant laws, regulations and
technical standards.
• Prepare and complete and clear reports and recommendations after appropriate
analyses or relevant and reliable information.

PROF. GRACE A. PADIERNOS, CPA, CMA

CONFIDENTIALITY

• Refrain from disclosing confidential information acquired in the course of their work,
except when authorized, unless legally obligated to do so.
• Inform subordinates as appropriate regarding the confidentiality of information acquired
in the course of their work and monitor their activities to assure the maintenance of their
confidentiality.
• 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 third parties.

PROF. GRACE A. PADIERNOS, CPA, CMA

INTEGRITY

• Avoid actual or apparent conflict of interest and advise all appropriate parties of any
potential conflict.
• Refrain from engaging in any activity that would prejudice their ability to carry out their
duties ethically.
• Refuse any gift, favor or hospitality that would influence or appear to influence their
activities.
• Refrain from either actively or passively subverting the attainment of the organization’s
legitimate and ethical objectives.

PROF. GRACE A. PADIERNOS, CPA, CMA

OBJECTIVITY

• Communicate information fairly and objectively.

• Disclose fully all relevant information that could reasonably be expected to influence an
intended user’s understanding of the reports, comment and recommendations
presented.

PROF. GRACE A. PADIERNOS, CPA, CMA

 • Financial Accounting

Branche • Management Accounting

s
of • Cost Accounting

Account • Tax Accounting

ing • Government Accounting

PROF. GRACE A. PADIERNOS, CPA, CMA

Financial
Accounting
• The broadest branch of accounting.
• Concerned with recognition,
measurement, and communication of
economic resources, economic
obligations and changes in economic
resources and economic obligations.
• Information is communicated
through complete set of financial
statements.
• Conform to the Generally Accepted
Accounting Principles (GAAP).
PROF. GRACE A. PADIERNOS, CPA, CMA
Management
Accounting
• Serves the information needs of
the internal users, specifically the
active owners and managers in
making and implementing short-
term and long-range plans for the
enterprise.
• Reports are not required to
conform with GAAP.

PROF. GRACE A. PADIERNOS, CPA, CMA

Cost Accounting
• Concerned with the measurement
and recognition of cost of goods
manufactured (CGM) and cost of
goods sold (CGS).

Financial Cost Managemen

accounting accounting t
accounting

PROF. GRACE A. PADIERNOS, CPA, CMA

Manageme
nt
Accounting
VS.
Financial
Accounting

PROF. GRACE A. PADIERNOS, CPA, CMA

 MANAGEMENT FINANCIAL
Users Internal users (managers, External and internal users
executives, etc.) (investors, creditors, lenders, etc.)

Frequency of As needed Periodic (annually)

reporting

Manageme Time orientation Projections, budgets, estimates,

historical data
Historical data

nt Focus of information Segments / Division /

Departments
Business as a whole (aggregated)

Accounting Type of information Financial and non-financial Financial

VS. Emphasis Relevance & timeliness Objectivity, Reliability & Precision

Financial Guiding principles Needs of management Generally Accepted Accounting

Principles (GAAP)

Accounting
Requirements Optional Mandatory

Purpose Decision-making Reporting

Sources of data Drawn from internal and external Drawn from company’s system
system
Unifying model None Assets = Liabilities + Equity

PROF. GRACE A. PADIERNOS, CPA, CMA

 The departments in a company can be viewed as
having either of the following:
• Line responsibilities
• Staff responsibilities

Line A line department is directly involved in providing

goods or services to the customers of the company.
• Senior Vice President—Equipment
position • Plant Manager—Chicopee, MA Plant
• Senior Vice President—Callaway Brand
VS. • Managing Director.

Staff A staff department provides services, assistance, and

advice to the departments with line or other staff
position responsibilities. A staff department has no direct
authority over a line department.
• Senior VP—Chief Administrative Officer
• Vice President, Human Resources
• Chief Financial Officer
• Controller

PROF. GRACE A. PADIERNOS, CPA, CMA

Line
LINE STAFF
Definition A position that is DIRECTLY A position that is INDIRECTLY
involved in the provision of goods involved in the provision of goods

position and services. and services.

Mainly providing support role.

VS. Examples CEO, COO, Plant manager, Plant

supervisor, Sales agent,
Warehousemen
Internal Auditor, CFO, Controller,
Treasurer, Accountant

Staff
position

PROF. GRACE A. PADIERNOS, CPA, CMA

 MANAGEMENT
Controller Treasurer
-Accounting aspect of work -Safeguarding of assets and capital
-Income tax return preparation -Cash custody and banking

CHIEF Reporting
Tax administration
Acquisition of assets
Provision of capital

FINANCIAL Internal control

Government reporting
Financing
Insurance

OFFICER Planning for control

Economic appraisal
Investor relations
Investments
Evaluating and consulting Credit & collections
Banking & custody of funds
Short-term financing

PROF. GRACE A. PADIERNOS, CPA, CMA

RECENT DEVELOPMENTS

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Customer value - It is the
difference between what is
received and given up by the
customer when procuring a
product or service (Roque, 2014).
• Customer receives – customer
gives up = VALUE
• Customer receives – everything
that has to do with product.
• Customer gives up – price or
any cost related to the product.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Value chain - It is the set of
activities required to design,
develop, produce market and
deliver products and services to
customers (Roque, 2014).
1. Secure resources
2. Research and development
3. Product design
4. Production
5. Marketing
6. Distribution and sales

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Total Quality Management
(TQM) - It is a broad set of
processes designed to focus the
entire organization and its
employees on providing
products and services that do
the best possible job of
satisfying the customer.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Concept of TQM:
Continuous improvement - is
the constant effort to eliminate
waste, simplify process and
product design and improve
quality and customer service.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Kaizen costing - It means
continuous improvement
through small betterment
activities rather than large
and radical improvement
through innovations and
huge investment in
technology.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Reengineering - It is the
complete redesign of a
process with an emphasis on
finding creative ways to
accomplish and objective
(Hilton, 2010).

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Activity-based costing - It is a two-
stage procedure used to assign
overhead cost to products and
services. First, significant activities
are identified, and overhead costs
are assigned to the activity cost
pools in accordance with the way
resources are consumed by the
activities. Then overhead costs are
allocated from each activity cost
pool to each product line in
proportion to the amount of the
cost driver consumed by the
product.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Theory of constraints
-This approach seeks to find the
most cost-effective way to
alleviate an organization’s most
limiting constraints.
-A method of analyzing the
bottlenecks (constraints) that
keep a system from achieving
higher performance.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Just-in-time inventory
management - It is a system
wherein raw materials are
purchased and components
are produced just in time to
be used at each stage of
production process.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Flexible Manufacturing
System – a production system
in which a single factory
manufactures numerous
variations of products
through the use of computer-
controlled robots.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Life Cycle Costing – the
accumulation of costs for
activities that occur over the
entire life cycle of a product
from inception to
abandonment by the
manufacture and the
consumer.

PROF. GRACE A. PADIERNOS, CPA, CMA

Recent
Developments
in Management
Accounting
• Target Costing – a method of
determining what the cost of
a product should be based on
the product’s estimated
selling price less desired
profit.

PROF. GRACE A. PADIERNOS, CPA, CMA

Ice breaker!
4 pics, 1 word

PROF. GRACE A. PADIERNOS, CPA, CMA

_I_E

PROF. GRACE A. PADIERNOS, CPA, CMA

TIME

PROF. GRACE A. PADIERNOS, CPA, CMA

P__DU_
_

PROF. GRACE A. PADIERNOS, CPA, CMA

PRODU
CE

PROF. GRACE A. PADIERNOS, CPA, CMA

_H___I
_G

PROF. GRACE A. PADIERNOS, CPA, CMA

SHOPP
ING

PROF. GRACE A. PADIERNOS, CPA, CMA

_A T__

PROF. GRACE A. PADIERNOS, CPA, CMA

MATCH

PROF. GRACE A. PADIERNOS, CPA, CMA

A____N__N
_

PROF. GRACE A. PADIERNOS, CPA, CMA

ACCOUNT
ANT

PROF. GRACE A. PADIERNOS, CPA, CMA

OTHER BASIC CONCEPTS

PROF. GRACE A. PADIERNOS, CPA, CMA

 COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects

Importance in
Management
decision- FS classification
discretion
making process
PROF. GRACE A. PADIERNOS, CPA, CMA
 COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects

Importance in
Management
decision- FS classification
discretion
making process
PROF. GRACE A. PADIERNOS, CPA, CMA
1. Variable Cost
 Total variable cost increases proportionately with an increase in the
activity
 Variable cost per unit remains constant

TOTAL PER UNIT

PROF. GRACE A. PADIERNOS, CPA, CMA
2. Fixed Cost
 Total fixed cost remains constant
 Fixed cost per unit fluctuates or inversely related with the activity
level

TOTAL PER UNIT

PROF. GRACE A. PADIERNOS, CPA, CMA
3. Mixed/Semi-variable/Hybrid Cost
 Combination of variable and fixed

TOTAL PER UNIT

PROF. GRACE A. PADIERNOS, CPA, CMA

4. Step-fixed Cost
 Costs that remain constant for a period but is subsequently affected
by the level of activity.

TOTAL PER UNIT

PROF. GRACE A. PADIERNOS, CPA, CMA

5. Step-variable Cost
 Costs that are closely classified as variable; characterized by small
increments.

PROF. GRACE A. PADIERNOS, CPA, CMA

6. Curvilinear
 Costs depicted by a curved graph; incorporating concepts of marginal
costs

PROF. GRACE A. PADIERNOS, CPA, CMA

 COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects

Importance in
Management
decision- FS classification
discretion
making process
PROF. GRACE A. PADIERNOS, CPA, CMA
 PROF. GRACE A. PADIERNOS, CPA, CMA

1. Direct Cost

Costs that can basically traced to a cost object

 PROF. GRACE A. PADIERNOS, CPA, CMA

2. Indirect Cost

 Cost that cannot be easily traced to a cost

object
 PROF. GRACE A. PADIERNOS, CPA, CMA

3. Common Cost

 Indirect or non-traceable costs incurred for

the benefit of more than one business unit
 PROF. GRACE A. PADIERNOS, CPA, CMA

4. Joint Cost

 Indirect or non-traceable costs that arise from

the simultaneous processing or manufacturing
of products produced from the same processes
 COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects

Importance in
Management
decision- FS classification
discretion
making process
PROF. GRACE A. PADIERNOS, CPA, CMA
 PROF. GRACE A. PADIERNOS, CPA, CMA

1. Controllable
 Cost over which a
production manager has
influence
 PROF. GRACE A. PADIERNOS, CPA, CMA

2. Non-controllable
 Costs over which a
production manager has no
influence
 COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects

Importance in
Management
decision- FS classification
discretion
making process
PROF. GRACE A. PADIERNOS, CPA, CMA
 PROF. GRACE A. PADIERNOS, CPA, CMA

1. Committed Cost

 Costs which require a series of payments over

a long period of time
 Governed by past decisions
 Cannot be reduced or avoided
 Ex. Depreciation
 PROF. GRACE A. PADIERNOS, CPA, CMA

2. Discretionary or
Programmed Cost
 Costs which are fixed as a result of
management policy
 Avoidable
 Ex. Advertising cost, research and
development
 COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects

Importance in
Management
decision- FS classification
discretion
making process
PROF. GRACE A. PADIERNOS, CPA, CMA
1. Differential Cost
net difference of cost between
two alternative courses of action

PROF. GRACE A. PADIERNOS, CPA, CMA

2. Relevant Cost
costs which are material to the
decision making of managers

PROF. GRACE A. PADIERNOS, CPA, CMA

3. Irrelevant Cost
Costs which do not affect the
decision making of managers

PROF. GRACE A. PADIERNOS, CPA, CMA

4. Sunk Cost
Cost incurred in the past and
cannot be changed by a future
action

PROF. GRACE A. PADIERNOS, CPA, CMA

5. Marginal Cost
Extra cost incurred when one
additional unit is produced

PROF. GRACE A. PADIERNOS, CPA, CMA

6. Out-of-pocket
Cost or Explicit Cost
Cost that require cash outlay

PROF. GRACE A. PADIERNOS, CPA, CMA

7. Opportunity Cost
Benefit forgone by choosing
an alternative course of action

PROF. GRACE A. PADIERNOS, CPA, CMA

 COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects

Importance in
Management FS
decision-
discretion classification
making process
PROF. GRACE A. PADIERNOS, CPA, CMA
  Cost of goods manufactured, or cost of goods
1. Product Cost purchased for resale
 Inventoried until goods are sold

PROF. GRACE A. PADIERNOS, CPA, CMA

2. Period Cost Non-product cost or expensed as incurred

PROF. GRACE A. PADIERNOS, CPA, CMA

Product vs.
Period
Cost

PROF. GRACE A. PADIERNOS, CPA, CMA

Thank you!!!

PROF. GRACE A. PADIERNOS, CPA, CMA