{"id":178,"date":"2018-04-16T21:27:37","date_gmt":"2018-04-16T21:27:37","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=178"},"modified":"2024-04-29T16:46:16","modified_gmt":"2024-04-29T16:46:16","slug":"key-components-of-managerial-accounting","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/key-components-of-managerial-accounting\/","title":{"raw":"Managerial Accounting","rendered":"Managerial Accounting"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\n<ul>\r\n \t<li>Explain the key components of managerial accounting<\/li>\r\n<\/ul>\r\n<\/div>\r\nManagerial accounting revolves around three primary components:\r\n<ol>\r\n \t<li style=\"font-weight: 400;\">Planning<\/li>\r\n \t<li style=\"font-weight: 400;\">Controlling<\/li>\r\n \t<li style=\"font-weight: 400;\">Decision making<\/li>\r\n<\/ol>\r\nAll companies have requirements around these components from the very beginning. Budgeting and business planning are the very first steps in beginning a business, and these are managerial accounting tasks! \u00a0But what would happen if you just jumped into a business, without planning anything?\r\n\r\nLet\u2019s look at a small business start-up:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=4306750&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=573&amp;video_id=eauCpt3cBjQ&amp;video_target=tpm-plugin-fhh44xg0-eauCpt3cBjQ\" width=\"800px\" height=\"500px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/MAModule1Video6PlanningDirectingandControllingProblem1-3_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video \"MA Module 1, Video 6, Planning Directing and Controlling, Problem 1-3\" here.<\/a>\r\n\r\nThe first step is planning. Let\u2019s assume we are going to start that restaurant Tony talked about in the video. \u00a0First, we will create a budget for our new venture. This budget provides us with milestones.\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">How much in sales do we need to bring in each month?<\/li>\r\n \t<li style=\"font-weight: 400;\">What will our menu look like?<\/li>\r\n \t<li style=\"font-weight: 400;\">How many employees do we need and how much will we pay them?<\/li>\r\n \t<li style=\"font-weight: 400;\">What will our cost of product be?<\/li>\r\n \t<li style=\"font-weight: 400;\">What will we pay for rent and utilities?<\/li>\r\n<\/ul>\r\nOnce we have the plan, and we operate our business for a while, we can then move on to the control portion of the managerial accounting process.\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Did we meet our sales goals?<\/li>\r\n \t<li style=\"font-weight: 400;\">Did we stay within our budget for payroll?<\/li>\r\n \t<li style=\"font-weight: 400;\">Did we meet our cost of product budget and goals?<\/li>\r\n<\/ul>\r\nThen we get to move on to decision making.\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">We didn\u2019t make our sales goals, so how will we adjust costs?<\/li>\r\n \t<li style=\"font-weight: 400;\">Should we adjust costs, or should we rethink our marketing plan to increase sales?<\/li>\r\n \t<li style=\"font-weight: 400;\">Are we pricing our product correctly?<\/li>\r\n \t<li style=\"font-weight: 400;\">Are we reaching our customer base effectively?<\/li>\r\n \t<li style=\"font-weight: 400;\">Do we need to change our menu to better meet customer needs?<\/li>\r\n \t<li style=\"font-weight: 400;\">If we didn\u2019t meet payroll budget, are we providing the correct training and direction for our employees to do their jobs effectively?<\/li>\r\n<\/ul>\r\nSo, hopefully this gives you a better understanding of the importance of planning, controlling and deciding! If you never did the budget, or review it, how would you be able to make decisions that will create a profitable business?\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=4306751&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=573&amp;video_id=wM77_vV_sJg&amp;video_target=tpm-plugin-nwutps8o-wM77_vV_sJg\" width=\"800px\" height=\"500px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/3ManagerialAccountingCh1Pt2FunctionsofManagersRoleofManagementAccountants_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video \"3. Managerial Accounting Ch1 Pt 2: Functions of Managers \u2013 Role of Management Accountants\" here.<\/a>\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/3da4c40c-8ea1-428c-9aff-1b935272fefa\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<ul>\n<li>Explain the key components of managerial accounting<\/li>\n<\/ul>\n<\/div>\n<p>Managerial accounting revolves around three primary components:<\/p>\n<ol>\n<li style=\"font-weight: 400;\">Planning<\/li>\n<li style=\"font-weight: 400;\">Controlling<\/li>\n<li style=\"font-weight: 400;\">Decision making<\/li>\n<\/ol>\n<p>All companies have requirements around these components from the very beginning. Budgeting and business planning are the very first steps in beginning a business, and these are managerial accounting tasks! \u00a0But what would happen if you just jumped into a business, without planning anything?<\/p>\n<p>Let\u2019s look at a small business start-up:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=4306750&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=573&amp;video_id=eauCpt3cBjQ&amp;video_target=tpm-plugin-fhh44xg0-eauCpt3cBjQ\" width=\"800px\" height=\"500px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/MAModule1Video6PlanningDirectingandControllingProblem1-3_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video &#8220;MA Module 1, Video 6, Planning Directing and Controlling, Problem 1-3&#8221; here.<\/a><\/p>\n<p>The first step is planning. Let\u2019s assume we are going to start that restaurant Tony talked about in the video. \u00a0First, we will create a budget for our new venture. This budget provides us with milestones.<\/p>\n<ul>\n<li style=\"font-weight: 400;\">How much in sales do we need to bring in each month?<\/li>\n<li style=\"font-weight: 400;\">What will our menu look like?<\/li>\n<li style=\"font-weight: 400;\">How many employees do we need and how much will we pay them?<\/li>\n<li style=\"font-weight: 400;\">What will our cost of product be?<\/li>\n<li style=\"font-weight: 400;\">What will we pay for rent and utilities?<\/li>\n<\/ul>\n<p>Once we have the plan, and we operate our business for a while, we can then move on to the control portion of the managerial accounting process.<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Did we meet our sales goals?<\/li>\n<li style=\"font-weight: 400;\">Did we stay within our budget for payroll?<\/li>\n<li style=\"font-weight: 400;\">Did we meet our cost of product budget and goals?<\/li>\n<\/ul>\n<p>Then we get to move on to decision making.<\/p>\n<ul>\n<li style=\"font-weight: 400;\">We didn\u2019t make our sales goals, so how will we adjust costs?<\/li>\n<li style=\"font-weight: 400;\">Should we adjust costs, or should we rethink our marketing plan to increase sales?<\/li>\n<li style=\"font-weight: 400;\">Are we pricing our product correctly?<\/li>\n<li style=\"font-weight: 400;\">Are we reaching our customer base effectively?<\/li>\n<li style=\"font-weight: 400;\">Do we need to change our menu to better meet customer needs?<\/li>\n<li style=\"font-weight: 400;\">If we didn\u2019t meet payroll budget, are we providing the correct training and direction for our employees to do their jobs effectively?<\/li>\n<\/ul>\n<p>So, hopefully this gives you a better understanding of the importance of planning, controlling and deciding! If you never did the budget, or review it, how would you be able to make decisions that will create a profitable business?<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=4306751&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=573&amp;video_id=wM77_vV_sJg&amp;video_target=tpm-plugin-nwutps8o-wM77_vV_sJg\" width=\"800px\" height=\"500px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/3ManagerialAccountingCh1Pt2FunctionsofManagersRoleofManagementAccountants_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video &#8220;3. Managerial Accounting Ch1 Pt 2: Functions of Managers \u2013 Role of Management Accountants&#8221; here.<\/a><\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_3da4c40c-8ea1-428c-9aff-1b935272fefa\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/3da4c40c-8ea1-428c-9aff-1b935272fefa?iframe_resize_id=assessment_practice_id_3da4c40c-8ea1-428c-9aff-1b935272fefa\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-178\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Managerial Accounting. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>MA Module 1, Video 6, Planning Directing and Controlling, Problem 1-3. <strong>Authored by<\/strong>: Tony Bell. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/eauCpt3cBjQ\">https:\/\/youtu.be\/eauCpt3cBjQ<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em><\/li><li>Managerial Accounting Ch1 Pt2: Functions of Managers - Role of Management Accountants. <strong>Authored by<\/strong>: Mark Meldrum. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=wM77_vV_sJg&#038;feature=youtu.be\">https:\/\/www.youtube.com\/watch?v=wM77_vV_sJg&#038;feature=youtu.be<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":4,"template":"","meta":{"_candela_citation":"[{\"type\":\"copyrighted_video\",\"description\":\"MA Module 1, Video 6, Planning Directing and Controlling, Problem 1-3\",\"author\":\"Tony Bell\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/eauCpt3cBjQ\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Managerial Accounting Ch1 Pt2: Functions of Managers - Role of Management Accountants\",\"author\":\"Mark Meldrum\",\"organization\":\"\",\"url\":\"https:\/\/www.youtube.com\/watch?v=wM77_vV_sJg&feature=youtu.be\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Managerial Accounting\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"47b5a508-3838-4cf8-86d9-039040fa0548, 3759cf89-e465-4f23-b269-533a51b6a873","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-178","chapter","type-chapter","status-publish","hentry"],"part":104,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/178","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":9,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/178\/revisions"}],"predecessor-version":[{"id":4049,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/178\/revisions\/4049"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/104"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/178\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=178"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=178"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=178"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}