Managerial Accounting and the Business Environment

Benchmarking:
The process of measuring a firm against the most successful firms in the industry.

Budget:
A detailed plan for the acquisition and use of financial and other resources over a specified time period.

Business process:
A series of steps that are followed in order to carry out some task in a business.

Constraint:
A limitation under which a company must operate, such as limited machine time available or limited raw materials available that restricts the company's ability to satisfy demand.
Control:
Those steps taken by management that attempt to increase the likelihood that the objectives set down at the planning stage are attained and to ensure that all parts of the organization function in a manner consistent with organizational policies.

Controller:
The manager in charge of the accounting department in an organization.

Controlling:
Ensuring that the plan is actually carried out and is appropriately modified as circumstances change.

Cycle time:
See Throughput time: The amount of time required to turn raw materials into completed products.

Decentralization:
The delegation of decision-making authority throughout an organization by providing managers at various operating levels with the authority to make key decisions relating to their area of responsibility.

Directing and motivating:
Mobilizing people to carry out plans and run routine operations.

Feedback:
Accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed.

Financial accounting:
The phase of accounting concerned with providing information to shareholders, creditors, and others outside the organization.

Finished goods:
Units of product that have been completed but have not yet been sold to customers.

Just-in-time (JIT):
A production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand.

Line:
A position in an organization that is directly related to the achievement of the organization's basic objectives.

Managerial accounting:
The phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making.

Non-value-added activity:
An activity that consumes resources or takes time but that does not add value for which customers are willing to pay.

Organization chart:
A visual diagram of a firm's organizational structure that depicts formal lines of reporting, communication, and responsibility between managers.

Performance report:
A detailed report comparing the budgeted data to the actual data.

Plan-do-check-act (PDCA) cycle:
A systematic approach to continuous improvement that applies the scientific method to problem solving.

Planning:
Selecting a course of action and specifying how the action will be implemented. Developing objectives and preparing budgets to achieve these objectives.

Planning and control cycle:
The flow of management activities through planning, directing and motivating, and controlling, and then back to planning again.

Process Reengineering:
An approach to improvement that involves completely redesigning business processes in order to eliminate unnecessary steps, reduce errors, and reduce costs.

Raw materials:
Materials that are used to make a product.

Segment:
Any part of an organization that can be evaluated independently of other parts and about which the manager seeks financial data. Examples include a product line, a sales territory, a division, or a department.

Setup:
Activities that must be performed whenever production is switched over from making one type of item to another.

Staff:
A position in an organization that is only indirectly related to the achievement of the organization's basic objectives. Such positions are supportive in nature in that they provide service or assistance to line positions or to other staff positions.

Theory of constraints (TOC):
A management approach that emphasizes the importance of managing constraints.

Throughput time:
The amount of time required to turn raw materials into completed products. Throughput time is also known as Cycle time.

Total quality management (TQM):
An approach to continuous improvement that focuses on customers and using teams of front-line workers to systematically identify and solve problems.

Work in process:
Units of product that are only partially complete and will require further work before they are ready for sale to a customer.