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Managerial Accounting: Conceptual Framework

Chapter 1 Managerial Accounting Concepts and Empirical Evidence. Managerial Accounting: Conceptual Framework. MANAGERIAL ACCOUNTING: Design and use of information systems for managerial planning and control. INFORMATION. DECISION MAKING (planning and control). Managerial Accounting.

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Managerial Accounting: Conceptual Framework

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  1. Chapter 1 Managerial Accounting Concepts and Empirical Evidence Managerial Accounting:Conceptual Framework

  2. MANAGERIAL ACCOUNTING:Design and use of information systems for managerial planning and control INFORMATION DECISION MAKING (planning and control) Managerial Accounting

  3. Planning and Control Framework Setting Organizational Objectives

  4. Identifying Opportunities and/or Problems Planning and Control Framework Setting Organizational Objectives

  5. Identifying Opportunities and/or Problems Selecting Course of Action and Allocating Resources Planning and Control Framework Setting Organizational Objectives

  6. Identifying Opportunities and/or Problems Selecting Course of Action and Allocating Resources Evaluating Accomplishments of Organizational Objectives Planning and Control Framework Setting Organizational Objectives

  7. Three-Way Classification Scheme of Information Nonfinancial Internal Ex post

  8. Three-Way Classification Scheme of Information Financial External Nonfinancial Internal Ex post Ex ante

  9. MaLa Toy Corporation - Introduction of New Toy Estimate of revenues = $2,000,000 Estimates of costs of new toy = $1,000,000 or $2,500,000, with equal probabilities Cost of developing specialized information system to help predict toy costs = $40,000 Cost prediction is 80% accurate with specialized information system Data for Example

  10. Prediction withoutSpecialized Information System Revenues = $ 2,000,000 Costs = $ 1,000,000 Probability (p) = 0.5 Low Costs High Costs Revenues = $ 2,000,000 Costs = $ 2,500,000 p = 0.5 EV = ($ 2,000,000 - $ 1,000,000)*.5 + ($ 2,000,000 - $ 2,500,000)*.5 = $ 250,000 Mala Toy CorporationInformation Economics

  11. Prediction withoutSpecialized Information System Prediction withSpecialized Information System Revenues = $ 2,000,000 Costs = $ 1,000,000 Low-Cost Signal, p = 0.8 Probability (p) = 0.5 High-Cost Signal, p = 0.2 Low Costs High-Cost Signal, p = 0.8 High Costs Low-Cost Signal, p = 0.2 Revenues = $ 2,000,000 Costs = $ 2,500,000 p = 0.5 EV = ($ 2,000,000 - $ 1,000,000)*.5 + ($ 2,000,000 - $ 2,500,000)*.5 = $ 250,000 Mala Toy CorporationInformation Economics

  12. Prediction withoutSpecialized Information System Prediction withSpecialized Information System Expected payoff Revenues = $ 2,000,000 Costs = $ 1,000,000 Low-Cost Signal, p = 0.8 Probability (p) = 0.5 = (.5)*(.8)*($ 2,000,000 - $ 1,000,000) = $ 400,000 High-Cost Signal, p = 0.2 Low Costs Do not Produce High-Cost Signal, p = 0.8 Do not Produce High Costs = (.5)*(.2)*($ 2,000,000 - $ 2,500,000) = $ -50,000 Low-Cost Signal, p = 0.2 Revenues = $ 2,000,000 Costs = $ 2,500,000 p = 0.5 Expected Value (EV) = $ 350,000 Less: Cost of Specialized Information System - 40,000 Net EV $ 310,000 EV = ($ 2,000,000 - $ 1,000,000)*.5 + ($ 2,000,000 - $ 2,500,000)*.5 = $ 250,000 Since $ 310,000 > $ 250,000 (by $60,000), install Specialized Information System Mala Toy CorporationInformation Economics

  13. Computer-based information systems designed to support managerial planning and control User Decision Support Systems Overview User

  14. Computer-based information systems designed to support managerial planning and control Data Base User Decision Support Systems Overview Data base Management System User

  15. Computer-based information systems designed to support managerial planning and control Model Base Data Base User Decision Support Systems Overview Model base Management System Data base Management System User

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