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Introduction to Evaluating Performance

Video Transcript:

"Welcome to our Decision Making and the Innovation Economy Series, an over view of managerial accounting. This module is evaluating performance using budgets, standard costing and variances.

Hello, I'm David Fionda. Currently I'm a CPA and a member of the accounting faculty of Bentley University of Waltham Mass. I thought it was important to take a few minutes to provide you with my perspective on decision making and managerial accounting.

Before I joined the faculty at Bentley I spent the majority of my career as an entrepreneur. I started three companies and had the fortune to sell two of them. I've also had the good fortune to work for companies like Great Plains Software. I watched them go from a small start up in Fargo North Dakota to being acquired by Microsoft for 1.6 billion dollars. They then became the foundation of Microsoft Dynamics Accounting Suite. I spent two years working with them helping them bring their products to the Italian market.

As an entrepreneur I've always had a great interest in looking at what makes companies successful and what causes companies to fail. Over the past 30 years I've had the opportunity to observe how our world and business climate has changed; how we went from sending memos to the typing pool to sending a text message, how even the smallest companies today can now access markets across the entire globe only accessible previously to the largest multinationals, and how the speed of business has accelerated to nearly light speed.

The common thread to all of this is information and decision making. In this fast paced innovation economy getting the right information and right decision is more than just an accounting exercise it's critical to the survival of any business. I've seen our economy transform into an innovation economy. Thanks to the power of the web consumers today are keenly aware of every product choice that might be available from multiple channels and providers. Gone are the days where you go to the T.V. store to purchase your television, or you get your housewares at Woolworth. Many years ago managerial accounting was simply about going through a series of calculations performed by a select group of individuals. The environment and markets were tightly controlled and you could wait the days or weeks for your answer.

Today every person in every organization is making those key decisions. The pace of today's competitive markets can't wait for an answer. The largest companies, like Apple Computer, to the smallest web start ups have to understand how the different components of the cost of their product work so they can accurately and quickly predict costs across a whole spectrum of sales and production, which products to introduce, which products to emphasize at what price, how to evaluate their performance and take corrective action, which costs are relevant to any decision, how to manage overhead to drive profitability and how to make decisions on accepting special orders, eliminating a product line, location or division, or whether to outsource and most importantly when and how to replace or acquire new equipment.

Successful companies are always innovating by constantly adding new products and services. Timely relative information is critical to supporting these decisions. The competition is so fierce these days there is no margin for error. Companies that understand this concept, like Apple, can price their products to succeed and make sure they are profitable. Companies that don't understand their product and service costs often make bad pricing and decisions that can doom them to failure. The focus of management accounting is decision making. To make the best decision you need accurate information quickly. Only the companies with the best information can make decisions at the speed that today's innovation economy requires.

I really hope that you enjoyed this module. I encourage you to reach out to me and ask any questions or let me know if I can be of further assistant to your organization. Thank you."


Next Lesson:
Instructor for this course
Course Syllabus
Standard Costing and Variances
Root Causes
  Root Causes2:11
  Hands on Root Causes14:28
Continuous Play
  Evaluating Performance using Standard Costing and Variances50:46
  Slides: Standard Costing and VariancesPDF
  Budgets Standards Costing and Variances Glossary IndexPDF