BPP LEARNING MEDIA CIMA P2 Advanced Management Accounting For exams in 2016 江西财经大学会计学院 吉伟莉

BPP LEARNING MEDIA Chapter 1 Analysing and managing costs —Activity based costing (ABC) —Activity based management (ABM) —Customer profitability analysis (CPA) —Activity based profitability analysis —TQM —Other important techniques

Analysing and managing costs Activity based costing Total quality management techniques Activity based management Chapter Overview TQM Just in time Theory of constraints Continuous improvement Kaizen costing Cost of quality reporting Process re-engineering

Changing customer requirements —Successful organisations make customer satisfaction their priority Key success factors —Cost efficiency —Quality —Time —Innovation Total Quality Management (TQM) 1

Total quality management (TQM) —The process of focusing on quality in the management of all resources and relationships within the organisation Two basic principles of TQM —Getting things right first time On the basis that the cost of correcting mistakes is greater than the cost of preventing them —Continuous improvement The belief that it is always possible to improve, no matter how high quality may be already Total Quality Management (TQM) 2

Total Quality Management (TQM) 3 Nine key elements of TQM —The only thing that matters is customer. —All-pervasive customer-supplier relationship —Prevent the cause of the defect in the first place —All personnel’s responsibility —Zero defects —Eliminated waste —All departments attempt to get things right first time —Quality certification programmes —Emphasis on the cost of poor quality

Measuring and controlling quality —Quality assurance (supplier guarantees quality) —Inspection of output (at various key stages) —Monitoring customer reaction Total Quality Management (TQM) 3

Employees and quality —Workers are empowered and encouraged to become multiskilled —Workers are encouraged to take responsibility for their work Internal customers and suppliers —To satisfy external customers’ expectations, the expectations of internal customers must be satisfied —Internal customers are therefore linked in quality chains Total Quality Management (TQM) 4

Cost of quality —The difference between the actual cost of producing, selling and supporting products/services and —The equivalent cost if there were no failures during production/usage Total Quality Management (TQM) 5

Total Quality Management (TQM) 6

Example: Categorise each cost IEIPPAPEIEIPPAPE

Continuous improvement (CI) —The use of an organisation’s human resources to produce a constant stream of improvements in all aspects of customer value —This includes quality, functional design and timely delivery, while lowering cost at the same time CI and Kaizen costing 1

Basic concepts of CI —Quality - defined by the needs of both internal and external customers —Process improvements - through technology and innovative ideas —Team work - in the form of quality circles and group problem–solving activities CI and Kaizen costing 2

Essential factors for CI —Commitment from senior management —Opportunity for all employees to contribute —Information about the organisation’s environment —Employees’ awareness of their role —Management of the performance and contribution of employees —Good communications —Recognised quality management systems and standards —Measurement and evaluation of progress against key performance indicators and benchmarks CI and Kaizen costing 3

—Kaizen costing process CI and Kaizen costing 4

—Standard costing v Kaizen costing CI and Kaizen costing 5

Just-in-time 1

Just-in-time 2

TOC and Throughput accounting 1

TOC and Throughput accounting 2

TOC and Throughput accounting 3

The following statements have been made about throughput accounting. (1)A factor other than a production resource may be a binding constraint in throughput accounting. (2)Production must be limited to the capacity of the bottleneck resource, but this resource should be utilised fully. (3)Direct labour should always be treated as a factory cost when measuring throughput. (4)If machine time is the bottleneck resource, there is no value in taking measures to improve direct labour efficiency. Which of the above statements is/are true? Answer: all TOC and Throughput accounting 4

Product X is made in a production process where machine time is a bottleneck resource. One unit of Product X requires 0.3 machine hours.The costs and selling price of Product X are as follows: $ Materials 8 Labour(0.4 hours) 4 Other factory costs 2 14 Sales price 18 Profit 4 TOC and Throughput accounting 5 What is the throughput accounting ratio for Product X? Answer: 1.67

TOC and Throughput accounting 6

—The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements —These improvements are seen in critical contemporary measures of performance such as cost, quality, service and speed —A process is a collection of activities that takes one or more kinds of input and creates an output Business processes re-engineering (BPR) 1

Business processes re-engineering (BPR) 2

Principles of BPR which influence systems development continued —Geographically-dispersed resources should be treated as if they were centralised —Parallel activities should be linked, not integrated —There is no distinction between workers and managers —Information should be captured once, at source Business processes re-engineering (BPR) 3

BPP LEARNING MEDIA End of Chapter 1