Management Accounting in a Changing Environment Chapter Fourteen.

Slides:



Advertisements
Similar presentations
Introduction When you choose a restaurant for a meal, are you concerned with: The price of the meal How long you have to wait to be seated The quality.
Advertisements

Performance Evaluation Using the Balanced Scorecard
9-1 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA.
Global Manufacturing and Materials Management
Use of non-financial measures in performance evaluation
Product and Service Design
Performance Measurement in Decentralized Organizations
Cost Management ACCOUNTING AND CONTROL
Chapter 2 Strategic Training
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
International Business 9e
Chapter 2, Operations Strategy
Strategic Management Accounting
Management Accounting in a Changing Environment
Responsibility Accounting and Transfer Pricing
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Planning and Strategic Management Chapter 04.
Managerial Control Chapter 16 Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Performance Evaluation Chapter 10 1.
Chapter One Introduction. Chapter One Introduction.
CHAPTER ONE Introduction McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-3 Accounting for Decision Making and Control.
1 PowerPointPresentation by PowerPoint Presentation by Gail B. Wright Professor Emeritus of Accounting Bryant University © Copyright 2007 Thomson South-Western,
© The McGraw-Hill Companies, Inc., 2002 McGraw-Hill/Irwin Costing and the Value Chain Chapter 18.
International Business Fourth Edition.
1 CHAPTER 18 MODERN DEVELOPMENTS IN MANAGING OPERATIONS.
The Changing Business Environment: A Manager’s Perspective 18.
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 07 Designing Organizational Structure.
Value-Based Systems: ABM and Lean 22. Value-Based Systems and Management OBJECTIVE 1: Explain why managers use value-based systems and discuss their relationship.
27 Lean Principles, Lean Accounting, and Activity Analysis
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter 14 Global Production McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Strategy,
Click to edit Master title style Click to edit Master text styles –Second level Third level –Fourth level »Fifth level 10/19/ Cost Management.
AFM The Balanced Scorecard By Isuru Manawadu B.Sc in Accounting Sp. (USJP), ACA.
C Learning Objectives Power Notes 1.Just-in-Time Principles 2.Applying a Just-in-Time Approach 3.Accounting for Just-in-Time Operations 4.Accounting.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fifth Edition Wild, Shaw, and Chiappetta Fifth Edition McGraw-Hill/Irwin Copyright © 2013.
Organizational Agility Chapter 09 Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Chapter 14 Global Production, Outsourcing and Logistics 1.
Criticisms of Absorption Cost Systems: Inaccurate Product Costs Chapter Eleven Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Criticisms of Absorption Cost Systems: Inaccurate Product Costs Chapter Eleven.
Chapter Two Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map.
Chapter 20 Strategy in Purchasing and Supply Management.
Chapter 11 Strategic Cost Management
Standard Costs: Direct Labor and Materials
Management and Cost Accounting, 6 th edition, ISBN © 2004 Colin Drury MANAGEMENT AND COST ACCOUNTING SIXTH EDITION COLIN DRURY.
Chapter 20 Managing inventory and quality. The importance of inventory management §Cope with uncertainties in customer demand and in production processes.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license.
CHAPTER SIX Budgeting. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 6-2 Outline of Chapter 6 Budgeting  Generic Budgeting.
International Business An Asian Perspective
Conflicting Advice in the Strategy Literature
Chapter 12 Global Production, Outsourcing, and Logistics.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
Chapter 16 Managing costs and quality
© The McGraw-Hill Companies, Inc., 2008 McGraw-Hill/Irwin Financial & Managerial Accounting The Basis for Business Decisions FOURTEENTH EDITION Williams.
© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Chapter Two.
CHAPTER FIVE Responsibility Accounting and Transfer Pricing.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 25 Managerial Accounting Concepts and Principles.
Responsibility Accounting and Transfer Pricing Chapter Five Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
CHAPTER TEN Criticisms of Absorption Cost Systems: Incentive to Overproduce.
Table 1: Comparison of Management and Financial Accounting.
CORNERSTONES of Managerial Accounting, 5e. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part,
Chapter 12 Performance Evaluation Using the Balanced Scorecard.
Chapter 1 Introduction to Cost Accounting. Learning Objectives  Explain the uses of cost accounting data.  Describe the ethical responsibilities and.
Chapter 3 Basic Cost Concepts McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-3 Learning Objectives Explain the cost.
Performance Measurement in Decentralized Organizations
Management Accounting in a Changing Environment
International Business 9e
Chapter One Introduction McGraw-Hill/Irwin
International Business 9e
Organizational Agility
Presentation transcript:

Management Accounting in a Changing Environment Chapter Fourteen

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Outline of Chapter 14 Management Accounting in a Changing Environment Integrative Framework Organizational Innovations and Management Accounting When Should the Internal Accounting System be Changed?

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Connection to Other Chapters Chapter 14 summarizes the concepts developed in the previous chapters and applies them to recent internal accounting system innovations. Every chapter mentions the trade-offs between decision management (decision making) and decision control. Internal accounting systems continue to evolve in response to changing needs and environments.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. History of Management Accounting As firms evolve, internal accounting systems evolve. Early 1800s: Multi-process textile mills develop absorption costing : Multi-location firms create cost controls : Large corporations decentralize in operating divisions : External reporting dictates internal accounting design. Recent: Automation induces redesign of product costing. Recent: TQM requires more non-financial measures Recent: JIT producers want to identify non-value-adding activities. Recent: The Balanced Scorecard links strategy to key performance indicators to help determine if the organization is moving in the right direction.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Organizational Architecture See Figure Decision rights partitioning -Separating decision management and control Performance evaluation system -Management accounting system -Nonfinancial measures Performance reward and punishment system

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Business Strategy Asset structure influences performance measurement. -Some firms can use historical financial accounting. -Publicly-traded firms may use stock market value. Customer base influences distribution of specialized knowledge. -May decentralize into many responsibility centers Knowledge creation influences partitioning of decision rights. -If knowledge is easy to acquire, more centralization is possible.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Environmental and Competitive Forces Technological change -Changes relative value of investment projects -Changes performance measures and controls Global market conditions change - Production sources dispersed internationally -Competitors from other countries

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Quality’s Multiple Meanings Different meanings of quality can conflict. High mean Low variance Larger number of options Meeting customer expectations Partitioning decision rights Who determines quality goals? Who measures quality?

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. TQM Program Elements A firmwide process -communicate up, down, and laterally Quality is defined by customer -specialized knowledge of customer needs Requires organizational changes -push decision rights down to operating and marketing Designed into the product -Reduce defects by redesigning production

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. ISO 9000 Issued by International Standards Organization, a European community body that sets quality standards. Requires written policies, procedures, and quality methods. Certifies that policies exist that allow quality products to be manufactured.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. TQM Quality Costs Benefits Reduce internal failures (before sold) Reduce external failures (after sold) Costs Prevention (reengineering and training) Appraisal (inspection and testing before delivery) Find optimal balance between benefits and costs. See Self-Study Problem 1.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. JIT Goals Just-in-time (JIT) production: Production does not start until order is received. JIT aims to minimize throughput time. Throughput time = Processing time + Non-value-added time Non-value-added time = Waiting + Transit + Inspection Manufacturing cycle efficiency (MCE) (not mentioned in textbook) MCE = (Processing time) = (Throughput time)

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. JIT Techniques Increase quality of material and processes Reduce setup times Balance flow rates across manufacturing cells Coordinate deliveries from suppliers Improve factory layout to reduce transit time Change performance measurement and reward system to focus on reducing throughput time of entire production process rather than individual departments

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. JIT Cost Flows See Figure Compare to Figure 9-1. Raw and In-Process (RIP) combines raw materials and work-in- process. Conversion Cost combines direct labor and all manufacturing overhead. Backflushing: As work completed, transfer costs to finished goods from RIP using standard rates or specific identification from conversion costs using throughput time or other allocation base See Self-Study Problem 2.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. JIT Limitations Advantages: Simpler because no work-in-process accounting Focus attention on throughput time Disadvantages: Become dependent on suppliers for on-time delivery Still need periodic physical count of materials inventory Reorganizing production can be expensive.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Balanced Scorecard Translates the strategy into a plan of action Identifies specific objectives and performance drivers (key performance indicators) Helps determine if the organization is moving in the right direction

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Balanced Scorecard Attempts to achieve a balance between: -short and long-term objectives -outcome and performance measures for cause and effect objectives -financial and non-financial performance measures -all of the stakeholders of the organization

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Balanced Scorecard For each objective there are -Driver performance indicators measure input activities to achieve the objective -Outcome performance indicators Measure if the objective has been realized -Driver and outcome performance indicators reflect the cause and effect nature of the balanced scorecard.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The Balanced Scorecard’s Four Perspectives Innovation and Learning Perspective Customer Perspective STRATEGY Financial Perspective Internal Business Processes Perspective

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Example Objectives, Performance Indicators, and Targets Review Table Pay particular attention to the specificity of the definition of each element, particularly the targets.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. What Makes the Balance Scorecard a Success or a Failure? Example 1: Philips Electronics (a success) Example 2:The U. S. retail banking operations of a leading international financial services provider (a failure) Summarize what is needed to achieve success and avoid failure.

McGraw-Hill/Irwin Accounting for Decision Making and Control, 5/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. When Should the Internal Accounting System be Changed? Continual evolution (economic Darwinism) No ideal management accounting system Respond to changes in technology and markets Trade-offs Decision making vs. Decision control Opportunity cost vs. Historical cost Simplicity vs. Comprehensiveness Internal users vs. External users Financial measures vs. Nonfinancial measures