mgt acctg introd
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Transcript of mgt acctg introd
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Introd - 1
STRATEGIC MANAGEMENT ACCOUNTANTS
Dynamic Business Partners
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Peter Drucker made the following
comments:
Accounting has become the most intellectuallychallenging area in the field of management, and
the most turbulent one.Accounting is the primary discipline attempting to
answer questions few executives yet knowhow to ask: What information do I need to do
my job? When do I need it? And from whomshould I be getting it?
Drucker, Peter E., Be Data LiterateKnow What to Know, The Wall Street Journal,
December 1, 1992, p. A16.
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Should I
make this
product?
How can I
improve market
share?
Is there
a better way
to provide this
Service?
What willthis change
cost me?
MANAGEMENT DECISIONS
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MANAGEMENT vs. FINANCIAL
ACCOUNTING
Management
Internal focus
Decision driven Emphasis on
future
Detailed
Segmentevaluation
Subjective (ifrelevant)
Financial
External focus
G.A.A.P. driven Historical
orientation
Aggregate
Entity-wideevaluation
Objective
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Strategic position
analysis--an
organizations basic wayof competing to sell
products or services.
Value chain analysis--
the study of value-
producing activities,
stretching from basic
raw materials to thefinal consumer of a
product or service.
Strategic Cost Management
Strategic Cost Management
Cost driver analysis--
the study of factors that
cause or influence costs.
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STRATEGIC MANAGEMENTACCOUNTING
Accounting exists within an business primarily to facilitatethe development and implementation of businessstrategy...
Three important generalizations emerge from this way ofviewing management accounting:
Accounting is not an end in itself, but only a means tohelp achieve business success
Specific accounting techniques or systems must beconsidered in terms of the role they are intended to play
In evaluating the overall accounting system... the keyquestion is whether the overall fit with strategy isappropriate.
Shank, John K. and Vijay Govindarajan, Strategic Cost Management
,
The Free Press, Macmillan, Inc., 1993, pp. 6-7.
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EMERGING THEMES OF
BUSINESS AND MANAGEMENTHighly Competitive Environment
Advanced Technologies
Continuous Change
Process Orientation
De-regulation
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Competition
takes place on
these dimensions.
Quality
Price/cost
Service
CompetitionCompetition
Diversity
Time
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Mission - the basic
purpose toward which
activities are directed.
Missions, Goals, and StrategiesMissions, Goals, and Strategies
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Goal - a definable
measurable target or
objective based on the
organizations mission.
Missions, Goals, and StrategiesMissions, Goals, and Strategies
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Strategy - a course of
action that will assistin achieving one or
more goals.
Missions, Goals, and StrategiesMissions, Goals, and Strategies
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Cost leadership
Product or service
differentiation
Focus on market
niche
Porters Strategic PositionsPorters Strategic Positions
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MANAGEMENTDECISION - MAKING
CYCLE
Planning
Organizing
Action
Control
Establishment of goals
Developing means to
achieve goalsReview of results
Revision of plans
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Seat customer and offer menu Take customer order
Bring order to kitchen Bring food to customer Replenish beverages Determine and bring bill to customer Collect money and give change Clear table
An Activity (A Unit of Work)An Activity (A Unit of Work)
Waiter or Waitress Activity
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Structural cost drivers are fundamental
choices about the size and scope of
operations and technology employed in
delivering products or services to customers.
Structural Cost DriversStructural Cost Drivers
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For a chain of discount stores--
Determine the
size of the stores
Determine the
type of
construction
Determine
the location
Determine the
kind of
technology
employed in
the store
Structural Cost DriversStructural Cost Drivers
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Organizational cost drivers are choices concerning
the organization of activities and choices concerning
the involvement of persons inside and outside the
organization in decision making.
Organizational Cost DriversOrganizational Cost Drivers
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Deciding to work closely with alimited number of suppliers.
Providing employees with costinformation and authorizing themto make decisions.
Deciding to reorganize the existingequipment in the plant so thatsequential operations are closer.
Organizational Cost DriversOrganizational Cost Drivers
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Designing components of aproduct so they can only fittogether in the correct manner.
Deciding to manufacture a lowvolume product on low-speed,general-purpose equipment ratherthan high-speed, special-purposeequipment.
Organizational Cost DriversOrganizational Cost Drivers
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Activity cost drivers
are specific units of
work (activities)performed to serve
customer needs that
consume costly
resources.
A
ctivity Cost DriversA
ctivity Cost Drivers
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CustomersCustomers
Served by
activities
ActivitiesActivities
ResourcesResources
Activities consumeresources
CostsCosts
Resourcescost money
Activity Cost DriversActivity Cost Drivers