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PPT 10 -1
Chapter Ten
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Learning Objectives
Compare and contrast functional-based,
measurement.
Explain the basic features of the Balanced
Scorecard.
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evaluating performance
assigning rewards
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Management accounting offers the following three types of responsibility accounting systems.
Functional-based Activity-based Strategic-based
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Organizational Unit
Profit Sharing
Salary Increases
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Process
Financial
Dynamic
Gainsharing
Salary Increases
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Gainsharing
Salary Increases
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Resources
Process Dimension
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Performance measurement
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Activity Analysis
Activity analysis should produce four outcomes: What activities are done? How many people perform the activities?
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Value-Added Activities
A discretionary activity is classified as value-added provided it simultaneously satisfies three conditions:
The activity produces a change of state. The change of state was not achievable by preceding activities. The activity enables other activities to be performed.
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Nonvalue-Added Activities
Non-Value-Added Activities are activities that add cost and impede performance. Scheduling Moving
Waiting
Examples
Inspecting Storing
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Activity Analysis
Activity Analysis Can Reduce Costs in Four Ways:
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Quality
Time
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Life-cycle costing
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Consider the following data: Activity Welding Activity Driver Welding hours SQ 10,000 AQ 8,000 SP $40
Rework
Setups Inspection
Rework hours
Setup hours # of inspections
0
0 0
10,000
6,000 4,000
9
60 15
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Total
$400,000
$590,000
$990,000
Total
$590,000
$355,000
$235,000
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Share Information
Organization B
Cost of Processing a Purchase Order is $15
How do we improve?
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SP x SQ $2,000 x 0 $0
SP x AQ $2,000 x 60 $120,000
SP x AU $2000 x 40 $80,000
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40
30 20 10 Planning Design
Testing
Production
Logistics
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Target Costing
A target cost is the difference between the sales price needed to capture a predetermined market share and the desired per-unit profit.
Example: Current product specifications and the targeted market share call for a sales price of $250,000. The required profit is $50,000 per unit. The target cost is computed as follows:
Target cost = $250,000 - $50,000 = $200,000
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Unit production cost Unit life-cycle cost Unit whole-life cost Budgeted unit selling price
$6 10 12 15
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Note: the post purchase costs are costs incurred by the customer and are not included in the budgeted income e statement.
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F U F U F
Analysis: Production costs were higher than expected because insertions of diodes and integrated circuits also drive costs (both production and post purchase costs).
Conclusion: The design of future products should try to minimize total insertions.
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Financial Perspective
The financial perspective has three strategic themes:
Revenue Growth Cost Reduction
Asset Utilization
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Measures
Cost Reduction: Reduce unit product cost Reduce unit customer cost Reduce distribution channel cost Asset Utilization: Improve asset utilization
Unit product cost Unit customer cost Cost per distribution channel
Measures
Performance Value:
Decrease price Decrease postpurchase costs Improve product functionality Improve product quality Increase delivery reliability Improve product image and reputation Price Postpurchase costs Ratings from customer surveys Percentage of returns On-time delivery percentage Aging schedule Ratings from customer surveys PPT 10 -39
Measures
Operations:
Increase process quality Quality costs Output yields Percentage of defective units Unit cost trends Output/input(s) Cycle time and velocity MCE
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Measures
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Processing time Processing time + Move Time + Inspection Time + Wait time
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Compute MCE.
MCE = 10/(10+3+8+10) = 10/40 = 0.25 or 25%
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Measures
Employee satisfaction ratings Employee turnover percentages Employee productivity (revenue/employee) Hours of training Strategic job coverage ratio (percentage of critical job requirements filled) Suggestions per employee Suggestions implemented per employee Percentage of processes with real-time feedback capabilities Percentage of customer-facing employees with on-line access to customer and product information
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End of Chapter 10
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