Cost Management Accounting & Control, Chapter 13

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COST MANAGEMENT

COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.

Cengage Learning and South-Western are trademarks used herein under license. 1

Accounting & Control

Hansen▪Mowen▪Guan

Chapter 13

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Study Objectives

1. Compare and contrast activity-based and strategic-based responsibility accounting systems.

2. Discuss the basic features of the Balanced Scorecard.

3. Explain how the Balanced Scorecard links measures to strategy.

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Activity-Based versus

Strategic-Based Responsibility Accounting

• The activity-based system adds a process perspective to the financial perspective of the functional-based responsibility

accounting system.

• A strategy-based responsibility accounting system translates the strategy of the

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Activity-Based versus

Strategic-Based Responsibility Accounting

• The Balanced Scorecard is a strategic-based performance management system that typically identifies objectives and

measures for four different perspectives.

– The financial perspective – The customer perspective – The process perspective

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Basic Concepts of the Balanced

Scorecard

• choosing the market and customer segments the business unit intends to service

• identifying the critical internal and business processes that the unit must excel at to deliver the value

propositions to customers in the targeted market segments

• selecting the individual and organizational capabilities required for the internal, customer, and financial

objectives.

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Basic Concepts of the Balanced

Scorecard

Process value analysis

– is fundamental to activity-based responsibility accounting

– focuses on accountability for activities rather than costs

– emphasizes the maximization of systemwide performance instead of individual performance. – is concerned with:

• Driver analysis • Activity analysis

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Basic Concepts of the Balanced

Scorecard

Only financial measure among

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Basic Concepts of the Balanced

Scorecard

Customer value is the difference between

Realization … what the customer receives and

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Basic Concepts of the Balanced

Scorecard

• Internal business process perspective

– Describes the internal processes needed to provide value for customers and owners

• Process value chain consists of three processes

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Basic Concepts of the Balanced

Scorecard

Responsiveness: The time it takes a company to respond to a customer order

Cycle time (manufacturing) is the length of time it takes to produce a unit of output from the time materials are received until the good is delivered to finished goods inventory.

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A company has the following data for one of its manufacturing cells:

Theoretical velocity: 40 units per hour Productive minutes available (per year): 1,200,000

Annual conversion costs: $4,800,000

Actual velocity: 30 units per hour

Conversion Cost Example

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COST MANAGEMENT

COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.

Cengage Learning and South-Western are trademarks used herein under license. 23

Accounting & Control

Hansen▪Mowen▪Guan

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