
a5dd74ff5701f3edf4cc579835a87218.ppt
- Количество слайдов: 54
Teaching Strategic Cost Management Ed Blocher University of North Carolina, Chapel Hill Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Overview 1. The Strategic Approach: an Introduction 2. Tools for Integrating Strategy: Value Chain Analysis, The Strategy Map, and the Balanced Scorecard (BSC) 3. Sample Course Outlines 4. Sample Course Topic: Activity-Based Costing (ABC), Time. Drive ABC (TDABC), and ABM 5. Sample Course Topic: Customer Profitability Analysis 6. Sample Course Topic: The Management and Control of Quality and Accounting for Lean 7. Sample Course Topic: Performance Measurement 8. Using Software in the Cost Management Course Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Part 1: the Strategic Approach to Teaching Cost/Management Accounting Topics—An Introduction Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Teaching Strategic Cost Management What? Why? How? Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Three Levels to Teaching… § First Level: Explain the topic § Second Level: As above, plus require homework § Third Level: As above, plus include the topic on exams Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Strategic Cost Management Prior Perspective • The Strategic Perspective Focus on Financial Reporting # View cost management as a tool for developing • Common emphasis on and implementing standardization and business strategy standard costs # The accountant as a • The accountant as business partner functional expert and # Focus on cost financial scorekeeper management Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Consequences of Lack of Strategic Cost-Management Information § Decision-making based on guess and intuition § Lack of clarity about direction and goals § Over time, lack of a clear and favorable perception of the firm by customers and suppliers § Incorrect decisions: choosing products, markets, or manufacturing processes that are inconsistent with the organization’s strategy § For control purposes, cannot link performance effectively to strategic goals §… Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Definition of Management Accounting: IMA Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Introducing Strategy Strengths Weaknesses Opportunities Threats Strategy Map Teaching Strategic Cost Management: Ed Blocher Balanced Scorecard (BSC) AAA Annual Meeting, August 2010
Michael Porter: Strategic Positioning q Cost Leadership—outperform competitors by producing at the lowest cost, consistent with quality demanded by the consumer q Differentiation—creating value for the customer through product innovation, product features, customer service, etc. that the customer is willing to pay for Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Aspects of the Two Competitive Strategies Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Part 2: Tools for Integrating Strategy into Cost Accounting/Cost Management Courses -- The Value Chain -- Strategy Maps & the Balanced Scorecard (BSC) Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Value Chain Analysis: A Detailed Look at Strategy… The Value Chain is a linked set of valueadding activities used by an organization to deliver its value proposition to its customers. It consists of: o “Upstream” Activities o Manufacturing/Operations o “Downstream” Activities Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Value-Chain Analysis § Identify value-chain activities § Develop competitive advantage by: § Identifying opportunities for adding value for the customer § Identifying opportunities for eliminating nonvalue added activities and reducing cost § Understand linkages among suppliers, the entity, and customers Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Strategy Maps & the Balanced Scorecard (BSC) The BSC and Strategy Map are used to align the organization’s activities with achieving strategic goals, using the four perspectives: • Financial • Customer • Internal Processes • Learning and Growth Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
vision & mission Exceed shareholder expectations Financial Diversify income stream Customer Increase sales volume Improve profit margins Diversify Increase sales to customer baseexisting customers Attract new customers Internal Process Target profitable Develop new market segments products Optimize internal processes Attract new customers Learning & Growth Develop employee skills Teaching Strategic Cost Management: Ed Blocher Integrate systems AAA Annual Meeting, August 2010
The Balanced Scorecard (BSC): Feedback to Strategy Map Teaching Strategic Cost Management: Ed Blocher Balanced Scorecard (BSC) AAA Annual Meeting, August 2010
Educational Resource: Tartan Manufacturing Case Key Issues: • Tartan emphasizes product leadership and quality • Limited manufacturing capacity • Fast sales growth in certain lines • The “Classic” Line has falling sales and is increasingly difficult to manufacture Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Part 3: Sample Course Outlines • Management Accounting • Cost Accounting • Advanced Management Accounting Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Introduction to Management Accounting · Strategic Positioning · Ethics Implementing Strategy Product Costing Cost Behavior (Planning and Operational Control) · The Value Chain · Volume Based (Job Costing) · Cost Estimation · The Balanced Scorecard · CVP Analysis · Master Budget · Activity based Costing · Management Control Teaching Strategic Cost Management: Ed Blocher Product Life Cycle · Target Costing · Life Cycle Costing · Decision Making · Flexible Budgets AAA Annual Meeting, August 2010
Cost Accounting · Strategic Positioning · Ethics Implementing Strategy · The Value Chain · The Balanced Scorecard Product Costing · Cost Behavior (Planning and Operational Control) Job Costing Product Life Cycle · Cost Estimation · Target Costing · CVP Analysis (ABC) · Life Cycle Costing · ABC Costing · Process Cost · Joint Costs · Standard Costing Teaching Strategic Cost Management: Ed Blocher · Master Budget (ABC) · Decision Making (ABC) § Managing Constraints AAA Annual Meeting, August 2010
Advanced Management Accounting · Strategic Positioning · Ethics Implementing Strategy Cost Behavior (ABC-based) · The Value Chain · Cost Estimation (Regression) · The Balanced Scorecard (BSC) · Management Control (TP) · Executive Compensation · Business Valuation Teaching Strategic Cost Management: Ed Blocher Product Life Cycle · Target Costing · CVP Analysis · Master Budget · Life Cycle Costing · Decision Making (LP) AAA Annual Meeting, August 2010
Part 4: Sample Course Topic— Activity-Based Costing (ABC), RCA, and TDABC Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Evolution of Cost Accounting Systems ABC Traditional Costing Resources Allocated to (simple & minimal) Resources Consumed by Activities Consumed by Cost Objects ABC (multidimensional) Consumed by outputs Cost Objects channels Cost Objects Teaching Strategic Cost Management: Ed Blocher Users AAA Annual Meeting, August 2010
ABC/M Framework What Things Cost Resource Costs Root Causes of Costs Resource Drivers Work Activities Performance Measures Activity Cost Assignment Cost Objects Why Things Cost Activity Drivers • Cost Reduction • Process reengineering • Cost of quality • Continuous improvement • Waste elimination • Benchmarking • Design for manufacturing Better Decision • Make versus Buy Teaching Strategic Cost Management: Ed Blocher Making AAA Annual Meeting, August 2010
Resource Consumption Accounting (RCA) Resource consumption accounting (RCA) is an adaption of ABC that emphasizes resource consumption by greatly increasing the number of resource cost pools, which allows more direct tracing of resource costs to cost objects than an ABC system with fewer cost centers. 8 RCA is particularly appropriate for large organizations with repetitive operations and high-level information systems such as those provided by SAP, Oracle, and SAS. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Time-Driven ABC When a substantial amount of the cost of a company’s activities are in a highly repetitive process (much like in the RCA example above), the cost assignment can be based on the average time required for each activity. Time-Driven Activity-Based Costing (TDABC) assigns resource costs directly to cost objects using the cost per time unit of supplying the resource, rather than first assigning costs to activities and then from activities to cost objects. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
TDABC Example TDABC computes the cost per minute of the resources performing the work activity. Assume 2 clerical workers paid $45, 000 annually perform a certain activity that is expected to require 17 minutes. TDABC calculates the total cost as $45, 000 x 2 = $90, 000; TDABC then calculates the total time available for the activity as 180, 000 minutes (assuming 30 hours per week with two weeks vacation: 2 workers x 50 weeks x 30 hours x 60 minutes per hour = 180, 000 minutes per year). The TDAC rate for the activity is $0. 50 per minute ($90, 000 / 180, 000). The cost of a unit of activity is $0. 50 x 17 min = $8. 50; if the activity required 20 min, then the allocation would be $. 50 x 20 = $10. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Part 5: Sample Course Topic —Customer Profitability Analysis Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Overview of Customer Profitability Analysis • Activity Based Costing (ABC) • Customer Relationship Management (CRM): • Customer Lifetime Value (CLV) • Customer Equity Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Customer Profitability Analysis: The Whale Curve Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
What Makes for a Profitable Customer? Profitable and unprofitable customers are distinguished by the demands they place on the organization u Less profitable customers u More profitable customers t t t t Small order quantities Special products ordered Heavy discounting Unpredictable demands Delivery times change High technical support Slow payment (imputed interest) t t t t Large order sizes Standard products ordered Little discounting Predictable demands Delivery times standard Low technical support On-time payment (imputed interest) These demands can be estimated by activity costs and activity cost drivers Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Migrating Customers to Higher Profitability – A Strategic Analysis Very Types of Customers Profitable High (Creamy) ble a fit o Pr Product Mix Margin le ab it of r np U Low (Low Fat) Low High Cost-to-Serve Teaching Strategic Cost Management: Ed Blocher 32 Very unprofitable AAA Annual Meeting, August 2010
Customer Relationship Management (CRM) Requires Strategic Cost Management Data Who is more important to pursue with the scarce resources of our marketing budget? § Our most profitable customers? Our most valuable customers? § What is the difference? § The “customer lifetime value” (CLV) measure is intended to answer this question. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
You are a pharmaceutical supplier: which customer is more important? Dentist A Dentist B Sales = $750, 000 Sales = $375, 000 profits = $100, 000 profits = $40, 000 Age 61 Age 25 Which is more profitable? Which is more valuable? Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Customer Lifetime Value (CLV) What is it? The projected economic value of customer relationships during the whole period of the relationship between the customer and company. The Measure The net present value (NPV) of all future profits from that customer; it is a projection, from when the customer is acquired or from the current date. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Customer Equity What is it? The economic value of ALL customer relationships. The Measure The sum of the CLVs for all customers. How Used Provides a measure of the value of the company from the perspective of customer profitability. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Part 6: Sample Course Topic —The Management & Control of Quality (including Six. Sigma and Lean) Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Relationship between TQM & Financial Performance Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
A Strategic Model for Managing Quality Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Lean Manufacturing • • At the heart of lean manufacturing is the Toyota Production System (TPS): a long-term focus on relationships with suppliers and coordination with these suppliers; an emphasis on balanced, continuous flow manufacturing with stable production levels; continuous improvement in product design and manufacturing processes with the objective of eliminating waste ; and flexible manufacturing systems in which different vehicles are produced on the same assembly line and employees are trained for a variety of tasks Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Accounting for Lean There are three reasons why the improvements in financial results typically appear later than the operating improvements from implementing lean. • Customers will benefit from the improved manufacturing flexibility by ordering in smaller, more diverse quantities. • Improvements in productivity will create excess capacity; as equipment and facilities are used more efficiently, some will become idle. • The decrease in inventory that results from lean means that, using full cost accounting, the fixed costs incurred in prior periods flow through the income statement when inventory is decreasing. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Accounting for Lean accounting uses value streams to measure the financial benefits of a firm’s progress in implementing lean manufacturing. Each value stream is a group of related products or services. Accounting for value streams significantly reduces the need for cost allocations (since the products are aggregated into value streams) which can help the firm to better understand the profitability of its process improvements and product groups. Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Lean Accounting – Value Streams Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Part 7: Sample Course Topic — Operational and Management-level Performance Measurement Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Performance Measurement • Motivation and Evaluation – Incentives: right decisions • Align performance measurement with strategy – Incentives: working hard • Compensation and bonus plans – Equity/fairness • Controllability • Cost allocations • Operational-level and Management-level Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Operational Performance Measurement with a Flexible Budget 2010 Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Management Performance Measurement Cost Centers • Engineered Cost (cost driver: volume based) • Flexible Budget • Discretionary Cost (cost driver? ) • Master Budget • “Profit Center” – one step from outsourcing… Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Management Performance Measurement • Profit Centers: • Variable costing income statements • Issue of transfer pricing • Role and importance of nonfinancial performance indicators • Investment Centers: • ROI vs. RI vs. EVA® • Measurement issues • Issue of transfer pricing • Role and importance of non-financial performance indicators Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Management –Level Performance Measurement: When to Use Profit or Cost Center Customer Plant Warehouse Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Part 8: Using Software in the Strategic Cost Management Course Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Using Software in the Strategic Cost Management Course 1. Excel: Goal Seek Solver 2. ABC: OROS (SAS), SAP, … Excel 3. Simulation: Crystal Ball, @Risk, Excel(Formulas/Functions) Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
ABC Software: OROS Quick (from SAS) • Comprehensive: resources through objects • Allow a couple of classes • Short Tutorial, 13 pages, couple of hours • Blue Ridge Manufacturing Case Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
Have a great Meeting and Visit in San Francisco! Teaching Strategic Cost Management: Ed Blocher AAA Annual Meeting, August 2010
a5dd74ff5701f3edf4cc579835a87218.ppt