mgt acctg introd

8/3/2019 mgt acctg introd

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Introd - 1

STRATEGIC MANAGEMENT ACCOUNTANTS

Dynamic Business Partners


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Introd - 2

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.



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Strategy - a course of

action that will assistin achieving one or

more goals.



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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.



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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.



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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

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