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PowerPointPowerPoint Presentation byPresentation by
Gail B. WrightGail B. WrightProfessor Emeritus of AccountingProfessor Emeritus of Accounting
Bryant UniversityBryant University
© Copyright !!" #homson $outh%Western& a part of #he
#homson Corporation. #homson& the $tar 'ogo& an(
$outh%Western are tra(emar)s use( herein un(er license.
MANAGEMENT
ACCOUNTING
8th EDITION
BY
HANSEN & MOWEN
* AC#+,+#-%BA$E /A0AGE/E0#
STUDENT EDITION
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1. Describe activity-based management &explain its relationship to activity-based
costing.2. Explain process value analysis.
3. Describe activity performance
measurement.4. Describe activity-based customer &
supplier costing
LEARNING OBJECTIVES
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AC#+,+#-%BA$E
/A0AGE/E0#1 efinition
system!ide" integrated
approach that focusesmanagement#s attention on
activities for improving customer
value and profit.
$% 1
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%+/E0$+20A' AB/ /2E'
E34+B+#E34+B+# *%5*%5
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2-dimensional
model sho!s
intersection of cost
& process.
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AB/ +/P'E/E0#A#+20 /2E'
E 3 4 + B
+ #
E 3 4 + B
+ # * %
* %
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$-$#E/$ P'A00+0G
ddresses these issues
urpose" ob'ectives of () system
%rgani*ations current & desired competitive
position
%rgani*ation#s business processes & product mix
+imeline" assigned responsibilities" resources
re,uired for implementationbility of organi*ation to implement" learn" use
ne! information
$% 1
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AB/ 6 7E$P20$+B+'+#-
ACC2U0#+0Gesponsibility accounting is fundamental tool
of managerial accounting control
lso related to process value analysis /0ssigning responsibility
Establishing performance measures" benchmars
Evaluating performance
ssigning re!ards
$% 1
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8+0A0C+A'%BA$E $-$#E/$
ssign responsibilities" measures performance
in financial terms
re useful in environments !ith slo! or littlechange
oncrete pipes" blocs
re !ell-defined or relatively stable
environments
$% 1
financial terms
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AC#+,+#-%BA$E $-$#E/$
Developed for firms in continuous
improvement environment
ssign responsibilities to processesse both financial & nonfinancial measures of
performance
re useful in environment that experiencerapid change
omputer technology
$% 1
rapid change
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7+,E7 A0A'-$+$1 efinition
nderstanding !hat causes
activity costs by understandingactivity inputs & outputs most
basic causes for an activity being
performed.
$% 2
722# CAU$E$1 efinition
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5hat are 6value-added7activities8
/alue-added activities are
activities that are necessary to
remain in business.
$% 2
necessary to
remain in business
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,A'UE%AE AC#+,+#+E$
re
)andatory to comply !ith la!s
Discretionary
roduces a change of state
9ot achievable by preceding activities
Enables other activities to be performed
erformed at a value-added cost to achieve
perfect efficiency
Eliminate !aste & reduce costs
$% 2
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020%,A'UE%AE AC#+,+#+E$
re unnecessary
:ail to satisfy 3 defining conditions of
value-added activities
;ncur non-value-added costs of
inefficiency
$% 2
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9A+:E0 C2$#+0G1 efinition
+he effort to reduce costs ofexisting products & processes.
$% 2
existing products & processes
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7EUC+0G C2$#$
ctivity elimination
:ocusing on non-value-added activities
ctivity selectionhoosing among different sets of activities
ctivity reduction
educing time" resources re,uiredctivity sharing
sing economies of scale
$% 2
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AC#+,+#- PE7827/A0CE
/EA$U7E$
Efficiency
elationship of activity inputs & outputs
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8+0A0C+A' /EA$U7E$ 28
AC#+,+#- PE7827/A0CE
:or potential & actual savings
/alue- & non-value-added activity cost reports
+rends in activity cost reports
>ai*en standard setting
(enchmaring
$ife-cycle costing
$% 3
$% 3
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,A'UE%AE $#A0A7
alls for elimination of non-value-added
activities
;dentifies optimal activity outputompares actual to value-added activity costs
allo!ing management to
ssess level of activity inefficiencyDetermine potential for improvement
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$% 3
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C2$# 7EP27#1 $tep 5
Activity Activity Driver SQ* AQ* S*
5elding 5elding hours 1?"??? 12"??? @4?
e!or e!or hours ? 1?"??? A
=etups =etup hours ? B"??? B?
;nspection C ;nspections ? 4"??? 1
$% 3
$% 3
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C2$# 7EP27#1 $tep
Activity
!"#ue$
A%%e% C't'
Nn$!"#ue$A%%e% C't'
Actu"#C't'
5elding @4??"??? @?"??? @4?"???
e!or ? A?"??? A?"???
=etups ? 3B?"??? 3B?"???
;nspection ? B?"??? B?"???
+otal @ 4??"??? @ A?"??? @ AA?"???
$% 3
E34+B+#E34+B+# *%;*%;
$% 3
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#7E0 7EP27#+0G
llo!s management to follo! up on
actions taen to reduce costs byexamining !hether outcomes !ere
as expected.
llo!s management to follo! up on
actions taen to reduce costs by
examining !hether outcomes !ere
as expected.
$% 3
$% 3
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#7E0 7EP27#1 $tep <
Activity
("'tYe"r
CurrentYe"r Ch"n)e
5elding @?"??? @?"??? @3?"???
e!or A?"??? F?"??? 2?"???
=etups 3B?"??? 2??"??? 1B?"???
;nspection B?"??? 3"??? 2"???
+otal @ A?"??? @ 3"??? @ 23"???
$% 3
E34+B+#E34+B+# *%5!*%5!
+rend report
sho!s
improvement that
has been made.
Nn$!"#ue$A%%e% C't'
$% 3
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BE0C4/A79+0G1 efinition
$% 3
ses 6best practices7 as the
standard for evaluating activity performance !ith the goal of
becoming the best at performing
activities & processes.
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AC#+,+#-%BA$E CU$#2/E7 6
$UPP'+E7 C2$#+0G
(y applying the approach of activity- based costing to customers andsuppliers" managers can identify &reduce true cost of theserelationships.
(y applying the approach of activity- based costing to customers andsuppliers" managers can identify &reduce true cost of theserelationships.
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$% 4
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AC#+,+#-%BA$E CU$#2/E7
C2$#+0G1 An E=ample
("r)eCu'ter
+, S"##erCu'ter'
%rder-filling costs @ 4"??? @ 4??"???
=ales force costs 1?"??? 21?"???
( costing sho!scomparative cost of larger &
smaller customers" assuming
same number of units sold.
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$% 4
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AC#+,+#-%BA$E $UPP'+E7
C2$#+0G
;dentifies costs other than price such as
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THE ENDTHE END
CHATE- .