1 / 36

Cost Management ACCOUNTING AND CONTROL

Cost Management ACCOUNTING AND CONTROL. HANSEN & MOWEN. 12. CHAPTER. Activity-Based Management. 1. The Relationship of Activity-Based Costing and Activity-Based Management. OBJECTIVE.

mvaldes
Télécharger la présentation

Cost Management ACCOUNTING AND CONTROL

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Cost ManagementACCOUNTING AND CONTROL HANSEN & MOWEN

  2. 12 CHAPTER Activity-Based Management

  3. 1 The Relationship of Activity-Based Costing and Activity-Based Management OBJECTIVE Activity-based management (ABM) is a systemwide, integrated approach that focuses management’s attention on activities with the objectives of improving customer value and the profit achieved by providing this value. ABC is the major source of information for activity-based management.

  4. 1 The Relationship of Activity-Based Costing and Activity-Based Management OBJECTIVE The Two-Dimensional Activity-Based Management Model

  5. 2 Process Value Analysis OBJECTIVE Process value analysis is fundamental to activity-based responsibility accounting, focuses on accountability for activities rather than costs, and emphasizes the maximization of systemwide performance instead of individual performance. Process value analysis is concerned with: (1) Driver analysis (2) Activity analysis (3) Performance measurement

  6. 2 Process Value Analysis OBJECTIVE Driver analysis is the effort expended to identify the factors that are the root causes of activity costs. Activity analysis is the process of identifying, describing, and evaluating the activities an organization performs. Activity analysis should produce four outcomes: What activities are performed. How many people perform the activities. The time and resources are required to perform the activities. An assessment of the value of the activities to the organization.

  7. 2 Process Value Analysis OBJECTIVE Those activities necessary to remain in business are called value-added activities. Activities needed to comply with the reporting requirements, such as the SEC, are value-added by a mandate. Implicit in this definition is the notion that value-added activities may contain nonessential actions that create unnecessary cost.

  8. 2 Process Value Analysis OBJECTIVE All activities other than those essential to remain in business are referred to as nonvalue-added activities. These activities fail to produce a change in the product’s state or those activities that replicate work because it wasn’t done correctly the first time.

  9. 2 Process Value Analysis OBJECTIVE • Scheduling • Moving • Waiting • Inspecting • Storing Nonvalue-Added Activities

  10. 1. Activity elimination 2. Activity selection 3. Activity reduction 4. Activity sharing 2 Process Value Analysis OBJECTIVE Activity management can reduce costs in four ways:

  11. Efficiency Quality Time 2 Process Value Analysis OBJECTIVE Assessing Activity Performance

  12. Financial Measures of Activity Efficiency 3 OBJECTIVE Financial measures of activity efficiency include: • Value- and nonvalue-added activity costs • Trends in activity costs • Kaizen standard setting • Benchmarking • Activity flexible budgeting • Activity capacity management

  13. Financial Measures of Activity Efficiency 3 OBJECTIVE Formulas for Value- and Non-Value-Added Costs

  14. Activity Activity Driver SQ AQ SP Purchasing Purchasing hours 20,000 23,000 $20 Molding Molding hours 30,000 34,000 12 Inspecting Inspection hours 0 6,000 15 Grinding Number of units 0 5,000 6 Financial Measures of Activity Efficiency 3 OBJECTIVE Value-added standards call for elimination

  15. Financial Measures of Activity Efficiency 3 OBJECTIVE Value- and Non-Value-Added Cost Report for the Year Ended December 31, 2006

  16. Financial Measures of Activity Efficiency 3 OBJECTIVE Trend Report: Non-Value-Added Costs

  17. Financial Measures of Activity Efficiency 3 OBJECTIVE Kaizen costing is concerned with reducing the costs of existing products and processes. Controlling this cost reduction process is accomplished through the repetitive use of two major subcycles: (1) the kaizen or continuous improvement cycle, and (2) the maintenance cycle.

  18. Financial Measures of Activity Efficiency 3 OBJECTIVE Trend Report: Non-Value-Added Costs Search Lock in

  19. Financial Measures of Activity Efficiency 3 OBJECTIVE Benchmarking uses best practices as the standard for evaluating activity performance. Benchmarking against internal operations is called internal benchmarking.

  20. Financial Measures of Activity Efficiency 3 OBJECTIVE Flexible Budget: Direct Labor Hours

  21. Financial Measures of Activity Efficiency 3 OBJECTIVE Activity Flexible Budget

  22. Financial Measures of Activity Efficiency 3 OBJECTIVE Activity Flexible Budget

  23. Financial Measures of Activity Efficiency 3 OBJECTIVE Activity-Based Performance Report* *Actual levels of drivers: 10,000 direct labor hours, 8,000 machine hours, 25 setups, and 15,000 orders.

  24. Financial Measures of Activity Efficiency 3 OBJECTIVE

  25. Financial Measures of Activity Efficiency 3 OBJECTIVE Activity Capacity Variance

  26. Financial Measures of Activity Efficiency 3 OBJECTIVE Activity capacity is the number of times an activity can be performed.

  27. Implementing Activity-Based Management 4 OBJECTIVE ABM Implementation Model (Continued on next slide)

  28. Implementing Activity-Based Management 4 OBJECTIVE ABM Implementation Model (Continued from previous slide)

  29. Implementing Activity-Based Management 4 OBJECTIVE Systems planning provides the justification for implementing ABM and address the following issues: 1. The purpose and objectives of the ABM system. 2. The organization’s current and desired competitive position. 3. The organization’s business processes and product mix. 4. The timeline, assigned responsibilities, and resources required for implementation. 5. The ability of the organization to implement, learn, and use new information.

  30. Implementing Activity-Based Management 4 OBJECTIVE Why ABM Implementations Fail • Lack of support of higher-level management. • Failure to maintain support from higher-level management. • Resistance to change. • Failure to integrate the new system.

  31. Financial-Based versus Activity-Based Responsibility Accounting 5 OBJECTIVE The Responsibility Accounting Model

  32. Financial-Based versus Activity-Based Responsibility Accounting 5 OBJECTIVE Responsibility Assignments Compared

  33. Financial-Based versus Activity-Based Responsibility Accounting 5 OBJECTIVE Performance Measures Compared

  34. Financial-Based versus Activity-Based Responsibility Accounting 5 OBJECTIVE Performance Evaluation Compared

  35. Financial-Based versus Activity-Based Responsibility Accounting 5 OBJECTIVE Rewards Compared

  36. End of Chapter 12

More Related