Lecture Management accounting: An Australian perspective: Chapter 15 - Kim Langfield-Smith

This chapter is an expansion of chapter 14 from the second edition, and relates contemporary cost management and time management to the generation of customer value. As in the previous edition, cost management techniques include activity-based management, business process re-engineering, and life-cycle costing. There is a more detailed coverage of target costing. The new material on time-based management includes measures of break-even time and time-to-market, and identifying and managing time drivers.
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Lecture Management accounting: An Australian perspective: Chapter 15 - Kim Langfield-Smith Chapter 15 Managing costs and time for customer valueCopyright 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & Hilton Slides prepared by Kim Langfield-SmithCost management Improvementofanorganisation’scost effectivenessthroughunderstandingand managingtherealcausesofcost Mainfocusisoncostreduction,butalso focusonimprovingotheraspectsof performancesuchasqualityanddelivery.Copyrightª2003McGrawHillAustraliaPtyLtd, 2Conventional versuscontemporary approaches Driversofcost Conventional:managerscontrolcostsby bringingthemintolinewithsomepredetermined goal Contemporary:reducescostsbyidentifying wasteandeliminatingitthroughidentifyingthe realcostdrivers continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 3Conventional versuscontemporary approaches Strategicperspective Conventional:controlcostswithinthe organisation Contemporary:costmanagementalso concernedwithachievingvalueforthecustomer Astrategicperspective continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 4Conventional versuscontemporary approaches Processperspective Conventional:controlcostsbyreportingresults forresponsibilitycentresbasedonfunctional areasofthebusiness Contemporary:recognisesthatcustomers’ needsaremetbyprocesseswhichflowacross thebusinessCopyrightª2003McGrawHillAustraliaPtyLtd, 5Activity-basedmanagement (ABM) Processofusinginformationfromactivity basedcostingtoanalyseactivities,cost driversandperformancesothatcustomer valueandprofitabilityareimproved Customervalue Thevalueacustomerplacesonparticular featuresofaproductorserviceCopyrightª2003McGrawHillAustraliaPtyLtd, 6Using ABM to reduce costs Identifythemajoropportunitiesforcost reduction Determinetherealcausesofthesecosts Developaprogramtoeliminatethecauses, and,therefore,thecosts Introduceperformancemeasurestomonitor theeffectivenessofcostreductioneffortsCopyrightª2003McGrawHillAustraliaPtyLtd, 7Identifying the majoropportunities Valueaddedactivities Provideessentialvaluetothecustomer,orare essentialtothefunctioningofthebusiness Nonvalueaddedactivities Donotaddvaluetoaproductorservicefrom thecustomers’perspectiveorforthebusiness and,therefore,canbeeliminatedCopyrightª2003McGrawHillAustraliaPtyLtd, 8Building activities intoprocesses Eliminatingnonvalueaddedactivities requiresaclearunderstandingoftheway workisdoneinanorganisation Linkingactivitiesintoprocesses Aseriesofactivitiesthatarelinkedtogetherto achieveaspecificobjective Oftencrosstheboundariesofresponsibility centres,suchasfunctionaldepartmentsCopyrightª2003McGrawHillAustraliaPtyLtd, 9Cost driver analysis Identificationofrootcausecostdriversfor themajornonvalueaddedactivities Analysisofrootcausecostdriversofvalue addedactivitiesmayalsoleadtomore efficientuseofresources Valueaddedmanagement(orvalue analysis) Theprocessoftargetingandeliminatingnon valueaddedactivitiesCopyrightª2003McGrawHillAustraliaPtyLtd, 10Measuring performance incost reduction Activitybasedperformancemeasurescan beusedtomonitortheeffectivenessofcost reductioneffort Performancemeasuresmaybebasedon previousactivitiesCopyrightª2003McGrawHillAustraliaPtyLtd, 11Impediments toimplementing ABM LackofawarenessofABM Uncertaintyoverpotentialbenefits Extensiveresourcerequirementsto implement ResistancetochangeCopyrightª2003McGrawHillAustraliaPtyLtd, 12Business processre-engineering Thefundamentalrethinkingandradical redesignofbusinessprocessestoachieve dramaticimprovementsincriticalareasof performancesuchascost,qualityand delivery Focusisonstrategicprocesses Thoseprocessesthatfocusonachievinga company’sbusinessobjectivesandstrategies continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 13Business processre-engineering Preparingabusine ...