COST MANAGEMENT
COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.
Cengage Learning and South-Western are trademarks used herein under license. 1
Accounting & Control
Hansen▪Mowen▪Guan
Chapter 13
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Study Objectives
1. Compare and contrast activity-based and strategic-based responsibility accounting systems.
2. Discuss the basic features of the Balanced Scorecard.
3. Explain how the Balanced Scorecard links measures to strategy.
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Activity-Based versus
Strategic-Based Responsibility Accounting
• The activity-based system adds a process perspective to the financial perspective of the functional-based responsibility
accounting system.
• A strategy-based responsibility accounting system translates the strategy of the
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Activity-Based versus
Strategic-Based Responsibility Accounting
• The Balanced Scorecard is a strategic-based performance management system that typically identifies objectives and
measures for four different perspectives.
– The financial perspective – The customer perspective – The process perspective
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Basic Concepts of the Balanced
Scorecard
• choosing the market and customer segments the business unit intends to service
• identifying the critical internal and business processes that the unit must excel at to deliver the value
propositions to customers in the targeted market segments
• selecting the individual and organizational capabilities required for the internal, customer, and financial
objectives.
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Basic Concepts of the Balanced
Scorecard
Process value analysis
– is fundamental to activity-based responsibility accounting
– focuses on accountability for activities rather than costs
– emphasizes the maximization of systemwide performance instead of individual performance. – is concerned with:
• Driver analysis • Activity analysis
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Basic Concepts of the Balanced
Scorecard
Only financial measure among
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Basic Concepts of the Balanced
Scorecard
Customer value is the difference between
– Realization … what the customer receives and
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Basic Concepts of the Balanced
Scorecard
• Internal business process perspective
– Describes the internal processes needed to provide value for customers and owners
• Process value chain consists of three processes
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Basic Concepts of the Balanced
Scorecard
• Responsiveness: The time it takes a company to respond to a customer order
– Cycle time (manufacturing) is the length of time it takes to produce a unit of output from the time materials are received until the good is delivered to finished goods inventory.
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A company has the following data for one of its manufacturing cells:
Theoretical velocity: 40 units per hour Productive minutes available (per year): 1,200,000
Annual conversion costs: $4,800,000
Actual velocity: 30 units per hour
Conversion Cost Example
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COST MANAGEMENT
COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.
Cengage Learning and South-Western are trademarks used herein under license. 23
