Kế toán, kiểm toán - Chapter 15: Managing costs and time for customer value

Chapter 15Managing costs and time for customer value1Cost managementImprovement of an organisation’s cost effectiveness through understanding and managing the real causes of costMain focus is on cost reduction, but also focus on improving other aspects of performance such as quality and delivery.2Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithConventional versus contemporary approachesDrivers of costConventional: managers control costs by bringing them into line with some predetermined goalContemporary: reduces costs by identifying waste and eliminating it through identifying the real cost driverscontinued3Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithConventional versus contemporary approachesStrategic perspectiveConventional: control costs within the organisationContemporary: cost management also concerned with achieving value for the customerA strategic perspectivecontinued4Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithConventional versus contemporary approachesProcess perspectiveConventional: control costs by reporting results for responsibility centres based on functional areas of the businessContemporary: recognises that customers’ needs are met by processes which flow across the business5Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithActivity-based management (ABM)Process of using information from activity-based costing to analyse activities, cost drivers and performance so that customer value and profitability are improvedCustomer valueThe value a customer places on particular features of a product or service6Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithUsing ABM to reduce costsIdentify the major opportunities for cost reductionDetermine the real causes of these costsDevelop a program to eliminate the causes, and, therefore, the costsIntroduce performance measures to monitor the effectiveness of cost reduction efforts7Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithIdentifying the major opportunitiesValue-added activitiesProvide essential value to the customer, or are essential to the functioning of the businessNon-value-added activitiesDo not add value to a product or service from the customers’ perspective or for the business and, therefore, can be eliminated8Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithBuilding activities into processesEliminating non-value-added activities requires a clear understanding of the way work is done in an organisationLinking activities into processesA series of activities that are linked together to achieve a specific objective Often cross the boundaries of responsibility centres, such as functional departments9Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithCost driver analysisIdentification of root-cause cost drivers for the major non-value-added activitiesAnalysis of root-cause cost drivers of value-added activities may also lead to more efficient use of resourcesValue-added management (or value analysis) The process of targeting and eliminating non-value-added activities 10Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithMeasuring performance in cost reductionActivity-based performance measures can be used to monitor the effectiveness of cost reduction effortPerformance measures may be based on previous activities 11Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithImpediments to implementing ABMLack of awareness of ABMUncertainty over potential benefitsExtensive resource requirements to implementResistance to change12Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithBusiness processre-engineeringThe fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical areas of performance such as cost, quality and deliveryFocus is on strategic processesThose processes that focus on achieving a company’s business objectives and strategiescontinued13Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithBusiness process re-engineeringPreparing a business process mapEstablish goalsReorganise work flowImplement the program14Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithBusiness process re-engineering versus ABMABM focuses on incremental, continuous improvement of processesBusiness process re-engineering involves fundamental changes to the way processes are structuredBoth use activity analysis to identify processes and activities15Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithLife cycle costingAccumulate and manage costs over the life cycle of the productFour stages of the product life cycleProduct planning and initial concept designProduct design and developmentProduction Distribution and customer (logistic) support16Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithLife cycle budgetingInvolves estimating the expected costs and revenues for each year of the expected life of a productUseful in product mix or pricing decisions17Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithManaging costs through a life cycle costingA lack of awareness, or uncertainty about how to calculate life cycle costsNot easy for products with longer lives as it is more difficult to assess Changes in consumer tastesImpact of competitors’ actionsEffects of inflation18Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith19Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithTarget costingA system of profit planning and cost management that determines the life cycle cost at which a proposed product must be produced to generate the desired level of profitThree steps in the target costing process20Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithThe target costing processMarket-driven costingDetermine target selling pricesDetermine target profit marginCalculate allowable costThe target cost at which a product must be produced if it is to be sold at the target selling price and generate the required rate of returncontinued21Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithThe target costing processProduct-level costingCost reduction objective is the degree of cost reduction needed to achieve the allowable costNeed to estimate the current cost—the cost that the product could be manufactured for, prior to any cost reduction objectivesProduct level target cost is the difference between the current cost and the target cost reduction objectivecontinued22Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithThe target costing processComponent-level costingBreaking down the product-level target cost into target costs for componentsValue engineering (VE): reviewing the product or process design to make changes to reduce cost, while still maintaining the functionality of the productPursue continuous improvement once production begins 23Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith24Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithKey features of target costing for cost managementIt is price ledFocuses on the customer and customer expectationsBased on principles of life cycle management, placing primary emphasis on managing downstream and manufacturing costsCross-functional, involving managers from across the value chain25Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithManaging timeTime dictates the rate at which products are produced and revenue generatedTime determines how long resources are tied up in processes, and unavailable for other usesTime delays lead to inventory build-upsTime to develop new products and delivering products to customers may be key to innovation26Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithTime-based managementMeasures for developing new products and servicesNew product development time: time from identification of initial concept to release of product to the marketBreak-even time (BET): the time from identification of initial concept to when a product has generated enough profit to pay back the original investmentcontinued27Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithTime-based managementTime take to fulfil a customer’s orderMeasures of customer response time, order receipt time, production lead time (cycle time), Reliability in meeting scheduled delivery dates28Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith29Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithManaging throughputThe theory of constraintsFocuses on identifying and removing bottlenecks to improve the rate of throughputRecognises the rate of production is limited to the capacity of the constraints (or bottlenecks) that existThroughput accountingMeasuring effects of bottleneck and other operational decisions using measures of throughput, inventory and operating expenses30Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith