Kế toán, kiểm toán - Chapter 18: Information for tactical decisions

Chapter 18Information for tactical decisions1The management accountant’s role in decision makingTo provide relevant information to managers and team who make the decisionsTypes of decisionsAccept or reject a special offerMake or buy (or outsource) a product or serviceAdd or delete a product, service or departmentJoint products: sell or process further2Copyright  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-SmithTactical versus long-term decisionsTactical decisionsDo not require significant or permanent resource commitmentsCan be revered if better opportunities ariseLong-term decisionsTend to be more strategic in natureMay involve changes in capacityMore difficult to reverse and effects may extend over longer time periods3Copyright  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-SmithA model of the decision-making processClarify the problemIdentify alternative courses of actionCollect relevant cost and benefitsCompare the cost and benefits of each possible course of actionSelect a course of action4Copyright  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-Smith5Copyright  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-SmithDetermining relevant informationRelevant information Differs under competing courses of actionRelate to the futureIs timelyCan be qualitative or quantitative6Copyright  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-SmithCharacteristics of relevant informationDifferent under competing courses of actionOpportunity costs may be relevantThe potential benefit given up when one alternative is chosen over anotherRelates to the futureSunk costs are ignoredCosts that have already been incurred and are irrelevant to any future decisionsPrediction of future costs may be based on past datacontinued7Copyright  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-SmithCharacteristics of relevant informationTimeliness versus accuracyTimelines I information available in time to be used in the decision-making processAs accuracy increases timeliness may decreaseQuantitative or qualitativeQuantitative information can be expressed in numeric terms, such as dollarsQualitative information cannot be expressed easily in numerical terms8Copyright  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-SmithProviding only relevant informationGenerating information is a costly processSupplying irrelevant data can result in a waste of managerial resourcesInformation overload decreases the effectiveness of decision-making9Copyright  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-SmithInformation for unique versus repetitive decisionsUnique decisionsArise infrequently or only onceRelevant information will often be found both inside and outside the organisationRelevant information is harder to generateRepetitive decisionsMade at regular or irregular intervalsMay draw on a large amount of historical dataRelevant information is readily available10Copyright  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-SmithInformation for decisions: terminologyIncremental revenueThe additional revenue that will be gained as a result of choosing one alternative over anotherIncremental costsThe additional costs that arise from choosing an alternativecontinued11Copyright  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-SmithInformation for decisions: terminologyAvoidable costs Costs that will not be incurred in the future if a particular decision is madeUnavoidable costsCosts that will continue to be incurred no matter which decision alternative is chosenIrrelevant to the decision12Copyright  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-SmithAccept or reject a special order Whether or not to supply a customer with a single, one-off order for goods or services, at a special price Excess capacityWhere equipment, labour or other inputs to production that are not being utilised and hence are available for other purposescontinued13Copyright  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-SmithAccept or reject a special orderExcess capacityIf incremental revenues > incremental costs, acceptable on financial groundsAllocated fixed costs should not be includedNo alternative uses for resources needed to fill the ordercontinued14Copyright  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-Smithcontinued15Copyright  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-SmithAccept or reject a special orderNo excess capacity Include opportunity costs associated with use of the capacityQualitative factorsWhether the decision to accept the special order will impact on regular businessIf the decision is not a one-off decision wider consideration need to be taken into account16Copyright  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-Smith17Copyright  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-SmithMake or buy a productWhether to produce particular goods or services, or purchase them from an external supplierConsiderAvoidable costs versus unavoidable costsIncremental costs and opportunity costs18Copyright  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-Smith20Copyright  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-SmithMake or buy a productQualitative and strategic issuesQuality of the productDelivery responsiveness of supplierTechnical capabilities of the supplierLabour relations at the supplier Financial stability of the supplierAbility of the supplier to respect confidential information 21Copyright  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-SmithOutsourcing decisionsPart of a manufacturing process, or another function normally undertaken within an organisation, is contracted to an outside businessMore long-term than make or buy decision Difficult to reverse22Copyright  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-SmithAdd or delete a product or departmentInvolves considering which costs and benefits will change if the decision is takenEntails long-term implicationsConventional accounting data should be treated with careQualitative and strategic issuesDeleting a department raises morale concernsStrategic implications23Copyright  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-SmithJoint products: sell or process furtherJoint products Two or more products produced simultaneously from the one production processCannot be separated prior to split-offSplit-off pointThe stage in the production process where the joint products are identifiable as separate productscontinued25Copyright  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-SmithJoint products: sell or process furtherJoint costAll manufacturing costs incurred in the production of joint productsRelative sales method Allocates joint cost to joint products in proportion to their sales value at the split-off point26Copyright  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-SmithImplications of ABC analysis for decisionsIdentification of relevant costs, incremental costs, opportunity costs, sunk costs and avoidable costs do not changeCosts more accurately assigned to products or departmentsLeads to identification of precise cost implications of various decision alternatives27Copyright  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-Smith28Copyright  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-SmithIncentives for decision makersManagers typically make decisions that will maximise their reported performance and rewardsCost systems may be explicitly designed to encourage certain biases in decisions makingTo encourage managers and employees to make certain decisions, systems must be designed with incentives29Copyright  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-SmithPitfalls to avoidIgnore sunk costsBeware of unitised fixed costs in decision makingBeware of allocated fixed costs; identify the avoidable costsPay special attention to identifying and including opportunity costs in a decision analysis 30Copyright  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