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Management Accounting:. A Road of Discovery. Management Accounting :. James T. Mackey Michael F. Thomas. A Road of Discovery. Presentations by: Roderick S. Barclay Texas A&M University - Commerce James T. Mackey California State University - Sacramento
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Administration Accounting: A Road of Discovery

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Management Accounting : James T. Mackey Michael F. Thomas A Road of Discovery Presentations by: Roderick S. Barclay Texas A&M University - Commerce James T. Mackey California State University - Sacramento © 2000 South-Western College Publishing

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Chapter 10 Should we start from the very beginning? Vital cost administration

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Key Learning Objectives 1. Examine how far reaching esteem chains and bookkeeping data help firms in recognizing their center skills. 2. Demonstrate the utilization of key cooperating and action based administration execution measures in overseeing providers. 4. Illustrate product offering administration with target costing, concurrent designing and quality capacity sending, and life cycle costing. 3. Create action based administration measures for consumer loyalty and clarify the part of ABC in overseeing client relations.

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Part I Strategic Value Chain Management

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What Business Are We In? Long haul esteem is Created by our business decisions and Strategies we apply inside our line of business. Transient esteem is Created through the administration of assets inside the long haul arrange and key esteem chain. This is the place conventional cost based bookkeeping administration is essentially connected. A broad esteem chain measures the arrangement of an industry\'s merchandise or administrations from \'support to grave\'. The esteem chain recognizes and characterizes the business.

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Farmers develop and reap crops Truckers ship to handling Plants process and pack vege-tables and grains Truckers ship to appropriation cen-ters and retailers Farmers keep up and drain dairy cows Truckers ship to handling Plants handle into cheddar items Truckers ship to dissemination cen-ters and retailers (farmers) raise hamburger cows Truckers ship to handling Plants prepare into meat items Truckers ship to circulation cen-ters and retailers Pizza eateries buy materials Pizza eateries get ready pizzas Pizza eateries serve clients and tidy up Refuse organizations discard waste Pizza eateries convey to clients Pizza\'s Industry-Wide Value Chain

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Part II Using Accounting Data to Identify Opportunities

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Farmers develop and collect yields Truckers ship to preparing Plants process and pack vege-tables and grains Truckers ship to dispersion cen-ters and retailers Farmers keep up and drain dairy cows Truckers ship to handling Plants prepare into cheddar items Truckers ship to appropriation cen-ters and retailers (farmers) raise hamburger steers Truckers ship to preparing Plants prepare into meat items Truckers ship to circulation cen-ters and retailers Pizza eateries buy materials Pizza eateries get ready pizzas Pizza eateries serve clients and tidy up Refuse organizations discard junk Pizza eateries convey to clients Return on Investment Ratios in the Pizza Industry ROI = 3%-8% ROI = 5%-10% ROI = 10%-15% ROI = 5%-10% ROI = 10%-20% ROI = 15%-30% ROI = 10%-20%

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Using Accounting Data Using bigger ROI as a sign of more prominent power and esteem, we can reconfigure the business by climbing and down the esteem chain. Diverse blends of exercises permit organizations to separate their products or administrations to make more esteem. In the pizza illustration, the goal was to catch the more gainful rubbish transfer movement. Distinctive blends of exercises permit organizations to separate their products or administrations. A bigger ROI demonstrates more prominent financial power. By retaining consecutive exercises, productivity can be made by joining center abilities and decreasing excess exercises. By concentrating on our esteem chain, we can recognize potential approaches to expand esteem and abatement costs.

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Part III The Need for Cost Management Analysis Using CVP investigation

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Sales incomes $15 100% $150 Less: Variable costs 5 33% 50 Contribution edge $10 67% $100 Less: Batch costs Delivery 25 Return 25 Cleanup 10 Disposal 20 Total clump costs $ 80 Net Income $ 20 Break even point = 8 pizzas CVP Analysis for Pizza Delivery, Cleanup,and Disposal Cost-volume-benefit examination permits us to look at the anticipated expenses and the advantages of moving into the tidy up and transfer business.

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Analysis of Pizza Business The objective deals cost per pizza is $15. Unit costs for every pizza are the variable costs which incorporate work and materials of $5. The commitment edge per pizza is $10. The cluster costs incorporate conveyance, return, tidy up, and transfer of $80. Every pizza deal with tidy up loses $70! In any case, by concealing just the clean with requests of ten pizza\'s or more, the commitment edge per bunch arrange increments to in any event $20. The PARTY PIZZA CLEAN-UP BUSINESS is conceived.

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Limitations on Value Chain Analysis Truly similar exercises might be hard to distinguish. Data might be hard to acquire. return for capital invested approximates productivity and power (bookkeeping gainfulness is not really monetary esteem). We require better measures that associate better with firm esteem. Fruitful separation and cost administration will require itemized cost examination.

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Part IV Using esteem Chains to Manage Multree Homes

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Sell houses Build houses Customer arrange assuming 1.1 Sales 1.2 Acknowledgment check (Finance) 1.3 Accounts receivable Materials procurement (inbound) 2.1 Scheduling 2.2 Purchasing 2.3 Receiving, review, stockpiling 2.4 Delivery to plant Where We Are on the Industry-Wide Value Chain Industry merchandise and enterprises (Exhibit 2-3) Multree Homes esteem chain (Exhibit 2-5)

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Build Houses Manufacturing 3.1 Lumber sawing 3.2 Wall gathering (surrounding) 3.3 Rough wiring 3.4 Rough pipes 3.5 Wall completing (comprehensive) 3.6 Roof development 3.7 Finish carpentry 3.8 Top-off pipes 3.9 Finish electric 3.10 Carpeting 3.11 Inspection Continued Value Chain

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Build Houses Sell houses Customer benefit (guarantee) Shipping (outbound coordinations) 4.1 Packing 4.2 Shipping 4.3 Set up for merchant, client Close deals 5.1 Customer examination 5.2 Bill client 5.3 Collect and store money After deal client administrations 6.1 Provide guarantee work 6.2 Survey consumer loyalty 6.3 New item and administration publicizing Concluded Value Chain

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Value Chain Discussion A procedure is the arrangement of exercises required to give products and ventures. Display 10-4 list the 6 forms that Multree needs to oversee. For instance, client arrange taking has three exercises — deals, credit checks, and records receivable. Every action turns into the cost objective for administration bookkeeping. Exercises are noteworthy expenses. Exercises are alloted taken a toll drivers. Regularly exercises or procedures can be outsourced.

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Core Competencies Core skills are exercises or procedures where organizations exceed expectations. They are the procedure that individual organizations show improvement over their rivals. Multree has distinguished six procedures in Exhibit 10-4 delineated already. Multree\'s center competency is the administration of exercises in the Organization esteem chain. Predominant cost and profit execution measures are approaches to recognize the relative favorable position of center abilities. Multree\'s favorable position against a general temporary worker is underway expenses — see Exhibit 10-6, p. 358.

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Company Core skills Products or administrations AT&T Technological authority through Bell Labs Telecommunications items Honda Small motor creation Motorcycles, snowmobiles, lawnmowers, snow blowers, cutting tools IBM Research and improvement Experienced deals compel Mainframe PCs and programming Microsoft/Apple Imagination better approaches to utilize data innovation Proctor & Gamble Research and advancement Marketing and conveyance Ivory, Tide , Folgers, Crisco, Pampers Xerox Information preparing Developed symbols, pull-down menus, mouse Core Competencies in Well-Known Companies

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Part V Value Chain Approach to Vendor Management

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Vendors expenses are normally a noteworthy item taken a toll. Enhancing expenses is subject to enhancing merchant efficiencies. I.E., if 70% of an organization\'s unit expenses are paid to sellers, a half change in inner procedures would just diminish costs by 15%. Along these lines, seller administration is a noteworthy administration thought.

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Decisions Regarding Vendors and Value Chains Strategic collaborating with chose sellers can bring about critical upper hand. By working with a little number of merchants, Multree has more impact over them. Long haul connections permit separated items to be created to dispense with excess exercises and supplement center exercises .

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Let\'s Look at Multree manufactures a standard 26-foot rooftop. They offer for the standard 10-foot groups of plywood on the open market to get the best cost. Every traverse requires three sheets. Four feet must be removed each third sheet and discarded. Utilizing three sheets leaves two creases that must be fixed and shapes frail focuses for breaks.

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Multree\'s Solution By vital cooperating with the plywood process, Multree can take out excess exercises amongst it and the plant. Multree pays for an extra setup on the plywood saw to cut 13-foot sheets. Display 10-7a, p.362 and 7b, p. 363, abridge the expenses previously, then after the fact the procedure overhaul. Multree diminishes it\'s cost per rooftop by 35% or $141.38.

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Let\'s Analyze Multree\'s Solution Multree\'s center competency is assembling. By key joining forces it\'s non-center exercises in acquiring, delivery, and arrangement, Multree can take out some less productive exercises and decrease unit costs. Esteem chain thinking le

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