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225 Cards in this Set
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developed and used to implement the organization's strategy. it consists of financial information about costs and revenues and non-financial information about customer retention, productivity, quality, and other key success factors for the organization
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cost management information
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the development and use of cost management information
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cost management
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a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy
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management accounting
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name the 5 stages of the value chain
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1) business events
2) data 3) information 4) knowledge 5) decisions |
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name some examples of external users
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investors and government regulators
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name the four management functions
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1) strategic management
2) planning and decision making 3) management and operational control 4) preparation of financial statements |
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the development and implementation of a sustainable competitive position
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strategic management
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cost management information is needed to make sound strategic decisions regarding choice of products, manufacturing methods, marketing techniques and channels, assessing customer profitability and other long-term issues
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strategic management
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cost management information is needed to support recurring decisions regarding replacing equipment, managing cash flow, budgeting raw materials purchases, scheduling production, and pricing
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planning and decision making
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cost management information is needed to provide a fair and effective basis for identifying inefficient operations and to reward and motivate the most effective managers
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management and operational control
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cost management information is needed to provide accurate accounting for inventory and other assets, in compliance with reporting requirements, for the preparation of financial reports and for use in the three other management functions
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preparation of financial statements
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involves budgeting and profit planning, cash flow management and other decisions related to operations
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planning and decision making
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takes place when mid-level managers monitor the activities of operating-level managers and employees
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operational control
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the evaluation of mid-level managers by upper-level managers
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management control
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requires management of comply with the financial reporting requirements of regulatory agencies
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preparation of financial statements
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merchandisers that sell to other merchandisers are called
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wholesalers
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those selling directly to consumers are called
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retailers
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_____________ firms use raw materials, labor and manufacturing facitilities and equipment to produce products
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manufacturing firms
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_______ firms provide a service to customers that offers convenience, freedom, safety, or comfort
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service
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_______ firms are growing at a higher rate than ___________ firms in the US
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service ;
manufacturing |
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name some of the primary changes in cost management practices
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1) increase in global competition
2) lean manufacturing 3) advances in technology 4) greater focus on the customer 5) new forms of management organization 6) changes in the social, political and cultural environment |
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name some of the alliances among large multinational firms
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NAFTA: North american free trade agreement
CAFTA: central america free trade agreement WTO: world trade agreement EU: european union |
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to produce significant cost and quality improvements through the use of quality teams and statistical quality control
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lean manufacturing
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the ability to deliver the product or service faster than the competition
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speed-to market
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quality, service, timeliness of delivery, and the ability to respond to the customer's desire for specific features
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focus on the customer
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early in the life-cycle; product design
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target costing; cost life cycle
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manufacturing
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theory of constraints; cost life cycle
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profitability
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life-cycle costing; cost life cycle
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life-cycle concepts in pricing decreases
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strategic pricing; cost life-cycle and sales life cycle
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the sequence of activities within the firm that begins with research and development followed by design, manufacturing, marketing/distributing and customer service; from the viewpoint of costs incurred
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cost life cycle
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sequence of phases in the product's or service's life in the market from the introduction of the product or service to the market, growth in sales, and finally maturity, decline and withdrawal from the market
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sales life cycle
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target costing =
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competitive price - desired profit
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determines the allowable cost for the product or service
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target costing
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name the 2 options for reducing costs to a target cost level:
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1) new technology, using activity-based costing, and seeking higher productivity
2) redesigning the product/service; reduction in total cost |
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name two ways in which the company can reduce total costs:
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1) in early upstream phases
2) many must also design the # and types of features in periodic updates |
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list the 5 steps to implementing a target costing approach
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1) determine the market price
2) determine the desired profit 3) calculate the target cost at market price less desired profit 4) use value engineering to identify ways to reduce product cost 5) use kaizen costing and operational control to further reduce costs |
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used in target costing to reduce product cost by analyzing the trade-offs between different types of product functionality and total product cost
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value engineering
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during value engineering:
perform a consumer analysis during the _____ stage |
design ; which identifies critical consumer preferences
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a common type of value engineering in which the performance and cost of each major function or feature of the product is examined; to determine a desired balance of functionality and cost
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functional analysis
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a common form of value engineering in which the design team prepares several possible designs of the product, each having similar features with different levels of performance and different costs;
industrialized and specialized products |
design analysis
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low cost and competitive
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benchmarking and value chain
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computer-based databases that include comprehensive information about the firm's cost drivers
- size of the product - materials used - # of features |
cost tables
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a method of identifying similarities in the parts of products manufactured so the same part can be used in 2 or more products, thereby reducing costs
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group technology
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example: automobile industry
*** but might increase service and warranty costs if a failed part is used in many different products |
group technology
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simultaneous engineering; an important new method that integrates product design with manufacturing and marketing throughout the products cost life cycle ; at each phase of the value chain
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concurrent engineering
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continuous improvement at the manufacturing stage
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kaizen
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- develop new manufacturing methods
- use new manufacturing techniques operational control total quality management theory of constraints |
target costing and kaizen
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the integration of value engineering, marketing analysis, and target costing to assist in determining which components of the product should be targeted for redesign
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quality function development
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list the 4 steps in quality function development
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1) determine the customer's purchasing criteria for this product and how these criteria are ranked
2) identify the components of the product and the manufacturing cost of each component 3) determine how components contribute to customer satisfaction 4) determine the importance index of each component |
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BENEFITS OF TARGET COSTING
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- increases customer satisfaction; as design is focused on customer values
- reduce costs - helps the firm achieve desired profitability - decrease total time for product development - competitive edge - improve overall product quality |
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the amount of time between the receipt of a customer order and the shipment of the order
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cycle time
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ratio of processing time to total cycle time
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manufacturing cycle efficiency
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separates total cycle time into time required for each of the various activities
ideally close to 1 |
manufacturing cycle efficiency
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those activities that slow the product's cycle time
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constraints
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improving speed at the constraints like just-in-time manufacturing
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Theory of constraints
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steps in the theory of constraints
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1) identify the constraint
2) determine the most profitable product mix given the constraint 3) maximize the flow through the constraint 4) add capacity to the constraint 5) redesign the manufacturing process for flexibility and fast cycle time |
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a flow chart of the work done that shows the sequence of processes and the amount of time required for each
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flow diagram
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the most profitable product mix is the
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combination of products that maximizes total profits for both products
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a TOC measure of product profitability; it equals price less materials cost, including all purchased components and materials handling costs
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throughput margin
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the speed at which units must be manufactured to meet customer demand;
conductors baton/rhythm |
Takt Time
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Takt time
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available manufacturing time
________________________ customer demand |
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name the five steps in the strategic decision making process
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1) determine the strategic issues surrounding the problem
2) identify the alternative actions 3) obtain information and conduct analyses of alternatives 4) based on strategy and analysis, choose and implement the desired alternative 5)provide an ongoing evaluation of the effectiveness of implementation in step 4 |
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assess the profitability of products;
- long-term analysis - includes all product costs - comprehensive analysis of cost drivers - average unit costs |
activity based costing ABC
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- short term approach
- materials related costs - useful method for improving short-term profitability |
theory of constraints TOC
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name the four standards of the IMA Statement of Ethical Professional Practice
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Competence
Confidentiality Integrity Credibility |
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Name the four Principles of the IMA Statement of Ethical Professional Practice
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Honesty
Fairness Objectivity Responsibility |
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activities of managers in short-run and long-run planning and control of costs
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strategy
ethics environment managing products, services and customers managing processes managing people |
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name the four functions of management
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strategic management
planning and decision making management and operational control preparation of financial statements |
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a set of goals and specific action plans that, if achieved provide the desired competitive advantage
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strategy
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competitive strategy in which a firm succeeds in producing products or services at the lowest cost in the industry
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cost leadership
example: walmart; 5-below |
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competitive strategy in which a firm succeeds by developing and maintaining a unique value for the product as perceived by consumers
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differentiation
sara lee |
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what do you do in an ethical dilemma that can't be resolved through the organization's policies
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go to a superior not involved in the situation
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used to develop a detailed description of the specific activities performed in the firm's operations
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activity analysis
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used to improve the accuracy of cost analysis by improving the tracing of costs to products or to individual customers
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activity-based management
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an accounting report that includes the firm's critical success factors in four areas:
financial performance customer satisfaction internal processes learning and growth |
a process by which a firm identifies its critical success factors, studies the best practices of other firms, for achieving these critical success factors, and then implementing improvements in the firm's processes to match or beat the performance of those competitors
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an approach to strategy implementation in which the management accountant uses data to understand and analyze business performance
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business intelligence
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a management method by which managers and workers commit to a program of continuous improvement in quality and other critical success factors
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business process improvement
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a strategy in which a firm outperforms competitors in producing products or services at the lowest cots
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cost leadership
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the development and use of cost management information
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cost management
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developed and used to implement the organization's strategy. it consists of financial information about costs and revenues and non-financial information about customer retention, productivity, quality, and other key success factors for the organization
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cost management information
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measures of those aspects of the firm's performance that are essential to its competitive advantage and therefore to its success
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critical success factors
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a competitive strategy in which a firm succeeds by developing and maintaining a unique value for the product or service as perceived by consumers
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differentiation
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means the balancing of the company's short- and long-term goals in all three dimensions of performance - social, environmental and financial
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enterprise risk management
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is a framework and process that firms use to manage the risks that could negatively or positively affect the company's competitiveness and success
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enterprise sustainability
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uses value streams to measure the financial benefits of a firm's progress in implementing lean manufacturing
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lean accounting
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a method used to identify and monitor the costs of a product throughout its life cycle
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life-cycle costing
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a profession that involves partnering in management decision making, devising, planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy
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management accounting
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a method based on the balance scorecard, which links the four perspectives in a cause and effect diagram
learning and growth internal process customer satisfaction financial performance |
strategy map
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determines the desired cost for a product on the basis of a given competitive price so that the product will earn a desired profit
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target costing
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used to help firms effectively improve the rate at which raw materials are converted to finished products
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theory of constraints
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a technique by which management develops policies and practices to ensure that the firm's products and services exceed customers' expectations
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total quality management
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an analysis tool firms use to identify the specific steps required to provide a product or service to the customer
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value chain
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how an organization matches its own capabilities with opportunities in the marketplace to accomplish its overall objectives
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strategy
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based on strategic competitive assessments of the firm; in order to develop effective cost management tools, it is necessary to know how a firm competes and how it is successful
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cost management
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- outperform competitors by producing at the lowest cost
- sustainable profits at lower prices |
cost leadership
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creating a perception among consumers that your products or services are unique in some important way, usually related to quality;
- allows the firm to charge higher prices, and outperform in profits without reducing costs significantly |
differentiation
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once you have a strategy, how can we manage and measure it
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the balanced scorecard
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what is the purpose of the balanced scorecard
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translates an organization's mission and strategy into comprehensive set of performance measures that provides a framework for implementing its strategy
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short-run, historical measures that focus on past transactions
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lagging indicators
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long term operational drivers; they communicate how to achieve a firm strategy and provide early indications if the strategy is being achieved
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leading indicators
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represents the employee and information systems aspects which support those key internal business processes
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learning and growth
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how the company delivers high quality products and services to its customers
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internal business processes
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market segment measures; how well the managers are retaining and serving current valued customers as well as obtaining targeted customers
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customer measure
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embodies the long-term objective of the company - to provide superior returns to its owners based on the capital invested in the business
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financial measures
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name 3 advantages of the balanced scorecard
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1) aligns performance measures with strategy - can make sure management thinks about all 4 areas - more comprehensive tool
2) communicates strategy to mangers throughout the organization 3) assists in evaluation of success of strategy implementation - compares targets to actual |
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cause and effect diagram of the relationship embodied in a bsc
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strategy map
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shows how the achievement of CSFs in one perspective should affect the achievement of goals in another perspective
***financial perspective*** |
strategy map
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strategic analysis tool used to better understand the firm's competitive advantage, to identify where value to customers can be increased or costs reduced, and to better understand the firm's linkages with suppliers, customers and other firms in the industry
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value chain analysis
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firms are outsourcing:
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those value chain processes that can be more efficiently done by others
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a systematic procedure for identifying a firm's critical success factors: its internal strengths and weaknesses and its external opportunities and threats
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SWOT analysis
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activities that firms in the industry must perform in the process of designing, manufacturing and providing customer service
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value activities
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a cause and effect diagram of the relationships among the BSC perspectives
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strategy map
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means the balancing of short- and long-term goals in three dimensions of the company's performance - social, economic and environmental
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sustainability
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name the three parts of the strategy triangle
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quality - differentiation
cost - cost leadership time - differentiation |
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name the 4 critical success factors
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financial factors
customer factors internal business processes learning and growth |
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manufacturing cycle time per product
F C I L |
internal business processes
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market share
F C I L |
financial and customer
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average ratings on customer satisfaction surveys
F C I L |
customer
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average cost per unit
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financial and internal business processes
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percent of receivables collected
F C I L |
financial
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dollar value of warranty work
F C I L |
financial and internal business processes
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time between order and delivery
F C I L |
internal business process
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time it takes to repair returned equipment
F C I L |
internal business processes
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number of times new technology is applied to current products
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learning and growth and internal business processes
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number of product change suggestions from sales
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learning and growth and internal business processes
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revenue growth
F C I L |
financial
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employee training hours
F C I L |
learning and growth
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number of quality improvement suggestions from employees
F C I L |
internal business processes
learning and growth |
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number of new customers
F C I L |
customer
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number of repeat customers
F C I L |
customers
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employee turnover rate
F C I L |
learning and growth
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defect rates for manufacturing production
F C I L |
internal business processes
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percentage of error-free rates in purchasing
F C I L |
internal business processes
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percentage of error-free rates in billing q
F C I L |
internal business processes and financial
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percentage of error-free rates in customer record keeping
F C I L |
internal business processes
customer |
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in this phase of the sales life cycle,
- there is little competition - sales rise slowing as customers become aware of the new product - costs are high - product variety is limited |
introduction phase
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in this phase of the sales life cycle,
- sales begin to grow rapidly - product variety increases - increases competition - prices begin to soften |
growth phase
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at this stage in the sales life cycle,
- sales increase but at a decreasing rate - prices soften further - differentiation is no longer important |
maturity
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in this phase of the sales life cycle
- sales decline - as do the # of competitors - cost control and effective distribution are keys to survival |
decline
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upfront activities before design
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upstream activities
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activities used to get the product to the customers
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downstream activities
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name some industries where both upstream and downstream costs are high
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car manufacturers
pharmaceuticals |
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considers the entire cost life cycle of the product or service; basically is the long-run costs from all elements of the value chain over the entire life of the product
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life cycle costing
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a firm has two options for reducing costs to a target cost level:
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1) integrate new manufacturing technology, using advanced cost management techniques such as activity-based costs, and seek higher productivity
2) redesign the product or service, because decisions account for much of the total product life cycle costs |
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what % of costs are determined in the design state
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80-90%
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name three types of costs
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labor
materials overhead |
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analyzing the trade-offs between different types of product functionality (different types of product features) and total product cost
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value engineering
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target cost =
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market/selling price - desired profit
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ways to maximize flow through the constraints
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1) simplify the operation
2) looks for quality defects in raw materials that might be slowing things down 3) reduce setup time 4) reduce other delays 5) simplify the constraint by removing all activities that will NOT reduce the function of the operation |
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TM per Constrained Resource =
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throughput Margin
___________________ constrained resource per unit |
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providing a product or service that conforms with a design that meets or exceeds customer expectations
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quality
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what two sections is quality divided into?
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design quality "features"
production quality "performers" |
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high performance data- driven approach to analyzing and solving the root causes of business problems
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six sigma
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name some critical success factors
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reduced time to market
reduced expected service costs reduced product environment impact improved ease of manufacture process planning and design |
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what are 3 pricing situations that management accountants have
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1 - special order decisions
2 - target costing 3 - long-term strategic pricing decisions |
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to help the accountant prepares information from three different perspectives
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1 - cost life cycle
2 - sales life cycle 3 - analytical pricing methods |
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cost information for pricing is commonly based on one of these 4 methods:
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1 - full manufacturing cost plus markup
2 - life-cycle costs plus markup 3 - full cost and desired gross margin % 4 - full cost plus desired return on assets |
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FULL MANUFACTURING COST + MARKUP FORMULA
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total variable and fixed manufacturing costs
x markup% to cover other operating costs plus profit |
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LIFE CYCLE COST PLUS MARKUP FORMULA
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total life-cycle costs
x markup |
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FULL COST AND DESIRED RETURN ON ASSETS
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markup rate =
desired before tax profit ____________________ life cycle cost of expected sales |
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an award given out
1987 - enhance competitiveness - publicizing successful performance strategies in manufacturing, service, small business, education and healthcare - 7 categories: leadership, strategic planning, customer and market focus, information and analysis, HR, process management and business results |
Baldridge Quality Award
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a set of guidelines for quality management and quality standards developed by the international organization for standardization, located in Geneva, Switzerland
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ISO 9000: 2000
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set of quality standards designed to minimize environmental effects of an organization's outputs
quality management |
ISO 14000
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customer satisfaction with the total experience of a product or service; the difference between customer expectations and actual performance of the product or service
- features and performance |
quality
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the extent to which product/service design is consistent with customer expectations
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features
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an award given out
1987 - enhance competitiveness - publicizing successful performance strategies in manufacturing, service, small business, education and healthcare - 7 categories: leadership, strategic planning, customer and market focus, information and analysis, HR, process management and business results |
Baldridge Quality Award
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the difference between customer expectations and product design
- failures - difference between actual features and what the customer wants |
design quality
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a set of guidelines for quality management and quality standards developed by the international organization for standardization, located in Geneva, Switzerland
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ISO 9000: 2000
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the difference between the design specifications of the product and the actual performance of the product
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performance quality
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set of quality standards designed to minimize environmental effects of an organization's outputs
quality management |
ISO 14000
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an overall strategy to accelerate improvements and achieve unprecedented performance levels by focusing on characteristics and eliminating causes of errors and defects in processes
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Six Sigma 9
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customer satisfaction with the total experience of a product or service; the difference between customer expectations and actual performance of the product or service
- features and performance |
quality
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DMAIC =
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defines - the problem and specific deliverables
measure - collects relevant process performance data analyze - uncover root causes of an underlying problem improve - proposed solutions generated and implemented control - ensure the problem does not occur |
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name the steps to implement SIx SIgma
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- leadership and resources
- reward system - ongoing training - select early projects - break up difficult projects - avoid employee layoffs |
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the extent to which product/service design is consistent with customer expectations
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features
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the difference between customer expectations and product design
- failures - difference between actual features and what the customer wants |
design quality
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the difference between the design specifications of the product and the actual performance of the product
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performance quality
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an overall strategy to accelerate improvements and achieve unprecedented performance levels by focusing on characteristics and eliminating causes of errors and defects in processes
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Six Sigma 9
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DMAIC =
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defines - the problem and specific deliverables
measure - collects relevant process performance data analyze - uncover root causes of an underlying problem improve - proposed solutions generated and implemented control - ensure the problem does not occur |
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name the steps to implement SIx SIgma
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- leadership and resources
- reward system - ongoing training - select early projects - break up difficult projects - avoid employee layoffs |
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name the three different contexts in which six sigma can be thought of in
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metric
methodology philosophy |
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refers to an acceptable range of a quality characteristic - such as thickness
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tolerance
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conformance to a quality specification expressed as a specified range around the target
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goal post conformance
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requires that all products or services to meet the target vale exactly with no variation
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absolute quality conformance
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there is no quality/failure cost or loss if all quality measures are within the limits
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goal post
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- costs/losses are a continuously increasing function
- better for long-term profitability and customer satisfaction |
absolute quality conformance
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financial information relevant to quality-related decisions;
consist of future costs that differ between decision alternatives |
relevant cost analysis
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future costs that can be avoided by choosing one decision alternative over another
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avoidable cost
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a comprehensive reporting framework for classifying quality-related costs
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cost of quality
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cost of activities associated with the prevention, identification, repair and rectification of poor quality
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cost of quality
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expenditures incurred to keep quality defects FROM occurring
- training - planning and execution of a quality program - investments |
cost of quality: PREVENTION
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costs incurred in the measurement and analysis of data to find out if products and services conform to specification
- raw materials inspection - work in progress inspection - finished goods inspection - test equipment |
cost of quality: APPRAISAL COSTS
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costs incurred as a result of poor quality found through appraisal prior to delivery to customers
- crap disposal - rework - loss due to downgrades - cost of corrective action - process costs - expediting costs |
cost of quality: INTERNAL FAILURE
** most expensive |
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costs incurred to rectify quality defects after unacceptable products or services reach the customer
- sales and return allowances - warranty costs - contribution margin of cancelled orders - costs to handle customer complaints and returns |
cost of quality: EXTERNAL FAILURE COSTS
** most expensive |
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incurred to ensure the products or services must meet customers' expectations
prevention costs appraisal costs |
COST OF CONFORMITY
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incurred because of reflection of products or services; includes opportunity costs
internal failure costs external failure costs |
COSTS OF NONCONFORMITY
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total cost of quality
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sum of conformance and nonconformance costs
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research and development
design |
prevention
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production or service
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appraisal
internal failure |
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marketing
distribution customer service |
external failure
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to make management aware of the magnitude of these costs
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cost of quality reports
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materials, labor, overhead costs
what kind of costs do these constitute |
internal failure
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engineering time
what kind of costs do these constitute |
internal failure
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wages and salary
what kind of costs do these constitute |
appraisal
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information systems costs expanded
what kind of costs do these constitute |
prevention
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clerical staff expense
what kind of costs do these constitute |
prevention
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salaries of problem solving teams
what kind of costs do these constitute |
prevention
internal failure |
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to determine whether a process is in control or not
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detecting poor quality
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plots successive observations of an operation taken at constant intervals
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control charts
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shows trends in quality measures over time
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run chart
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when the central line and the limits in a control chart are determined through a statistical process
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statistical quality control chart or statistical process control chart
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if no sample observation is outside the established limits
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statistical control
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a graphical representation of the frequency of attributes or events in a given set of data
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histograms
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a histogram of the frequency of factors contributing to a quality problem; ordered from the most to the lease frequent
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pareto diagram
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organizes a chain of causes and effects to sort out root causes of an identified quality problem
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cause and effect diagram
aka fishbone diagram |
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name the four m's
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machines
materials methods manpower |
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any product you can get right off of the shelf
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"push" manufacturing
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just in time manufacturing =
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managing quality + time + productivity +_capacity
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comprehensive production and inventory system that purchases and produces materials and parts only as needed and just in time to be used at each stage of production
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just in time manufacturing
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pull all processes to get the product to the customer
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pull manufacturing
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which has less inventory?
push or pull manufacturing? |
pull manufacturing
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what is the goal of lean manufacturing?
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to increase product flow and product quality, reduce inventory, improve decision making and increase profitability
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name the 5 principles of lean manufacturing
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1 - value
2 - value stream 3 - pull and flow 4 - empowerment 5 - perfection |
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under just in time manufacturing:
does one employee make the whole product or is there an assembly line>? |
one employee makes the whole product
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name some benefits of just in time manufacturing
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- eliminates waste, defects, scrap and non-value added activities
- reduces inventory - stronger supplier relationships - increases employee involvement - shortens cycle time and customer response time |
