Accountant’s role in the organization

What is the cost of producing one unit or providing

services?
What should be the sales-mix to achieve a target net
income?
What is the break-even point?
Is it cheaper to buy products from outside vendors or to do
manufacturing in-house?
Is it worthwhile to invest more resources in dsign and
manufacturing if it reduces costs in marketing and
customer service or increase revenue?
Modern cost accounting is more than numbers
Major player in management decision making
Provides information for decision making
Cost accounting contributes to the company’s decisions
about strategy, planning and control, by…
Problem solving
Score keeping
Attention directing
Problem solving
This involves comparative analysis for decision making
This role asks: Of the several alternatives available, which
is the best?
Analyzing, for a Mitsubishi international-manufacturing
manager, the desirability of having some auto parts made
in India
Preparing for the manager of production control of an
Indian steel plant, a cost comparison of two
computerized-manufacturing control systems
Analyzing for a GM product designer the impact on
product costs of a new headlight
Score keeping
This involves accumulating data and reporting reliable
results to all levels of management
This role asks: How is the business doing?
Preparing a monthly statement of Indian sales for the IBM
marketing VP
Preparing a scrap report for the Finishing Dept of a Toyota
parts plant
Attention directing
This involves helping managers properly focus their
attention
This role asks: Which opportunities and problems should be
emphasized first?
Attention directing should focus on all opportunities to add
value to an organization, not just cost-reduction
opportunities
Interpreting differences between actual results and
budgeted amounts on a performance report for the
Customer Warranty Dept of GE
Interpreting why a New Delhi distribution center exceeded
its delivery-costs budget
Management Accounting, Financial Accounting and Cost
Accounting
Purpose of information
Primary users
Focus and emphasis: future orientation
Rules of measurement and reporting
Time span and type of reports
Value Chain Analysis
Research & Development > Design of Products, Services,
Processes > Production > Marketing > Distribution >
Customer Service
Regal Marine uses cost accounting information in all parts of its
Florida-based boat manufacturing operation.
The R & D team needs to examine the costs of alternative boat
designs.
The production dept. must control its materials and labour costs
to stay on budget.
The marketing group wants to evaluate different advertising
media to make the best choice.
Distribution needs to manage the costs of delivering finished
water craft to customers.
Value Chain Analysis
Management accountants track the costs incurred in each
value-chain category
Goal is to reduce costs in each category and to improve
efficiency
Cost information also helps managers to make cost-benefit
tradeoffs
HCL incurs the some costs:
- Salary of computer scientists working on the next generation of
minicomputers- R & D
- Purchase of products of competitors for testing against potential
HCL products- R & D
- Electricity costs for the plant assembling the HCL computer
line of products- Production
- Cost of cables purchased from outside supplier to be used in the
HCL printer- Production
- Payment to television network for running HCL
advertisements- Marketing
- Cost of HCL employee visit to a major customer to
demonstrate HCL’s ability to interconnect with other
computers- Customer service
Supply Chain Analysis
Supply chain describes flow of goods, services and
information from initial sources of materials and services
to delivery of products to consumers, regardless of
whether those activities occur in the same organization
or in other organizations.
Cost management emphasizes integrating and coordinating
activities across all companies in the supply chain, as
well as across each business function in an individual
company’s value chain, to reduce costs
Supply Chain Analysis
Coca-Cola contracts with its suppliers (aluminum cane
suppliers) to frequently deliver small quantities of
materials directly to the production floor to reduce
materials handling costs.
To reduce inventory levels in the supply chain, Reliance
Fresh is asking its suppliers such as Coca-Cola to be
responsible for and to manage inventory at both the
Coca-Cola warehouse and Reliance Fresh.
Key Success Factors
Cost and efficiency: continuous pressure to reduce the
costs
Managers work with management accountants to achieve
the target cost by eliminating non-value added activities
(rework).
Nike has moved its manufacturing operations to China and
Mexico.
Citigroup and America Online are increasingly doing their
software development in Spain, Eastern Europe and
India.
Key Success Factors
Quality:
Designing product or service to meet the needs and wants
of customers, as well as, making product/service with
zero/minimal defects and waste and with low inventories
Management accountants evaluate costs and revenue
benefits of TQM initiatives
Key Success Factors
Time:
New-product development time
Increasing pace of technological innovations has led to
shorter product life cycles and need for companies to
bring new products to market more rapidly
Management accountant measures the costs and benefits of
a product over its life cycle
Customer-response time- delays or bottlenecks
Management accountants quantify the costs and benefits of
relieving the bottleneck constraints
Key Success Factors
Innovation:
Constant flow of innovative products or services- basis of
ongoing company success
Management accountant helps managers evaluate
alternative investment decisions and R & D decisions
Decision Making, Planning and Control
Five-Step Decision Making Process
Identify the problem and uncertainties: increase selling
price per newspaper or increase rate per page charged to
advertisers
Obtain information
Make predictions about the future
Make decisions by choosing among alternatives
Implement the decision, evaluate performance, and learn