10 -1 Activity- and Strategy-Based Responsibility Accounting 现代责任会计 CHAPTER.

10 -1

Activity- and Activity- and Strategy-Based Strategy-Based Responsibility Responsibility

AccountingAccounting

现代责任会计现代责任会计

CHAPTERCHAPTER

10 -2

1. Define responsibility accounting, and describe four types of responsibility centers.

2. Compare and contrast functional-based, activity-based, and strategic-based responsibility accounting systems.

3. Discuss methods of evaluating and rewarding managerial performance.

4. Explain process value analysis.5. Describe activity performance measurement.

ObjectivesObjectivesObjectivesObjectives

10 -3

Responsibility accounting is a system that measures the results of each responsibility

center according to the information managers need to operate their centers.

Responsibility accounting is a system that measures the results of each responsibility

center according to the information managers need to operate their centers.

1. Responsibility Accounting

1. Responsibility Accounting

394

10 -4

1) Types of Responsibility Centers1) Types of Responsibility Centers

Cost center成本中心 : A responsibility center in which a manager is responsible only for costs.

Revenue center收入中心 : A responsibility center in which a manager is responsible only for sales.

10 -5

ACCOUNTING INFORMATION USED TO MEASURE ACCOUNTING INFORMATION USED TO MEASURE PERFORMANCEPERFORMANCE

CapitalCapital Cost Sales Investment Other Cost Sales Investment Other

Cost center x

Revenue center Direct cost xonly

Profit center x x

Investment center x x x x

394

10 -6

Types of Responsibility CentersTypes of Responsibility Centers

Profit center利润中心 : A responsibility center in which a manager is responsible for both revenues and costs.

Investment center投资中心 : A responsibility center in which a manager is responsible for revenues, costs, and investments.

10 -7

Return on InvestmentReturn on Investment

ROI = Operating income

Average operating assets

Beginning net book value + Ending net book value

2

2) Investment center performance measuring: 397

10 -8

Margin and TurnoverMargin and TurnoverMargin and TurnoverMargin and Turnover

ROI = Margin x Turnover

Operating IncomeSales

SalesAverage operating assets

10 -9

1. It encourages managers to focus on the relationship among sales, expenses, and investments.

2. It encourages managers to focus on cost efficiency.

3. It encourages managers to focus on operating asset efficiency.

Advantages of ROIAdvantages of ROI

10 -10

1) It can produce a narrow focus on divisional profitability at the expense of profitability for the overall firm.

2) It encourages managers to focus on the short run at the expense of the long run.

Disadvantages of ROIDisadvantages of ROI

10 -11

Economic value added (EVA) is after-tax operating profit minus the total annual cost of capital.

EVA = After-tax operating income – (Weighted average cost of capital * Total capital employed)

EVA = After-tax operating income – (Weighted average cost of capital * Total capital employed)

10 -12

There are two steps involved in computing cost of capital:

1. Determine the weighted average cost of capital (a percentage figure)

2. Determine the total dollar amount of capital employed

10 -13 例 :Weighted Average Cost of Capital

Amount Percent x After-Tax Cost = Weighted Cost

Bonds $2,000,000 0.25 0.009(1 –0.4) = .054 0.0135

Equity 6,000,000 0.75 0.06 + 0.06 = .120 0.0900

Total $8,000,000 0.1035

Thus, the company’s weighted average is 10.35%.

Thus, the company’s weighted average is 10.35%.

10 -14

A number of companies have discovered that EVA helps to encourage the right kind of behavior from their divisions 分部 in a way that emphasis on operating income alone cannot. The underlying reason is EVA’s reliance on the true cost of capital.

Behavioral Aspects of EVA

10 -15

Behavioral Aspects of EVAIn many companies, the responsibility for investment decisions rests with corporate management. As a result, the cost of capital is considered a corporate expense. If a division builds inventories and investment, the cost of financing that investment is passed along to the overall income statement and does not show up as a reduction from the division’s operating income.

10 -16

对于两个责任中心而言The value of a transferred good is revenue to the selling division and cost to the buying division. This value is called transfer pricing.

4)Transfer Pricing4)Transfer Pricing 转移定价转移定价4)Transfer Pricing4)Transfer Pricing 转移定价转移定价

10 -17

(1) divisional performance measures 分部业绩

(2) firm-wide profits 公司整体利润

(3) divisional autonomy 分部自主权

Transfer PricingTransfer PricingTransfer PricingTransfer Pricing

Transfer pricing affects both transferring divisions and the firm as a whole through its impact on--

10 -18

The Transfer Pricing Illustration

Tyson Manufacturers produces small appliances. The Small Parts Division produces parts used by the Small Motors Division. The parts also are sold to other manufacturers and

wholesalers.

10 -19


The Small Motors Division is operating at 70 percent

capacity. A request is received for 100,000 units of a certain

model at $30 per unit. A component for this motor can be supplied by the Small Parts Division. The transfer price is

$8 despite the Small Parts Division only experiencing a

cost of $5 per unit.

10 -20


Using the $8 transfer price, the total cost is $31 per unit,

calculated as follows:

Direct materials $10Transferred-in component 8Direct labor 2Variable overhead 1Fixed overhead 10 Total cost $31

Direct materials $10Transferred-in component 8Direct labor 2Variable overhead 1Fixed overhead 10 Total cost $31

10 -21


The Small Motors Division is operating at 70 percent capacity,

so the $10 fixed cost is not relevant. Recalculating the cost--

The Small Motors Division can pay the Small Parts Division $8 per unit and still make a substantial

contribution to the overall profitability of the Division.

Direct materials $10Transferred-in component 8Direct labor 2Variable overhead 1Total cost $21

Direct materials $10Transferred-in component 8Direct labor 2Variable overhead 1Total cost $21

10 -22

Negotiated Transfer PricesNegotiated Transfer Prices

When imperfections exist in competitive markets for the

intermediate product, market price may no longer be suitable.

When imperfections exist in competitive markets for the

intermediate product, market price may no longer be suitable.

10 -23

Negotiated Transfer PricesNegotiated Transfer Prices

In this case, negotiated transfer prices may be a practical

alternative. Opportunity costs can be used to define the boundaries

of the negotiation set.

In this case, negotiated transfer prices may be a practical

alternative. Opportunity costs can be used to define the boundaries

of the negotiation set.

10 -24

Disadvantages of Negotiated Transfer Prices

Disadvantages of Negotiated Transfer Prices

1. A division manager who has private information may take advantage of another divisional manager.

2. Performance measures may be distorted by the negotiated skills of managers.

3. Negotiation can consume considerable time and resources.

10 -25

Despite the disadvantages, negotiated price transfer prices

offer some hope of complying with the three criteria of goal

congruence, autonomy, and accurate performance evaluation.

Despite the disadvantages, negotiated price transfer prices

offer some hope of complying with the three criteria of goal

congruence, autonomy, and accurate performance evaluation.

10 -26

以 Opportunity Cost Approach确定以 Opportunity Cost Approach确定

This approach identifies the minimum and maximum price that a selling division would be willing to accept and the maximum price that a buying division would be willing to pay.

The minimum transfer price is the transfer price that would leave the selling division no worse off if the goods were sold to an internal division than if the

good were sold to an external party (floor).

The minimum transfer price is the transfer price that would leave the selling division no worse off if the goods were sold to an internal division than if the

good were sold to an external party (floor).

The maximum transfer price is the transfer price that would leave the buying division no worse off if an

input were purchased from an internal division than if the good were purchased externally (ceiling).

The maximum transfer price is the transfer price that would leave the buying division no worse off if an

input were purchased from an internal division than if the good were purchased externally (ceiling).

2. Responsibility Accounting model2. Responsibility Accounting model

Assigning responsibility 划分职责 Establishing performance measures or

benchmarks 建立考核基准 Evaluating performance 评价业绩 Assigning rewards 给予奖励

The responsibility accounting model is defined by four essential elements:

pp.282~3

10 -28

Functional-based 基于功能的

Activity-based 基于作业的 Strategic-based 基于策略的

Types of Responsibility Accounting

Types of Responsibility Accounting

Management accounting offers the following three types of responsibility accounting systems.

10 -29

A functional-based responsibility accounting system assigns responsibility to organizational units( 组织单元 ) and expresses( 描述 ) performance measures( 业绩考核 ) in financial terms( 以数据的方式 ).

1) Functional-Based Responsibility Accounting System

1) Functional-Based Responsibility Accounting System

It was developed when most firms were operating in relatively stable( 稳定的 ) environments.

10 -30

Responsibility is Responsibility is DefinedDefined

Individual in Charge 责任人

Operating Efficiency

Financial Outcomes

Unit Budgets

Static Standards

Standard Costing

Currently Attainable Stds.

Financial EfficiencyActual vs. Standard

Controllable CostsFinancial Measures

Performance Measures Performance Measures are Establishedare Established

Performance is Performance is MeasuredMeasured

Individuals are Individuals are Rewarded Based on Rewarded Based on

Financial PerformanceFinancial PerformanceProfit Sharing

分成

Promotions 晋升 Bonuses 花红

Salary Increases 加薪

Organizational Unit

Elements of Functional-Based Responsibility Accounting

10 -31

Why would managers not provide good service? There are three reasons:

1. They may have low ability

2. They may prefer not to work as hard as needed

3. They may prefer to spend company resources on perquisites

Incentive Pay for ManagersIncentive Pay for ManagersIncentive Pay for ManagersIncentive Pay for Managers

10 -32

Incentive Pay for ManagersIncentive Pay for ManagersIncentive Pay for ManagersIncentive Pay for Managers

Perquisites are a type of fringe benefit given to managers over and above a salary.

A nice office

Use of a company car or jet

Expense accounts

Paid country club memberships

10 -33

An activity-based responsibility accounting system assigns responsibility to processes and uses both financial and nonfinancial measures of performance. (含非财务指标考核 )

2) Activity-Based Responsibility Accounting System

2) Activity-Based Responsibility Accounting System

It is the responsibility accounting system developed for those firms operating in continuous improvement environments

( 持续发展的环境 ).

10 -34

Responsibility is Defined

Team

Value Chain

Optimal

Process Oriented 以过程为导向

Dynamic

Value-Added

Time Reductions

Cost Reductions

Quality Improvement

Trend Measures

Performance Measures are Established

Performance is Performance is MeasuredMeasured

Individuals are Rewarded Individuals are Rewarded Based on Multidimensional Based on Multidimensional

PerformancePerformanceGain-

Sharing

Promotions Bonuses

Salary Increases

Financial

ProcessElements of an Activity-Based Responsibility Accounting System (p285 )

10 -35

3 ） Strategy-Based Responsibility Accounting System

3 ） Strategy-Based Responsibility Accounting System

A strategic-based responsibility accounting system (Balanced Scorecard) translates the mission and strategy of an organization into operational objectives and measures for four different perspectives:

The financial perspective

The customer perspective

The process perspective

The infrastructure (learning and growth) perspective

Responsibility Is Responsibility Is DefinedDefined

Financial

Process

Communica-tion Strategy

Alignment of Objectives

Balanced Measures

Link to Strategy

Financial Measures

Process Measures

Customer Measures

Infrastructure Measures

Performance Measures Performance Measures Are EstablishedAre Established

Performance Is Performance Is MeasuredMeasured

Individuals Are Rewarded Individuals Are Rewarded Based on Multidimensional Based on Multidimensional

PerformancePerformanceGain-

Sharing

Promotions Bonuses

Salary Increases

Infrastructure

Customer

288Elements of an Activity-Based Responsibility Accounting System

10 -37

Activity-based management (ABM) is a systemwide, integrated approach that focuses management’s attention

on activities with the objective of improving customer value and the profit achieved by providing this value.

3. Activity-Based Management (ABM)

3. Activity-Based Management (ABM)

Activity-based management encompasses both product costing and process value analysis.

10 -38

Cost Dimension

Activity-Based Management 二维模型

ResourcesResources

Process DimensionProcess Dimension

Driver Driver AnalysisAnalysis

Why?Why?

PerformancPerformance Analysise Analysis

How well?How well?

Products Products and and

CustomersCustomers

ActivitiesActivities

What?What?

10 -39

Process value analysis is fundamental to activity-based responsibility accounting, focuses on accountability for

activities rather than costs, and emphasizes the maximization of systemwide performance instead of

individual performance.

1) Process Value Analysis1) Process Value Analysis1) Process Value Analysis1) Process Value Analysis

Process value analysis is concerned with:

Driver analysis

Activity analysis

Activity performance measurement

10 -40

2) Activity Analysis2) Activity Analysis2) Activity Analysis2) Activity Analysis

Activity analysis is the process of identifying, describing, and evaluating the activities an organization performs.

Activity analysis should produce four outcomes:

What activities are done.

How many people perform the activities.

The time and resources are required to perform the activities.

An assessment of the value of the activities to the organization.

10 -41

Those activities necessary to remain in business are called

value-added activities.

Those activities necessary to remain in business are called

value-added activities.

Value-Value-Added Added




10 -42

Activities needed to comply with the reporting

requirements, such as the SEC, are value-added by a

mandate.

Activities needed to comply with the reporting

requirements, such as the SEC, are value-added by a

mandate.





10 -43

A discretionary activity is classified as value-added provided it simultaneously satisfies three conditions:





The activity produces a change of state.

The change of state was not achievable by preceding activities.

The activity enables other activities to be performed.

10 -44

All activities other than those essential to remain in business

are referred to as nonvalue-added activities.

All activities other than those essential to remain in business

are referred to as nonvalue-added activities.

NonvalueNonvalue-Added -Added


NonvalueNonvalue-Added -Added


10 -45

Nonvalue-Nonvalue-Added Added


Nonvalue-Nonvalue-Added Added


Scheduling 工序安排 Moving 移动 Waiting 等候 Inspecting 检验 Storing 贮存

10 -46

Activity Analysis

Activity elimination

Activity selection

Activity reduction

Activity sharing

Activity Analysis Can Reduce Costs in Four Ways:

10 -47

Efficiency

Quality

Time

Measures of Activity Performance


10 -48


Financial measures of activity efficiency include:

• Value and nonvalue-added activity cost reports

• Trends in activity cost reports

• Kaizen standard setting

• Benchmarking

• Life-cycle costing

10 -49

Value- and Nonvalue-Added Cost Reporting

Activity Activity Driver SQ AQ SP

Welding Welding hours 10,000 8,000 $40

Rework Rework hours 0 10,000 9

Setups Setup hours 0 6,000 60

Inspection Number of inspections 0 4,000 15

Value-added standards call for their elimination

10 -50

Value- and Nonvalue-Added Cost Reporting

Activity Activity Driver SQ AQ SP

Welding Welding hours 10,000 8,000 $40

Rework Rework hours 0 10,000 9

Setups Setup hours 0 6,000 60

Inspection Number of inspections 0 4,000 15

Value-added standards call for their elimination

10 -51

Value-added costs = SQ x SP

Nonvalue-added costs = (AQ – SQ)SP

Where SQ = The value-added output level of an activity

SP = The standard price per unit of activity output measure

AQ = The actual quantity used of flexible resources or the practical activity capacity acquired for committed resources

Formulas

10 -52

Welding $400,000 $ - 80,000 $320,000

Rework 0 90,000 90,000

Setups 0 360,000 360,000

Inspection 0 60,000 60,000

Total $400,000 $430,000 $830,000

Value- and Nonvalue-Added Cost Report

Value-Added Nonvalue- ActualValue-Added Nonvalue- Actual Activity Costs Added Costs CostsActivity Costs Added Costs Costs

10 -53

Welding -$80,000 $ 50,000 $ 30,000

Rework 90,000 70,000 20,000

Setups 360,000 200,000 160,000

Inspection 60,000 35,000 25,000

Total $430,000 $355,000 $235,000

Nonvalue-Added CostsNonvalue-Added Costs Activity 2003 2004 ChangeActivity 2003 2004 Change

Trend Report: Nonvalue-Added Costs

10 -54

The EndThe EndThe EndThe End

Chapter ThirteenChapter Thirteen

10 -1 Activity- and Strategy-Based Responsibility Accounting 现代责任会计 CHAPTER.

Documents

Transcript of 10 -1 Activity- and Strategy-Based Responsibility Accounting 现代责任会计 CHAPTER.