Stratergic Management Accounting

8/19/2019 Stratergic Management Accounting

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STRATERGIC MANAGEMENT ACCOUNTING

APC 309

UNIVERSITY OF SUNDERLAND

.


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CONTENTS PAGE

NO

1. Importa!" o# p"r#orma!" m"a$%r"$ 3

2. R"t%r o I&"$tm"t '()

3. L*m*tat*o o# ROI +

'. E!oom*! &a,%" a--"- (/

). EVA L*m*tat*o$ 9

+. L*m*tat*o$ o# P"r#orma!" m"a$%r"$ 10

. a,a!" S!or"!ar- 11

/. Co!,%$*o 12


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Importance of Performance Measurement

P"r#orma!" m"a$%r" *$ o" o# t" m"a$%r"$ *! %$"- to m"a$%r" t"

p"r#orma!" o# t" maa"m"t pro!"$$ * a -*&*$*o or *&"$tm"t

!"tr". It$ *!,%-" t" 4ot o45"!t*&" a- $%45"!t*&" a$$"$$m"t$ o# t"

4ot *-*&*-%a, a- -*&*$*oa, p"r#orma!". P"r#orma!" m"a$%r"m"t *$

"6"!t*&" a7 o# "$%r* t" -*&*$*o *$ p,a!"- t" ora*8at*o $trat"7

$%!!"$$#%,,7. I or-"r to mo*tor t" ora*8at*o oa,$ a- o45"!t*&"$ ar"

* ",, p,a!" *t* t" -*&*$*o t*$ m"a$%r" *,, %$" 47 t" ora*8at*o.P"r#orma!" m"a$%r" !o$*$t$ o# a!*a, a- o a!*a, *#ormat*o

(Drury, C 2005).R"t%r o I&"$tm"t:ROI; a- E!oom*! &a,%"

a--"-:EVA;


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Return on Investments (ROI)

ROI *$ o" o# t" mo$t *mportat prota4*,*t7 rat*o$. It=$ %$"- to "&a,%at"

t" ">!*"!7 o# a *&"$tm"t to !ompar" t" ">!*"!7 o# a %m4"r o#

-*6"r"t *&"$tm"t$.ROI *$ $*m*,ar m"a$%r" to ROCE 4%t t*$ ma*,7 %$"-

to appra*$" t" *&"$tm"t -"!*$*o$ o# a -*&*$*o or *&"$tm"t

!"tr".ROI "?pr"$$"- t" -*&*$*oa, prot a$ a p"r!"ta" o# t" a$$"t$

"mp,o7"- * t" -*&*$*o or *&"$tm"t (Drury, C 2005) ROI !a,!%,at" a$

#o,,o$

ROI@ NET PROFIT 100

NET INVESTMENT

ROI pro&*-" rat*oa, #or t" #%t%r" -"!*$*o r",at"$ to t" *&"$tm"t$ a-

a!B%*$*t*o$. It ",p$ to maa"m"t to !oo$" *! *&"$tm"t opt*o

""- to 4" #o,,o"- a- *! $o%,- 4" *or"-."

D*&*$*o Y

Prot 1m 2m

I&"$tm"t 'm 20m

ROI 2) 10

" " !ompar" t" r"$%,t$ 4"t"" a4o&" "?amp," -*&*$*o 7 prot *$

"?!""-* t" -*&*$*o ?. %t " " !ompar" t" r"t%r "tt* #orm

*&"$tm"t *t=$ !,"ar,7 -*&*$*o ? -%" to t" #a!t tat ROI a$ 2) "

!ompar"- to D*&*$*o Y 10. T*$ *$ o" o# t" ma5or a-&ata"$

a$$o!*at" *t ROI. A,$o *t pro&*-" $%mmar7 o# pa$t rm$ *&"$tm"t

*! !ap*ta, *&"$t"-. T"$" *#ormat*o ",p to maa"r$ to -"!*-"

t"*r #%t%r" *&"$tm"t. A!!or-* to t" Kaplan an !t"#nson -"$p*t"

t" #a!t tat ,a! o# m"a$%r"m"t o# "?(po$t r"t%r$ o !ap*ta,< t"r" *$ a

,*tt," ",p #or a!!%rat" "$t*mat"$ o# #%t%r" !a$ Ho$ -%r* t" !ap*ta,4%-"t* pro!"$$. M"a$%r* t" r"t%r$ o# !ap*ta, *&"$t"- ",p


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maa"r$ to -ra t"*r att"t*o to t" *mpa!t o# ,"&",$ o# or* !ap*ta,

o t" ROI * part*!%,ar *t $to!$ a- -"4t$ (Drury, C 2005). T*$ !a

,"a- to t" -"!*$*o ma* tat ar" opt*ma, #or -*&*$*o a- $%4 opt*ma,

#or !orporat" ora*8at*o. F%rt"r a-&ata" o# ROI *$ *t$ !a 4" %$"- a$!ommo -"om*ator #or !ompar* r"t%r$ o# ot"r 4%$*"$$"$ $%! a$

ot"r -*&*$*o$< !omp"t*tor$ a- ot"r -*$$*m*,ar 4%$*"$$.


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$#m#tat#ons of Return on #nvestment

D"$p*t" t" a-&ata"$ o# ROI t"r" ar" $om" ma5or -ra4a!$ #or t"

ROI $%! a$ -7$#%!t*oa, -"!*$*o ma*. E

D*&*$*o A

I&"$tm"t 20m 20m

R"t%r #rom t" *&"$tm"t 'm 2.+m

ROI 20 13

C%rr"t ROI 2) 9

Co$t o# !ap*ta, 1)

I t*$ $*t%at*o -*&*$*o a maa"r *,, r"5"!t t" *&"$tm"t -%" to t"

#a!t tat *&"$tm"t ROI *$ ,o"r ta t" C%rr"t D*&*$*o ROI. "!a%$" *#

maa"r A a!!"pt t" *&"$tm"t !o%,- arm *$ 4o%$ #or -*&*$*o

p"r#orma!". %t a!!"pt* t" *&"$tm"t -*&*$*o A !o%,- ,"a- to

$%!!"$$ a$ t" !ompa7 !o$t o# !ap*ta, *$ ,o"r ta t" *&"$tm"tr"t%r.

Aot"r *mportat ,*m*tat*o o# ROI *$ $om" *&"$tm"t *-*!at"$ ,o or

"at*&" %r"$ * t" $ort t"rm 4%t *t *!r"a$" * t" ,o t"rm. %t

-*&*$*oa, maa"r$ t"mpt to r"5"!t t" *&"$tm"t o t" ,o"r r"t%r$

o t" $ort t"rm.

D*&*$*oa, ma"r$ !o%,- ma*p%,at" t" prot a- !ap*ta, "mp,o7"- *or-"r to *mpro&" t" r"$%,t$ o# ROI to "t t" 4o%$ pa7m"t$.


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A,$o -*6"r"t a!!o%t* po,*!7 $%! a$ -"pr"!*at*o po,*!7 !o%,- a&"

a-&"r$" "6"!t o t" !ompar*$o.

U$" o# ROI *$ ot ",p* !ompa7 $ar"o,-"r "a,t ma?*m*$at*o a$

-*&*$*o$ a!!"pt t" *"r ROI %r"$ *! oo- #or -*&*$*o$.

%conom#c &alue !e (%&!)

I a ora*8at*o pr*mar7 o45"!t*&" *$ ma?*m*$at*o o# $ar"o,-"r$

"a,t. So $%!!"$$#%, p"r#orma!" m"a$%r" "&a,%at" t" o t"

!ompa7 p"r#orm to a!*"&" *t$ o45"!t$. Mo$t o# t" ora*8at*o %$"-

prot 4a$"- m"a$%r"- a$ t"*r pr*mar7 m"a$%r" o# a!*a, p"r#orma!".

%t t"r" ar" to ma* pro4,"m$ r",at* to t" prot *! *$

• Prot *or"$ t" !o$t o# !ap*ta,

• Prot$ ar" !a,!%,at"- a!!or-* to t" a!!o%t* $ta-ar- *! *$

ot tr%,7 r"H"!t* t" "a,t tat a$ 4"" !r"at"- a- *t !o%,-

ma*p%,at" 47 a!!o%tat$.

E!oom*! Va,%" A--"- :EVA TM; a$ -"&",op"- 47 t" US !o$%,t* rm

St"r St"art J !o< a- *t a$ "?pa-"- amo t" ",,(o

!ompa*"$ $%! a$ Co!a Co,a< S"*m"$. Et!. EVA a$ -"&",op"- to

o&"r!om" a4o&" to -*>!%,t*"$ *! #a!" 47 ora*8at*o$.EVA

p"r#orma!" m"a$%r" 4a$"- o t" op"rat* *!om" a#t"r ta?"$ a- t"

*&"$tm"t * a$$"t$ r"B%*r"- to ""rat" tat *!om" a- t" !o$t o# t"

*&"$tm"t * a$$"t$. :ACC;.EVA ma* o45"!t*&" *$ pro-%!" o&"ra,,

a!*a, m"a$%r" *! "!o%ra" $"*or maa"r$ to #o!%$ o t"

-",*&"r7 o# $ar"o,-"r &a,%". EVA *$ po%- amo%t *# t" amo%t *$

po$*t*&" %r" m"a$ !ompa7 a$ "ar"- a#t"r ta? op"rat* *!om"

ta t" !o$t o# a$$"t$ "mp,o7"- to ""rat" tat *!om". O t" ot"r

a- "at*&" %r" *-*!at" tat !ompa7 !o$%m* !ap*ta, !ompar"-

to ""rat* "a,t $o !ompa7 oa,$ *$ to a&" po$*t*&" a- *!r"a$*

EVA. It$ !a,!%,at" a$ #o,,o$.


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%&! ' convent#onal #v#s#onal prots account#n* a+ustments

cost of cap#tal c-ar*e on #v#s#onal

Or

%&! ' et operat#n* prot after ta/ (1otal cap#tal employe

3e#*-te avera*e cost of cap#tal)

%conom#c value !e stren*t-s

EVA a$ o&"r!om" t" ROI pr*mar7 ,*m*tat*o *! *$ ma"r$ ma"

-"!*$*o$ *," *or* t" !ompa7 a$ o," to "t t" p"r#orma!"

4o%$. S%! a$ *&"$tm"t *! a$ 12 r"t%r a- -*&*$*oa, maa"r

*or" t*$ -%" to t" -*&*$*oa, ROI *! *$ 1).%t Compa7 a$ o,"

!o$t o# !ap*ta, *$ 10 a- *# t"7 #o,,o"- tat *&"$tm"t !o%,- "t oo-

prota4*,*t7 a- *t !o%,- ,"a- to $ar"o,-"r "a,t ma?*m*$at*o$. EVA

!a o&"r!om" tat $*t%at*o 47 %$* EVA *$t"a- o# ROI %$* !ompa7

!o$t o# !ap*ta, a$ o," to !oo$" *&"$tm"t o&"r 10.Apart #rom t"

oa, !or%"!" EVA !a ",*m*at" t" -*$tort*o$ * t" GAAP to #o!%$

-"!*$*o o r"a, "!oom*! r"$%,t$. EVA *$ mor" pra!t*!a, !o!"pt ta t"

ROI *! *$ *,7 !omp,"? a- ar- to %-"r$ta-.EVA pro&*-" 4"tt"r

a$$"$$m"t o# -"!*$*o !ompar"- to ROI a$ *! a6"!t I!om"

$tat"m"t a- 4a,a!" $""t or tra-"o6$ 4"t"" "a! tro% t" %$"

o# t" !ap*ta, 4%-"tar7 tar"t$. A,$o *t o&"r!om"$ t" -7$#%!t*oa,

-"!*$*o ma*.


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%&! $#m#tat#ons

D"$p*t" t" a-&ata"$ o&"r ROI< t*$ m"a$%r" a&" $om" ,*m*tat*o a$

",,.EVA *$ r"B%*r"- %m"ro%$ a-5%$tm"t$ to prot a- !ap*ta, "mp,o7"-

%r"$.EVA -o"$=t pro&*-" !ompar*$o 4"t"" -*&*$*o EVA *$ a

a4$o,%t" m"a$%r".EVA ma*,7 4a$"- o t" *$tor*!a, -ata a-

$ar"o,-"r$ *t"r"$t * #%t%r" p"r#orma!".EVA -o"$=t !otro, #or $*8"

-*6"r"!"$ a!ro$$ -*&*$*o$. Lar"r -*&*$*o t"- to a&" *"r amo%t o#

EVA a- $ma,,"r D*&*$*o$ a&" ,o"r amo%t o# EVA.EVA *$ 4a$"- o t"

!omp%t"- %m4"r tat r",*"$ o a!*a, a!!o%t* m"to-$ o# r"&"%"

r"a,*8at*o a- "?p"$" r"!o*t*o. So t*$ !o%,- 4" ,"a- maa"r$ to

ma*p%,at" to$" %m4"r$ to "t oo- p"r#orma!".EVA !,"ar,7 #o!%$"$

o t" *mm"-*at" r"$%,t$ *! !o%,- $top *&"$t* o *o&at*&" pro-%!t

or pro!"$$ t"!o,o*"$.EVA -o ot !o$*-"r t" oa!*a, #a!t$ *!

*$ "mp,o7"" $at*$#a!t*o< mar"t !omp"t*t*o< pro-%!t$ B%a,*t7. T"$"

#a!tor$ ar" !r%!*a, " ma* "6"!t*&" -"!*$*o$.


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$#m#tat#ons of 4#nanc#al Performances

F*a!*a, p"r#orma!" m"a$%r"m"t$ ar" ""ra,,7 $ort t"rm or*"t"-

a- *t ,"a-$ maa"r$ to 4"!om" $ort t"rm or*"t"-. So t*$ ma7 *or"

t" po$*t*&" *&"$tm"t$ *! a$ **t*a, a-&"r$" o t" -*&*$*o

p"r#orma!" a- *"r pa7o6 ,at"r p"r*o- or * t" ,o r%.

F*a!*a, p"r#orma!" m"a$%r"$ !o$*-"r a$ ,a* *-*!ator$ :E!!,"$

a- P74%r< 1992; 47 t*m" ,a 4"t"" a!t*o a- r"$%,t$. *! m"a

o%t!om"$ o# t" maa"m"t a!t*o a#t"r $om" t*m" a- *t=$ too ,at" to

a,t"r t" -"!*$*o$.


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alance scorecar (6C)

SC a$ *tro-%!"- 47 Kap,a a- Norto :1992; to o&"r!om" t"

$ort!om* o# EVA a- ROI a- !otro, *! #a*,$ to pro&*-" $*a,$ to

!a"$ * t" !ompa7 "!oom*! &a,%" a$ a ora*8at*o ma"$

$%4$tat*a, *&"$tm"t$ or" -"p,"t"$ pa$t *&"$tm"t$ * *ta*4,"

a$$"t$. T"$" ma,7 !o$*$t"- #o%r -*6"r"t p"r$p"!t*&"$ *! *$

!%$tom"r$< *t"ra, 4%$*"$$ pro!"$$"$< a- ,"ar* a- rot.SC !a

%$" #or #o,,o* r"a$o$<

• Impro&* ora*8at*oa, p"r#orma!" 47 m"a$%r* at matt"r$

to t" !ompa7.

• I!r"a$" #o!%$ o $trat"7 a- r"$%,t$

• A,* ora*$at*o $trat"7 *t -*&*$*o$ or"r$ o a -a7 to -a7

4a$*$

• Fo!%$ o -r*&"r=$ "7 to #%t%r" p"r#orma!".

• Pr*or*t*$" pro5"!t$ a- *&"$tm"t$.

SC approa! to p"r#orma!" m"a$%r"m"t o6"r $"&"ra, a-&ata"$$%! a$

• It m"a$%r"$ t" -*&*$*o p"r#orma!" * a &ar*"t7 o# a7$< rat"r

ta r",7* o o" %r".

• I t"$" m"a$%r"$ maa"r$ ar" ot a4," to -*$tort t" p"r#orma!"

m"a$%r".

• SC ta" ,o p"r$p"!t*&" o# 4%$*"$$ p"r#orma!".

• Fo%r ar"a$ $o%,- ,"a- to t" ,o t"rm $%!!"$$ o# t" !ompa7.


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Conclus#on

T"r" ar" ma7 ar%m"t$ *! $%"$t ROI a- EVA mot*&at"

maa"r$ to #o!%$ o t" $ort t"rm$ o# t" -*&*$*o$. %t t"7 po$$"$$

t" tra*t$ o# ,o t"rm. Ma* ,*m*tat*o *t ROI a- EVA t"7 o,7 -"p"-

o t" a!*a, *#ormat*o *! t"7 m"a$%r" t" prota4*,*t7 * t"

$ort t"rm. %t 4ot p"r#orma!" m"a$%r"$ *or" t" o a!*a,

#a!tor$ $%! a$ "mp,o7"" $at*$#a!t*o< B%a,*t7 o# pro-%!t$ a-

$"r&*!"$."t!. %t SC a$ o&"r!om" t*$ ,*m*tat*o 47 *!,%-* t" o

a!*a, *#ormat*o to "&a,%at" t" p"r#orma!". D*&*$*oa, p"r#orma!"

m"a$%r"$ $o%,- 4" 4a$"- o t" !om4*at*o o# a!*a, a- o

a!*a, m"a$%r"$ * or-"r to ma?*m*$" $ar"o,-"r$ "a,t.


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CO1%16 P!7% O

1. Mar*a, Co$t* 1'(1

2. A4$orpt*o Co$t* 1/(20

3. A!t*&*t7 4a$"- Co$t* 21(23

'. Co!,%$*o 2'

). R"#"r"!"$ 2)

+. App"-*!" 2+


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Mar*#nal Cost#n*8&ar#a9le cost#n*

Mar*a, !o$t* *$ a!!o%t* $7$t"m * *! &ar*a4," !o$t !ar"- to

t" !o$t %*t a- ?"- !o$t$ o# t" p"r*o- ar" r*tt" o6 * #%,, aa*$t

ar"at" !otr*4%t*o (CIM!).Mar*a, !o$t* !ompo"t$ -o"$=t

*!,%-" ?"- !o$t. Mar*a, !o$t* "a4,"$ maa"m"t to ta"

"!"$$ar7 arra"m"t$ to t" -"!*$*o a- %-"r$ta- t" !o$t

$tr%!t%r". T" mar*a, pro-%!t*o !o$t o# a *t"m *$ "B%a, to $%m o#

-*r"!t mat"r*a, !o$t. D*r"!t ,a4o%r< -*r"!t "?p"$"$ a- &ar*a4,"

pro-%!t*o o&"r"a-. a$*!a,,7 " pro-%!t*o &o,%m" a- $a,"$

*!r"a$" tota, &ar*a4," !o$t *,, r*$" proport*oat",7. A,to% ?"- !o$t

r"ma* %!a"- * a t*m" p"r*o-. Cotr*4%t*o !o!"pt *$ &*ta, *

mar*a, !o$t* a- *t !a,!%,at" a$ #o,,o$<

Sa,"$ R"&"%"


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1)

L"$$ &ar*a4," !o$t o# pro-%!t :;

Cotr*4%t*o

Cotr*4%t*o *! "ar"- #rom $p"!*! pro-%!t$ or ro%p o# pro-%!t$ *$

a--"- $o a$ to !a,!%,at" t" tota, !otr*4%t*o. F*?"- !o$t *$ pa*- #orm t*$

tota, !otr*4%t*o a- t" part o# t" tota, !otr*4%t*o *! r"ma*$

4"!om"$ prot o# t" 4%$*"$$ a$ o,".

Mar*a, !o$t* $tat"m"t

Sa,"$ r"&"%"

:(;Var*a4," !o$t o# pro-%!t*o :;

Cotr*4%t*o

:(; F*?"- !o$t :;

Tota, prot

!vanta*es of Mar*#nal Cost#n*

Pro&*-" %$"#%, -ata #or -"!*$*o ma* pro!"$$.

V"r7 "6"!t*&" too, o# prot p,a*.

U-"r t*$ t"!*B%" pro4,"m$ *! ar*$" #rom t" !omp%tat*o$ o#

a!!%rat" $%! a$ ?"- #a!tor7 o&"r"a- rat" !a 4" a&o*-"- a$ *t

!ar"- aa*$t !otr*4%t*o. C,o$* *&"tor7 &a,%"- at &ar*a4," !o$t a- *t ",p to a&o*- t"

!arr7* ?"- !o$t o# o" p"r*o- to t" "?t p"r*o- tro% !,o$*

*&"tor*"$. U-"r mar*a, pro-%!t &ar*a4," !o$t p"r %*t *$ !o$tat #rom

p"r*o- to p"r*o- *t* $ort $pa o# t*m"< Pr*!* -"!*$*o !a

"a$*,7 4" ta" 47 t" maa"m"t


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$#m#tat#on of Mar*#nal cost#n*

Mar*a, !o$t a$$%m"$ tat $"m* &ar*a4," !o$t !a 4" -*&*-"- * to

to part$ $%! a$ ?"- a- &ar*a4," ","m"t$ a- *t *$ -*>!%,t ta$

to -o *t * pra!t*!a,.

It "?!,%-"$ t" ?"- !o$t a- $om" t*m" *t !o%,- 4" ,"a- to ro

!o!,%$*o$.

*t -"&",opm"t o# t" t"!o,o7 a- app,*!at*o o# a%tomat*o

o# t" *-%$tr7 ?"- !o$t a&" $%4$tat*a, *mpa!t o t" pro-%!t*o

!o$t a- mar*a, !o$t *$ #a*,"- to r"H"!t o t" *mpa!t o t" ?"-

!o$t a$ t"7 *&" r"at *mporta!" to t" &ar*a4," !o$t.

Mar*a, !o$t* -o"$ ot pro&*-" param"t"r #or !o$t !otro, a- *t

!a a!*"&"- 4"tt"r *t ",p o# $ta-ar- !o$t* a- 4%-"tar7

!otro, rat"r ta r",7* o t*$ !o$t*.

I&"tor7 &a,%at*o *$ ot ",p#%, * !a$" o# a4orma, ,o$$ a- $%!

&a,%at*o *$ ot a!!"pt"- %-"r t" &*" po*t o# *!om" ta?

a%tor*t*"$ a- a%-*tor$.


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Mana*er#al Dec#s#on ma"#n* 6#tuat#on

D"t"rm*at*o o# opt*m%m pr*!" *$ &"r7 *mportat #or a !ompa7 a$ t"7

at to ma" prot #rom "a! %*t o# pro-%!t or $"r&*!". I mar*a,

!o$t* ?"- !o$t *,, ot 4" !a" at a7 pro-%!t*o ,"&",. Mar*a,

!o$t* &ar*a4," !o$t *$ !a* *$ t" o,7 a7 to "tt* opt*m%m pr*!"

"r" !ompa7 !a a!*"&" "?p"!t"- prot.!PP%DI :

Coo$" o# oo- pro-%!t m*? a,$o o" o# t" *mportat -"!*$*o$ #or

ora*8at*o. Som" t*m" !ompa7 pro-%!" mor" ta o" pro-%!t a- *

$%! a $*t%at*o !ompa7 a$ to !a,!%,at" t"*r "a! pro-%!t$ !otr*4%t*o

mar* or ro$$ prot mar*. T" pro-%!t *! *&"$ *"r !otr*4%t*o

mar* *,, !oo$" to o a"a-. A,$o !ompa7 !a !"! !otr*4%t*o 47

pro-%!* -*6"r"t B%at*t7 o# ot"r pro-%!t$. I!r"a$* B%at*t7

pro-%!* ma?*m%m !otr*4%t*o< *t *,, 4" "B%*,*4r*%m po*t a-

pro-%!t*o o# %*t$ at tat B%a*t,7 *,, 4" 4""t to t" !ompa7.


18/27

1/

!9sor9 cost#n*8full cost#n*

A4$orpt*o !o$t* $7$t"m *! tr"at$ a,, !o$t o# pro-%!t*o a$ pro-%!t

!o$t$< *or* t" #a!t tat ?"- or &ar*a4,". Co$t o# pro-%!t %*t %-"r

a4$orpt*o !o$t* !o$*$t$ o# -*r"!t mat"r*a,$< -*r"!t ,a4o%r< a- 4ot

&ar*a4," a- ?"- o&"r"a-. U-"r t" a4$orpt*o !o$t* ?"- !o$t ar"

a,,o!at"- to "a! pro-%!t %*t a,o *t t" &ar*a4," ma%#a!t%r* !o$t.

U-"r t" a4$orpt*o !o$t ma%#a!t%r* o&"r"a- *! a$ 4""

app,*"- to pro-%!t$. U-"r t" a4$orpt*o !o$t* o&"r"a- *$ app,*"-

4a$"- o t" pr"-"t"rm*"- o&"r"a- a,,o!at*o rat". O&"r"a- *$ o&"r

a4$or4"- " t" amo%t a,,o!at"- to a pro-%!t or !o$t *$ *"r ta

t" a!t%a, amo%t o# o&"r"a-. O t" ot"r $*-" " a!t%a, amo%t o#

a,,o!at*o *$ *"r ta t" a,,o!at*o a- *t=$ !a,,"- %-"r a4$or4"-.


19/27

19

!vanta*es an $#m#tat#ons of a9sor9#n* cost#n*

!vanta*es

A4$or4* !o$t tr"at ?"- !o$t * t" pro-%!t !o$t a- *t$ ",p to

-"t"rm** pr*!" o# t" pro-%!t. A4$orpt*o !o$t* m"to- *,, $o mo$t appropr*at" prot

!a,!%,at*o ta t" &ar*a4," !o$t* * a $*t%at*o "r" pro-%!t*o

*$ -o" to a&" $a,"$ * #%t%r" $%! a$ $"a$oa, pro-%!t*o a-

$"a$oa, $a,"$. A4$orpt*o !o$t* m"to- *$ r"!o*8* m"to- *! %$" #or

pr"par* "?t"ra, r"port$ a- *&"tor7 &a,%at*o pro!"$$. It a&o*-$ t" !o$t $"parat*o $%! a$ ?"- a- &ar*a4," ","m"t$.

T" a,,o!at*o a- apport*om"t o# ?"- #a!tor7 o&"r"a-$ to !o$t

!"tr"$ *! ma"$ ma"r mor" aar" a- r"$po$*4," #or !o$t

a- $"r&*!"$ pro&*-"- to ot"r$. A4$orpt*o !o$t ",p to a!!r%a, a- mat!* a!!o%t* !o!"pt$

*! r"B%*r"$ mat!* !o$t *t r"&"%" #or part*!%,ar a!!o%t*

p"r*o-.


20/27

20

$#m#tat#ons

Co$*-"r* ?"- ma%#a!t%r* o&"r"a- a$ pro-%!t !o$t *!

*!r"a$" t" !o$t o# o%tp%t a- *t !o%,- 4" arm#%, #or $p"!*a,,7

o6"r"- pr*!" #or pro-%!t. U-"r t" a4$orpt*o !o$t $om" !%rr"t pro-%!t !o$t !a r"mo&"

#rom t" *!om" $tat"m"t 47 pro-%!" a$ *&"tor7 a- *t !o%,-

,"a- to maa"r$ o "&a,%at"- o t" ro%- o# op"rat* *!om"

!a *mpro&" t"mporar*,7 prot 47 *!r"a$* pro-%!t*o. A4$orpt*o !o$t ma*,7 -"p"-$ o t" tota, !o$t *! *!,%-"

&ar*a4," a- ?"- *$ ot %$"#%, #or maa"m"t * -"!*$*o ma*

$7$t"m.

Mana*er#al ec#s#on ma"#n* s#tuat#ons

U-"r t" a4$orpt*o !o$t* a,,o!at"$ ?"- o&"r"a- * to !o$t %*t *!

ma"$ *t app"ar a$ to% a--*t*oa, %*t pro-%!"- a-- o&"r"a- !o$t< *

#a!t t"7 ar" r"&"%" opport%*t*"$." Compa7 ma"$ 100 4a$"4a,,$ p"r

mot #or &ar*a4," !o$t o#' a- ?"- o&"r"a- !o$t o# 100 p"r mot<

%-"r t" a4$orpt*o !o$t* *t a,,o!at"$ 1 to "a! 4a$"4a,, #or a tota,

!o$t o# ).I# !ompa7 $",,$ aot"r a--*t*oa, 10 4a$"4a,,$ at '.) "a!

%-"r t" a4$orpt*o !o$t* !ompa7 ma" ,o$$ o# .)0 "a!. It $ ma*

.)0 "a! a$ *t *$ ot a--* ?"- !o$t 47 pro-%!* 10 mor" %*t$ t"7

o,7 a-- &ar*a4," !o$t. D%" to t" r"a$o a4$orpt*o !o$t* *$ *a-"B%at"

#or -"!*$*o ma* pro!"$$.


21/27

21

I&"tor7 app"ar o t" 4a,a!" $""t a$ a a$$"t 4%t *t -o"$=t app"ar

a$ a "?p"$"$ or !o$t o# oo-$ $o,-. T*$ *$ -%" to t" #a!t tat %-"r t"

a4$orpt*o !o$t a,,o!at*o$ o# ?"- o&"r"a- to t" *$"- %*t ,"&",.

!ct#v#ty 9ase cost#n*

A " approa! to !o$t* !a,,"- A!t*&*t7 4a$"- !o$t* -"&",op"- 47

;arvar


22/27

22

2. Loa- S"!o-ar7 !o$t poo,$ Cr"at" !o$t poo,$ *! !o$t *!%rr"- to

pro&*-" $"r&*!"$ to ot"r part$ o# t" !ompa7 $%! a$ !omp%t"r

$"r&*!"$< a-m**$trat*&" $a,ar*"$..."t!.3. Loa- pr*mar7 !o$t poo,$ Cr"at" !o$t poo,$ #or to$" !o$t *!

a,*"- *t t" pro-%!t*o mor" !,o$",7 $%! a$ r"$"ar! a-

-"&",opm"t< a-&"rt*$*< pro!%r"m"t a- -*$tr*4%t*o.'. M"a$%r* A!t*&*t7 Dr*&"r$ U$" a -ata !o,,"!t*o $7$t"m to !o,,"!t

*#ormat*o a4o%t a!t*&*t7 -r*&"r$ *! ar" %$"- to a,,o!at" t"

$"!o-ar7 !o$t poo,$ to pr*mar7 !o$t poo,$< a- pr*mar7 !o$t poo,$

to !o$t o45"!t$. T*$ *$ "?p"$*&" pro!"$$.). A,,o!at" !o$t$ * $"!o-ar7 poo,$ to pr*mar7 poo,$ U$" a!t*&*t7

-r*&"r$ to apport*o t" !o$t * t" $"!o-ar7 !o$t poo,$ to pr*mar7

!o$t poo,$.+. Car" !o$t to !o$t o45"!t$ U$* a!t*&*t7 -r*&"r to a,,o!at" t"

!ot"t$ o# "a! pr*mar7 poo, to !o$t.. Form%,at" R"port$ o t*$ $ta" !o&"rt t" r"$%,t$ o# AC $7$t"m

* to r"port mo-" #or maa"m"t %$".

!vanta*es an D#savanta*es

!vanta*es

AA *$ %$"#%, #or pro&*-* a!!%rat" !o$t p"r %*t $o a$ a r"$%,t

*mpro&"- pr*!*< $a,"$ $trat"7< p"r#orma!" maa"m"t a-

-"!*$*o ma*. Mo$t *mportat,7 *t r"!o*8"$ tat o&"r"a- !o$t *$ ot a,, r",at"-

to t" pro-%!t*o a- &o,%m". AC app,*"- to a,, o&"r"a-$ ot 5%$t pro-%!t*o o&"r"a-$.

AC *$ %$"#%, " %$" a$ $"r&*!" !o$t* a- pro-%!t !o$t*.

It pro&*-"$ m%! 4"tt"r *$*t &*" o# at -r*&"$ o&"r"a- !o$t$.


23/27

23

D#savanta*es

It *$ &"r7 ar- to a,,o!at" a,, o&"r"a- !o$t to $p"!*! a!t*&*t*"$.

Imp,"m"t* a AC $7$t"m *$ r"B%*r"$ $%4$tat*a, r"$o%r!"$ a-

t*m" a- o!" *t *mp,"m"t"-< *t *$ !o$t,7 to ma*ta*. It !a "a$*,7 m*$*t"rpr"t a- m%$t 4" %$"- *t !ar" " ma*

-"!*$*o$. AC *$ mor" !omp,"? to "?p,a* to t" $ta"o,-"r$ o# t" !o$t*

"?"r!*$". Co*!" 4"t"" a!t*&*t*"$ a- !o$t -r*&"r$ m*t 4" *appropr*at".

Dec#s#on Ma"#n* 6#tuat#ons

A!t*&*t7 !o$t$ *! *$ -"$*"- to tra! t" !o$t o# a!t*&*t*"$. It

",p$ to $"" *# t" a!t*&*t7 !o$t *$ a!!or-* *t *-%$tr7 $ta-ar-$.

A,$o *t ma7 %$" #or "?!",,"t #""-4a! too, #or m"a$%r* t"

oo* !o$t o# $p"!*! $"r&*!"$ *! ",p maa"m"t to #o!%$

o !o$t r"-%!t*o. C%$tom"r prota4*,*t7 *! *$ ",p maa"m"t to - t" !o$t

*!%rr"- #rom *-*&*-%a, !%$tom"r$ $%! a$ pro-%!t !o$t$


24/27

2'

Ma" or %7 -"!*$*o$ AC $7$t"m $o$ !ompr""$*&" &*" o#

"&"r7 !o$t a$$o!*at"- *t ma%#a!t%r" pro-%!t a- t" *t *,, ",p

to *-"t*#7 *! !o$t *,, 4" ",*m*at"- *# *t"m *$ o%t$o%r!"- &"r$%$

*! !o$t r"ma*$. M**m%m pr*!" *! *$ 4a$"- o t" mar"t pr*!" #or pro-%!t a- *t

",p mar"t* maa"r to o at t" !%rr"t !o$t o# t"

pro-%!t * or-"r to a&o*- $",,* pro-%!t$ "r" !ompa7 ma"

,o$$"$ #or pro-%!t $a,"$.AC *$ pro&*-" -"ta*,$ *! o&"r"a-$ ""-

to 4" *!,%-" * t" m**m%m !o$t -"p"-* o $*t%at*o$.

Conclus#ons

Compa*"$ m%$t "&a,%at" t"*r !omp,"?*t7 o# t" op"rat*o a- !ap*ta,

!o$*-"rat*o< at%r" o# t" !omp"t*t*o 4"#or" !o$" *! $7$t"m to%$". Compa7 m%$t a-opt $7$t"m "r" *t *,, !apt%r" %$"#%, *#ormat*o

*t* t"*r -"!*$*o ma* $7$t"m. S%! a$ !ompa7 *! pro-%!" o"

pro-%!t o%,- ot ""- to %$" !omp,"? !o$t $7$t"m a$ t"r" a,,

o&"r"a-$ ar*$" to $%pport o" pro-%!t. O t" ot"r a- !ompa*"$

*! pro-%!" m%,t*p," pro-%!t$ ar" !omp,*!at"- a- t"7 $o%,- %$"

!omp,"? !o$t $7$t"m $%! a$ AC.


25/27

2)

References

Kap,a< R.< At*$o< A< 199/.A-&a!"- Maa"m"t A!!o%t*.3r- E-

r*"r< . :E-.;. :199);. a-4oo o# Co$t Maa"m"t< o$to< MA

arr" Goram Lamot.

Camp4",,< R. :199)< a%ar7;. St"",* t*m" *t AC a- TOC.

Maa"m"t A!!o%t*< 31(3+.

a$"< D.< J Mo"< M. :199;. Co$t maa"m"t A!!o%t* a-

!otro,. C*!*at*< O So%t"$t"r P%4,*$*.

a7"$< R.< J A4"rat7< . :19/0< %,7(A%%$t;. Maa* o%r a7 to

"!oom*! -"!,*". ar&ar- %$*"$$ R"&*"< +(.

orr"< C.< Fo$t"r< G.< J Datar< S. :199;. Co$t a!!o%t* A maa"r*a,

"mpa$*$. Upp"r Sa--," R*&"r< N Pr"t*!" a,,.

o$o< T.< J Kap,a< R. :19/;. R","&a!" ,o$t T" r*$" a- #a,, o#

maa"m"t a!!o%t*. o$to< MA ar&ar- %$*"$$ S!oo, Pr"$$.


26/27

2+

Kap,a< R.< J Norto< D. :1992< a%ar7(F"4r%ar7;. T" 4a,a!"- $!or"!ar-

( M"a$%r"$ tat -r*&" p"r#orma!". ar&ar- %$*"$$ R"&*"< 1(9.

M!K*o< S.< J r%$< . :1993< a%ar7;. at pro-%!t*o maa"r$

r"a,,7 at to o. Maa"m"t A!!o%t*< 29(3).

Mor$"< .< Da&*$< .< J artra&"$< A. :199+;. Maa"m"t a!!o%t* A

$trat"*! approa!. C*!*at*< O So%t"$t"r P%4,*$*.

Port"r< M. :19/);. Comp"t*t*&" a-&ata" Cr"at* a- $%$ta**

$%p"r*or p"r#orma!". NY T" Fr"" Pr"$$.

So,omo$< D. :19+);. D*&*$*oa, p"r#orma!" M"a$%r"m"t a- !otro,.

om"oo-< IL R*!ar- D. Ir*< I!.

St"art III< G. :1991;. T" B%"$t #or &a,%" A %*-" #or $"*or maa"r$.

NY arp"r Co,,*$ P%4,*$*.

T%,,7< S. :1993< S"pt"m4"r 20;. T" r"a, "7 to !r"at* "a,t. Fort%"<

3/()0.

!PP%DI

1. S%ppo$" a !ompa7 at$ to "ar 1) "t prot mar* o 20


27/27

2

20000 S.P ( 3000 S.P @ 1/0000 )00000

1000 S.P @ +/0000

S.P @ +/0000Q1000 @ '0

or

E?p"!t"- S",,* pr*!" @ R$. '0

Stratergic Management Accounting

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